AMP unveils plans to launch a new digital bank

AMP has revealed its upcoming venture into the digital banking sphere, announcing the launch of a new digital bank aimed at catering to the needs of small businesses and sole traders.

The newly announced digital bank will specifically target sole traders and small businesses with one to 20 employees, providing a range of transaction and savings accounts.

Its design will prioritise tailored functionalities and features tailored to assist small-business owners in effectively managing their finances on the go, directly from their mobile phones.

Set to be developed throughout the financial year 2024 and officially introduced in Q1 of 2025, this initiative will operate as a separate entity within AMP Bank, utilising a distinct technological platform.

In a partnership with Engine, the SaaS subsidiary of the UK-based Starling Bank, AMP will leverage Starling’s ‘Engine’ technology platform to construct the new digital banking solution under a Software as a Service agreement.

The digital bank will solely focus on transactions, payments and deposits, without a lending component for small business and consumers.

Speaking to The Adviser, Sean O’Malley, group executive of AMP Bank, said while the digital bank won’t focus on lending, it will grow the bank’s existing lending capabilities.

“We'll continue to invest in the broker experience in our existing ecosystem and improving turnaround times, improving digital capabilities, etc,” he said.

“The biggest opportunity here is the more that AMP Bank can be successful in growing deposits on the new division, the more that we can lend.

“With almost all of our lending, going to brokers, I think the more that we’re able to successfully do that, the more we’re able to grow our lending business.”

In addition, as brokers themselves are small businesses, “there’s an opportunity for us to talk with brokers and potentially have brokers come on to the banking offering”, he added.

The move followed a recent analysis by PwC, indicating deposit balances from the sole trader and small-business segment nearing $220 billion as of June 2021, further highlighting the potential of this market, AMP highlighted.

Mr O’Malley said the small-business market in Australia “is the backbone of our economy”.

“It’s significant and it’s growing rapidly 99 per cent of the 2.6 million businesses in Australia are small businesses,” Mr O’Malley said

“AMP Bank is well poised to capitalise on this continuous flow of new businesses who need a bank that can grow with them.

“Working with Engine enables us to equip small businesses with the best digital tools to help them manage their finances efficiently and conveniently on their mobile phone while on the go.”

AMP’s latest stride in its banking strategy aligns with its goals of mitigating funding risks over the medium and long term, aiming to establish a sustainable funding base while continuing to serve the evolving needs of businesses in Australia.

AMP’s chief executive Alexis George said by partnering with Starling and harnessing the Engine software, the bank will be able to leverage its expertise and help manage risk.

She emphasised: “It will reshape the bank portfolio in the medium term to better position AMP for the headwinds the industry is facing when it comes to bank funding.

“By partnering with one of the most innovative and fastest-growing digital banks we will be able to better serve Australia’s growing number of small businesses, and individuals, with their banking needs.”

The establishment of this new digital bank division will necessitate an investment of approximately $60 million across FY24 and FY25, with around $40 million being capitalised.

AMP plans to absorb these costs within existing controllable expenditure targets, primarily through repurposing existing bank investment spending and leveraging the ongoing business simplification program.

Projected to become net profit after tax (NPAT) and return on capital (ROC) accretive for AMP Bank from 2027 onwards, this move is expected to have no immediate impact on AMP’s previously outlined FY24 and FY25 controllable cost targets.

[Related: AMP reports loan book lift in 3Q23]