Private investor-backed neobank Xinja has wasted no time sticking it to the majors, coming straight out with transaction account availability on Monday – the same day it was officially granted a full unrestricted banking license by the Australian Prudential Regulatory authority.
“From today, we’re rolling out bank accounts to customers,” said Xinja’s founder and CEO Eric Wilson, who is pitching the essentially mobile-oriented institution at tech savvy 20-something customers looking for a point of difference from the the Big Four.
The completely cloud-based greenfield institution, which has been built on SAP’s S4B core banking system on S/4 HANA, believes it can put a dent in the market by securing customer loyalty with a superior user experience unfettered by legacy.
The rapid launch of so-called neobanks, essentially cloud-based ground-up builds on post-internet architecture, represents a potential threat or acquisition target for the majors because they can potentially spin-up products and offers in hours rather than weeks and months.
The burden of legacy systems is starting to sting older rivals, especially as post-Royal Commission remediation and compliance costs bite into project talent and innovation budgets.
Struggles with core systems legacy and customer experience and product revamps has recently been on public display at Suncorp, which on Monday also inked in a new CEO, Steve Johnston, after it drew a line under its API-driven apps marketplace strategy that cost predecessor Michael Cameron his job.
At the same time ANZ has effectively paused expansion of its massive agile transformation after its tightening in home lending criteria collided with a mortgage application automation drive, causing a conspicuous bleed in mortgage book market share to rivals.
Both ANZ and Suncorp run the veteran Hogan core banking system previously owned by Computer Sciences Corporation and now run out of DXC Technology.
While there is little dispute the distributed architecture of the product Hogan can run real-time transactions – indeed one of its previous champions, former Westpac and CBA CIO Bob McKinnon is now chair of the New Payments Platform – it’s the cost of unravelling decades of proprietary custom code that hurts.
Perhaps predictably, Xinja is dining out on the misery of its established rivals, crowing that it has “zero legacy systems” as it milks the cult of youth.
“We don’t have bricks and mortar branches or old technology that we are constantly patching to meet the needs of customers,” its chief Eric Wilson crowed.
“Our costs will be significantly lower than traditional banks.”
The big sell there is that as Xinja scales, its lower cost base will allow it to carve out a better cost-to-income ratio and thus fatter margin which can be fed back into cheaper and superior product offerings.
Some of the figures are stark. In August Xinja revealed it spent just $1.8 million building its SAP-based core in what it characterised as a ‘race to the top’ in data-driven personalised services once it could secure a full licence.
That day has now arrived, and the race is on.
The only real question is whether Xinja’s backers will stick with their ‘indy’ positioning or let a major label or private equity take a stake.
Young or old,Xinja looks headed “Into the Black” so to speak.