Xinja Bank CIO Greg Steel outlines how the neobank’s service proposition is underpinned by consumer confidence and a trusted technology partnership.
The term “legacy” seems to be cropping up more and more frequently in the post royal commission era.
Australia’s big banks are said to be encumbered by old but seemingly irreplaceable legacy technology, discredited by legacy business practices, and damned by a legacy of public mistrust – the antithesis of sober respectability that venerable financial institutions crave.
Untainted by these legacies, neobanks are challenging the incumbents with new unique selling propositions – transparency, technology and trust – of which the major banks are rather short.
Xinja Bank secured a full banking licence in January this year and is servicing customers via a mobile phone app, starting with a bank account, soon followed by a savings account – or ‘stash’ – and then lending products in 2020.
One product it will never offer is a credit card, says Steel.
“It’s not a product that helps customers to help themselves, it doesn’t align with our vision or our principles. Our vision is to help customers get themselves out of debt and do better with their money.”
Steel says Xinja will also be nudging customers by recommending “smarter things to do with their money”.
“There are plenty of smart strategies out there for separating your money into different buckets or different management styles, none of which are then very easy to go and implement for yourself or to follow or think about.
“So we can definitely use our technology platform capability to make it easier for customers and we can definitely use our intelligence and our awareness and our very rich set of contextual information to intelligently nudge customers in the right way and at the right time to keep doing better.
“We will be able to show customers how they compare with other people of their group or income. They’ll get a sense or feeling of ‘how am I doing financially?’ or ‘what should I be doing better?’
“There’s not a lot of trust in banking at the moment. Many consumers feel that if banks are nudging them in some direction, they’re nudging them in a direction that’s going to make more money for the bank. So there’s a whole rebuilding of trust there before people are going to follow the lead of an organisation.
“It’s a reason for Xinja to exist. We don’t have the massive cost burden that other banks have, so we really can do better for the customer.”
Steel notes that Xinja, as a 100 percent digital bank, will probably never have a physical branch to interact with customers. Instead it uses know-your-customer (KYC) services such as those offered by Australia Post, Equifax and Frankie Financial to verify account applications.
“We don’t need to [have a physical presence] if we can on-board customers without having to have a piece of paper being signed or someone having to present themselves. Why would we if most of our target market has no inclination ever to go and find a bank branch?”
But before Xinja could earn the trust of those prospective customers, it had to find the right systems. The technology team looked at a variety of platforms, but none of them offered exactly what the neobank was after: a core banking platform that would meet its technical requirements and satisfy APRA, the banking regulator with which Xinja was working to get an authorised deposit-taking institution (ADI) banking licence.
“We found ourselves in about April/May last year, half-way through the restricted ADI application process, without a core banking platform that was going to meet our needs. We’d been looking at some of the emerging banking platforms, some of which we were very keen on, but then working with the regulator, we realised how far away these vendors were from ever being able to satisfy an Australian regulator.
“It was around about that time that we came across the Cloud4Banking (C4B) team from SAP, which was just such a critical piece of timing. Everyone will look back on a start-up and talk about areas where they were lucky. That was certainly one for us.
“We met up with three guys from the C4B (S4B at the time) team and we went through from top to bottom what their offering was, what their vision was, what their intent was. It was fascinating, it ticked all our boxes, exactly what we were looking for.”
Steel says it took a just a month from the first meeting to signing a contract with SAP for the core banking platform.
“Two or three days after signing the contract we had about 10 implementation teams descend on our very tiny little office space. And then, three months from signing that contract, our core banking platform was in production and fit for purpose.
“Because of the strength of the relationship and the alignment in terms of innovation thinking that we’ve established with SAP, I think it’s very clearly a long-term relationship. We see that SAP will keep up and continue to bring attractive offerings to the market.”
“There is a very strong partnership there. Not because we’ve technically plumbed the depths that we can never replace them, but a partnership based on ongoing mutual benefit.”