New Zealand's first fully digital bank, planned for launch next year, is expecting to be able to offer high-yield term deposit rates of more than five per cent, says the company behind the concept.
Edward Recordon, CEO of NZFintech, says it is gearing up to establish a neobank in 2022 and expects its term deposits will be one of our "very appealing products." He says the neobank is aiming to offer rates in excess of five per cent depending on the amount invested and the term.
"New Zealanders can't access this type of return through traditional banks (these have been hovering around one per cent for some time) and I am sure this will be a very popular feature."
Recordon says lower overheads, diverse consumer-related product offerings and fully digital operations are key factors enabling higher term deposit rates for customers.
Neobanks don't have branches and operate entirely online. They offer apps, software and other technologies to streamline mobile and online banking through flexible and scalable cloud technology.
"Neobanks are about providing customers with more," Recordon says. "More flexibility in how they transact, more information on their financial affairs and more money on their pockets (through no transaction fees and higher returns for depositors."
As well as higher term deposit rates, Recordon says there are a number of other features the digital bank will offer – including smart reporting and AI services to help customers with real-time budgeting and managing of their bills.
There are also discounted traditional banking services,including international transfers, early access to paychecks and other consumer finance products such as vehicle finance "all wrapped up in a smart-tech, dynamic user-friendly interface."
Recordon says NZFintech, a digital lender based in Christchurch and which in recent years expanded into digital vehicle finance with Zooma.co.nz, will be revealing the neobank's brand and taking customer details for early registration in spring.
He says, as the financial landscape shifts to a fully digital customer experience, a gap has developed between what the traditional banks are offering and what a neobank can create – and get to market quickly.
"We have long held aspirations of becoming a leading New Zealand digital bank, challenging the existing institutions that have for too long stifled innovation and market competition in this country.
Around 256 neobanks exist worldwide according to research by Exton Consulting, a strategy and management consulting firm for the financial sector based in Paris. Their rise has been highly anticipated, although a NZ Herald report earlier this year revealed two of four new neobanks in Australia exited the market after being granted restricted banking licences.
Recordon says where some other neobanks have struggled is with commercial delivery, such as monetising their services.
"Our evolution as a business has come from developing fintech lending products that service everyday Kiwi's needs – and entering neobanking having already gained years of finance experience and success."
Asked if the planned neobank has a licence, Recordon said that information is commercially sensitive, "but is obviously a prerequisite to operating a fully-fledged bank."