Eric Wilson, Founder and Chief Executive, Xinja Bank
"One of the main reasons customers are signing up for Xinja is because they have had enough of the big lazy four, and this sentiment increased noticeably after the Royal Commission. We are entering a new, tougher era of what trust in banking means."
Recently granted its full banking licence, we speak with Xinja’s founder and chief executive Eric Wilson on being an Open Banking native institution, and why the neobank is throwing down the gauntlet to the “big lazy four".
FST Media: What is your vision for Australia’s banking future and what role do you see for neobanks in this evolving banking framework?
Wilson: My vision is an Australia where people make more out of their money, get out of debt faster, understand their financial situation, and can easily improve it with less stress by using the best technology has to offer. I see that being delivered by lots of well regulated, safe neobanks – hopefully with Xinja at the front of the pack!
FST Media: Xinja, to considerable fanfare, recently acquired its unrestricted banking licence. What makes this ADI status such an important milestone for Xinja?
Wilson: If we're going to achieve our mission of helping people make more out of their money, then being a bank is a key vehicle for making that happen. It puts us in a position to help people manage their money better and deliver value back to them using their own data. It allows us to help them optimise their finances across the lending, borrowing, and spending spectrum. It also means we have passed the very rigorous conditions of becoming a bank, which makes us a more attractive investment proposition, which in turn will help us build our business.
We've built a state-of-the-art tech stack and platform, and now the work begins to build increasing levels of service to our customers from that. We have already launched the bank account to early customers and we look forward to rolling this out, iterating the app, and adding savings facility – or 'Stash' – in the next few months. In 2020, we're planning to launch lending to complement the bank accounts.
FST Media: As the financial services industry makes the inevitable leap to full Open Banking adoption, data-driven and personalised service offerings will likely become important differentiators for FSIs. How has Open Banking shaped Xinja’s digital innovation agenda and how can it position itself at the forefront of service delivery through the scheme?
Wilson: Neobanks are made for Open Banking and we have always supported it; it's the first cab off the rank in the open data movement and the beginning of allowing consumers to benefit from their own data (rather than being exploited by companies for their own ends). However, we think the rollout could be slow, and it will need constant ongoing pressure from the government to make sure it happens. Meanwhile, we will be focused on building our data capability and personalised service to customers, so that when we deploy Open Banking, it will be a further accelerant, allowing us to provide even better, more competitive, more creative services.
FST Media: How is Xinja strengthening its artificial intelligence/machine learning and data capabilities to deliver next-gen customer service offerings? What insight can you offer on current in-house initiatives that leverage these emerging technologies?
Wilson: Obviously, at this stage, we don't have that much data. But in preparation, we have implemented a highly scalable, flexible and efficient data architecture, and we are in the process of building out our data science team. This will be the engine room of Xinja, where we use increasing amounts of data and increasingly intelligent algorithms to understand a customer's position and trajectory and proffer timely, optimised messaging that helps them improve their longer-term financial outcomes.
Right now, we're looking in particular at modelling for fraud identification and prediction as an essential part of bolstering security, and also at building out credit risk modelling in anticipation of launching lending next year. We hope being able to offer personalised interest rates and dynamic credit risk assessments in-house will be central to the value we can provide to customers.
FST Media: The Hayne Royal Commission dealt a massive reputational blow to FSIs, revealing systemic malpractice and ethically questionable business models. How can financial services rebuild customer trust as an industry? Being relatively untouched by scandal, do you feel neobanks can leverage this credibility dividend to put further competitive pressure on the incumbents?
Wilson: We are already seeing that one of the main reasons customers are signing up for Xinja is because they have had enough of the big lazy four, and this sentiment increased noticeably after the Royal Commission. We are entering a new, tougher era of what trust in banking means. It used to be simply 'can I trust you not to lose my money?' but this is now a level playing field and not really an issue, as every bank is covered by the government deposits guarantee – the financial claims system. Now people are asking 'can I trust you with my data?', 'can I trust you not to lose it ?', and 'can I trust you to use my data in my interests, not your own?'. The other question people ask is 'can I trust you to do the right thing by me?'.
At Xinja, all decisions have to pass the 'is this good for both Xinja and the customer' question. If the answer is ‘no’ to either, the decision doesn't get made. We think that if we treat our customers well and help them make more out of their money, they will stay with us longer, take more products out with us, and recommend us to their friends. We think we will gain trust from customers when they can see that we've helped improve their situation and they realise that treating them well is critical to our success.
At the end of the day, though, there are lots of people talking about trust and saying they deserve it in FSI. The only real way to judge that is whether they do the right thing over and over again, every day.
FST Media: Open banking is set to transform the relationship between banks and customers, empowering the latter with more choice and greater insight. However, a significant number of consumers remain unaware or even suspicious of the scheme. How is Xinja working to reduce resistance and educate customers on the benefits of sharing their data?
Wilson: They are right to be suspicious. The scheme hasn't been finalised or implemented yet and there are many incumbent vested interests trying to bend it to their agendas. Open Banking only works when it is built for the people who own the data, not the organisations trying to make money out of them. We know that education is important for customers to benefit, as well as to control who gets what out of their data, and this was a key learning out of the UK. If consumers don't want their data being used by either a new or, critically, as their current institution, it has to be very easy and very clear how to prevent that. So far, we have only written a few blogs on the subject to try and make it more accessible, but longer-term, and as it draws nearer, you will hear more from us. And, as with all things at Xinja, we believe this needs to be accessible, human, engaging, and relevant, rather than boring and dry. The very term 'Open Banking' is not very meaningful to anyone outside the industry, and we will take care to use language that brings it to life for the customer.
FST Media: Xinja is among several neobank challengers that have emerged over the last two years in Australia. How does Xinja seek to differentiate itself from fellow neobank competitors, particularly in its digital service offering?
Wilson: Largely we don't! We see our competition as less the other neobanks than the big four. However, there is a key distinction – we consider that there are only two actual neobanks in Australia: ourselves and Volt. There are some digital front ends on existing institutions – Up, which sits on top of Bendigo Bank, and 86400, owned by Cuscal, in particular. We do make the point that independence and an independent culture is key – if you want to stick it to the man, you can't be owned by the man. And, also, they are likely to revert at some point into the legacy systems that inhibit the escalation of customer service because of clunky old technology.
Xinja is also the first Australian bank to be fully in the cloud, and this will allow us incredible flexibility and the ability to extend microservices rapidly in the future.
FST Media: What emerging innovation or technology do you predict will be the most significant disruptor of FSIs over the next 18 months?
Wilson: Competition. Right now, Xinja is the only new competitor in the market that isn't owned by another existing bank. That's pretty sad when you think about it. However, competition is coming from both on-shore and off-shore. The digital banking revolution isn't even 5 per cent complete in Australia.
I hope we will see a swathe of new neobanks come up over the next five years, accompanied by a bunch of new fintechs using the neobanks as partners to stick it to the existing low service, high cost, high profit margin banking and financial services models. Frankly, Australians deserve a damn sight better than they have had for the last 30 years.
FST Media: As a featured keynote speaker at FST’s Future of Financial Services Sydney conference, what lessons do you hope to impart on the industry?
Wilson: How incredibly exciting a time this is for everyone who has a bank account and wants to get ahead. To share my optimism on what the neobank revolution will deliver – how it will create new standards of personalised service for bank customers and raise the bar for all banks, ending an era of oligopolistic greed, and opening an era of banks working in the interests of customers. We are on the edge of a golden era for Australian consumers of banking and financial services.
Don't miss Eric Wilson's featured keynote presentation, 'The race to the top: why neobanks will change banking for good', at the 2019 Future of Financial Services conference in Sydney. Register now to secure your place!