Can Australia’s newest bank give the ‘big four’ some real competition?

Australia officially has a new bank. Last week, the Australian Prudential Regulation Authority granted Revolut Australia a full banking licence. This means it can now accept deposits as an Australian bank, offer eligible deposit products protected under the Financial Claims Scheme, and expand its savings and lending services. This new entrant isn’t a fledgling startup. Before being granted a full banking licence, Revolut Australia already had more than one million customers for its digital payments app. Its parent company, London-based Revolut Group, is Europe’s most valuable startup, with more than 75 million customers worldwide. Revolut is the latest challenger seeking a foothold in Australia’s highly concentrated banking market. Its large existing customer base and strong global backing give it an advantage, but they do not guarantee success. The test will be whether customers who already use Revolut for travel and foreign exchange will eventually move their salaries and savings there, and borrow from it. The travel card that really took off Revolut was founded in London in 2015, initially offering an app-linked travel card designed to make overseas spending and international transfers cheaper and easier. Revolut’s app lets customers hold and exchange currencies without leaving their existing bank. In 2018, Revolut received a specialised European banking licence from the European Central Bank, following an assessment by the Bank of Lithuania, the country’s central bank and financial regulator. It has since expanded its services to include features that help customers track spending and manage their budgets, as well as investments, cryptocurrency and business accounts. In March this year, it was granted a full banking licence in the United Kingdom, nearly five years after submitting its application in 2021. Why other ‘neobanks’ struggled In Australia, several “neobanks” – digital-first banks without physical branches – have tried to challenge the established banks. One, Volt Bank, was granted a restricted banking licence in 2018, then a full licence in 2019. But it closed in 2022, after failing to raise enough capital. Another, Xinja, was granted a full banking licence in 2019, but handed it back in late 2020 and returned customers’ money, after struggling to develop a large loan book. A third, 86 400, was granted a full banking licence in 2019. But in 2021 it was acquired by National Australia Bank (NAB) and folded into NAB’s own digital-first division, Ubank. All three of these banks had to obtain licences, build technology, attract customers and create lending businesses together. It’s hard to predict if Revolut will be more successful in Australia. But it has done things in a different order: first building a global payments business and customer base, then adding banking. A subscription model? Or just old-school bank fees? Revolut’s business model also has some unusual features. Traditional banks rely heavily on the difference between the interest they pay savers and charge borrowers. Revolut will certainly do this too. But Revolut also offers a subscription pricing model that looks less like a traditional bank fee and more like that of Spotify or an airline loyalty club. For example, the company’s standard plan has no monthly fee, but customers can pay between A$5.99 and $99.99 a month for higher-tier plans. These plans combine higher foreign-exchange and cash-withdrawal allowances with benefits such as insurance, rewards and subscriptions to services including the coworking space company WeWork and virtual private network providers. Other sources of income for the bank include card payments, currency exchange services and investing. Globally, it reported US$6 billion (A$8.5 billion) in revenue and US$2.3 billion (A$3.3 billion) in before-tax profit for 2025. A fight over real estate Revolut’s technology, brand and profitable global group give it advantages Australia’s earlier neobanks lacked. Even so, the hardest part begins now. Australian banking is heavily centred on home loans. A new bank must do more than attract deposits with high savings rates. It needs capital, stable funding, sound credit systems and enough lending scale to use those deposits profitably. Revolut currently offers savings, credit cards and personal loans in Australia, but not home loans. That leaves a major gap in the long-term relationship between households and their banks. The friction of switching Customer behaviour creates another barrier. In 2023, research prepared for the Australian Competition and Consumer Commission found 81% of people with transaction accounts had not changed their main account during the previous three years. Inertia and status quo bias encourage people to stay with a familiar provider. Switching also means changing salary details, direct debits and bill payments. Trust may matter even more. Trying a travel card with a small balance is very different from moving a salary, emergency savings or mortgage. Customers need confidence a bank is secure, reliable and able to help quickly when a card is blocked, a scam occurs or a large transfer is delayed. Established banks benefit from decades of brand recognition and customer relationships. These forces also help explain why Australian banking remains concentrated. It pays to be big In 2023, Australia’s big four banks held 72% of banking-system assets. Banking has strong economies of scale: large banks can spread the fixed costs of technology, cybersecurity, branches and regulation across millions of customers. They can raise money more cheaply, already have well-established home-loan businesses, and benefit because many customers are reluctant to switch banks. These advantages help the big banks stay dominant and make it difficult for new banks to grow. Still, Revolut may become a strong challenger in payments, travel, savings, cards and personal loans without becoming a fifth major bank. The best outcome for consumers may not be millions abandoning the big four, but the big four working harder because a credible new competitor has arrived.