Published : 1 year ago, on 28/06/2023

Lender Prospa Starts Offering Banking Services in Australia

For the past 10 years, Australian fintech company Prospa has been offering loans to small-to-medium sized businesses. With a slick and modern platform that turns over approvals quickly, Prospa quickly becomes a popular way to get loans of up to $500,000.

However, earlier last year, Prospa laid out some plans to become more bank-like, with services that include invoicing, expense management, and payments. Despite still being a non-bank, this year, Prospa has released an all-in-one business account to businesses around the country.

Prospa’s new bank account

The primary use of the new business account is to reduce admin and better manage cash flow. By centralising your transactions with the same company you’re using for debt repayments, there’s a handy One View of your cash flow. Although it could be beneficial to use your loan platform as a business account, you don’t need a Prospa loan to sign up for the account.

Users can connect it to Apply and Google Pay, and even use the Visa spending card they provide to make payments. Opening an account is proposed to take just minutes, and the interactive features are claimed to make managing your payroll, expenses, and revenue a much more streamlined experience. And, it helps to have the newer neobank features of remotely freezing your card and changing your PIN.

Neobank landscape in Australia

Every country has their big 4 – 6 banks. For Australia, it’s ANZ, Westpac, CommBank, and NAB. Whilst they continue to be unrivalled when it comes to market cap, they’re no longer sitting comfortably when it comes to business spending accounts.

In Australia, business banking is changing – a new “aspiring to be big 3” are emerging, with the likes of Wise, Revolut, and Cape. All three appear to be frontrunners when we think about turning to a business bank account in Australia, and they’re experiencing high growth.

Though, it may be a mistake to speak about online banks in the traditional framework. The big 4 got to their position through vast mergers and acquisitions, high street trust and complacency, government support, and investment banking. These are attributes we do not associate with neobanks, because the market is currently built on meritocracy, innovation, and fierce competition.

In fact, the list of online business banks operating in Australia continues to grow each year, and each seemingly stands a chance of being in the top 3 or 4 bracket. When taking the largest neobank in the world, Revolut, its $33 billion price tag is still under half that of the smallest one of the big 4, ANZ. Consider the fact that ANZ operates in Australia and New Zealand only, whilst Revolut has 25-30 million users dotted around the world, which is almost higher than the Australasia population. The reason is because neobanks are laser-focused on customer-facing services alone. And, they’re always looking for new ways to monetise.

Cape, for example, operates on a monthly subscription model just like Netflix. $7 a month will get you a credit limit up to $5,000, $0 transaction fees, $2,000 in foreign transactions, and a modern accounting feed. Or, you could head to Wise and get a card for free, and instead of focusing on credit, it focuses on efficient international transfers with a small commission.

Some are more broad than others, whilst many connect to each other. For example, business owners can connect Revolut to Stripe to Xero. Now you can receive payments, exchange them, and track them using a specialist for each area. In that sense, they’re not always in competition with one another.

Is the Australian landscape changing? 

Australia’s business banking landscape aligns more with the UK’s setting than the US. The US has a vastly complex regulatory environment, and this makes it difficult to obtain a banking license – or simply to just operate. The UK has been a global leader in fostering neobank growth, and even many British companies do not travel across the pond. They do, however, enjoy heading to Australia.

This is why Australia’s current market is mostly filled with British and Australian firms. The neobanking environment is slightly newer, but it’s quickly growing due to supportive regulations. Some things did get more stringent after the Xinja collapse, and the potential for raising money is often seen as smaller.

Within Australian fintech, the payments space sees the highest number of companies. It’s also arguably the fastest-changing, as new infrastructure improvements are made, along with novel ways to monetise.

The second-largest space within fintech remains lending, in which modern tech solutions and AI risk management techniques are a key way to facilitate safe and fast lending. It’s not all that common to see Australian fintechs take on both sub-sectors at once, which is why all eyes are on Prospa right now.

The most expected change within Australian fintech will be the way customers are delivered financial products. Currency exchange, loans, and payment solutions are all now available at the click of a button. We are expected to see the big 4 fight back and provide their own solutions, but the legacy systems in place make it slow to adapt. It’s also difficult for the big 4 when startups don’t need to be a fully licensed bank in Australia in order to offer many of the bank-like services.