[Aqwis]

Can someone explain the logic behind this excerpt? I don't understand the connection between rising inflation and interest rates and online-only banks being outcompeted.

> "Rising inflation and interest rates this year have made it harder for online-only banks, called neobanks in Australia, to compete with established lenders, making fundraising much more difficult."

The first online-only bank in Norway was founded all the way back in 2000, and has overall been very successful. (Unfortunately, in my opinion, they were bought out by the largest local bank this year.) I understand how regulations and local habits/expectations can mean that an online-only back won't work in certain countries. For example, I can't imagine it'd work very well somewhere like Germany which is very conservative when it comes to tech in finance – cash and faxed contracts still being very much a thing and so on (correct me if I'm wrong, though). However, Australia doesn't strike me as being as conservative as Germany in this sense, so I'd be interested in hearing more about why online-only banking doesn't seem to be doing well there.

[imachine1980_]

hikes in interest rates, if you have negative cash flows (need funding), the cost of the capital incises needing even more capital to pay your old debt, this affect less more establish banks who use they own cash flow.

inflation cause price of the product to go out but also the cost of the production, if you don't have a profitable product this make it even more negative cash flow.

also people are less likely to take debt if their fear how to pay back.

i don't know Australia but most bank offer solid smartphones and web base service( in south-america) meaning that maybe isn't that much of deal breaker anymore, you can do similar things whit the competition and have a full physical service to fall back if it something go wrong.

[RileyJames]

I’d suggest competition is strong. Not sure the value of an online only bank in Australia.

Most banking is fee free, if your pay check goes into the account.

FX fees are insane, but Wise solve that.

Payments are free, and in most cases instant.

Mortgages are competitive, and not necessarily through banks.

Other lending has already been displaced from banking.

Majors have apps and atm networks.

Features like withdrawing from an atm using your phone.

PayWave has been around for years. Apple Pay has been adopted.

Not really sure what the wedge would be for an online only bank.

[22c]

The article does not do a good job of explaining the situation, but (from memory) digital banks in Australia can not give out their own loans. They're on special, limited (but supposedly easier to get) licenses from the Australian government that allows them to do "banky" things but not offer loans.

They do still offer loans, but they're "white-label" loans from other providers, which means the margins are way thinner and you're mostly at the mercy of the "white-label" provider when it comes to setting your lower threshold.

My guess is people don't mind paying an extra quarter of a percent or so if they get a really nice app and modern banking experience when interest rates are low, but with recent rate hikes they're probably shopping around and going with the best rate they can get.

The other factor is that traditional Australian banks have put efforts into modernising themselves over the past few years, spending a lot on their apps etc. so the differences between "digital" banks and traditional banks are shrinking.

[legulere]

A German perspective here: In high interest times all banks can offer free bank accounts, in low interest times people flee from brick and mortar banks when they start to ask fees. Even if your bank does not have a physical branch, you can still nowadays easily get your money: you can withdraw cash at the checkout of the supermarket when you are shopping for groceries, and a lot of banks offer free withdrawals at other banks.

Brick and mortar-banks have their advantage too. Most in Germany are either a credit union or owned by the public. You have someone responsible for you you can speak with in person and they can often offer you better terms on loans.

[rowls66]

Bank's make money on loans. In order to make loans, a bank needs money to lend which it needs to borrow. A bank's customer deposits are often an inexpensive source of borrowing for the bank. It sounds like Volt was trying to grow in the mortgage loan business, but with a limited customer base, needed to borrow wholesale money. When interest rates rise, rates in the wholesale market tend to rise faster than the rate for customer deposits. As a result Volt was unable to compete for loan origination.

[jcbrand]

> For example, I can't imagine it'd work very well somewhere like Germany

Germany has had multiple Neobanks since at least a decade and they're fairly popular.