Alex, the new Australian neobank on the block, launches Temenos collaboration

The news: Australian neobank “Alex” has gone live on Temenos’ software as a service (SaaS) Temenos Banking Cloud. Earlier this month, Alex received its Restricted-Authorized Deposit-Taking Institution (RADI) license from the Australian Prudential Regulation Authority (APRA).

More on this: Currently, Alex’s only offering is personal loans between AUD$2,100 ($1,444.84) and AUD$30,000 ($20,640.52), with repayment periods ranging from six to 60 months.

Temenos’ press release claims that its technology has enabled it to process approximately 10,000 loans in the last six months, and complete each application in three minutes.

Alex plans to roll out a wider range of savings and lending products in the future. Temenos noted that its preconfigured Australia Model Bank methodology will help it do so quickly.

The bigger picture: A recent contraction in the Australian retail neobanking environment forced out two consumer-facing neobanks, leaving space for new entrants.

• From 2018 to early 2020, four budding neobanks held banking licenses and positioned themselves as alternatives to the country’s incumbents.
• The pandemic and prevailing economic headwinds eventually forced Xinja to shutter in December, and 86 400 agreed to be acquired by National Australia Bank in February 2021.
• Two of the original four remain—Volt and Judo—but Volt has pivoted toward banking as a service (BaaS) and mortgage lending, and Judo is SMB-centered.

The result is a dearth of consumer-facing neobanks in Australia—partially by design, as the Australian Prudential Regulatory Authority (APRA) has worked to stiffen its requirements for neobanks seeking full banking licenses. (Alex currently has a restricted license and will need to conduct a limited launch of a deposit product to get a full license.)

The open space gives Alex an opportunity to quickly ramp up its customer base once it begins broadening its offerings. Its primary competition will be Up, whose parent bank, Bendigo and Adelaide Bank, supplies it with licensing.

Another tailwind for Alex is that its first product—loans—are profit driving. One major cause of 86 400’s and Xinja’s downfall was the expensively generous high-yield savings accounts that made their initial splash in the market. A revenue-first approach could set Alex on a path to sustainable long-term growth.