March has seen some of Australia’s neobanks toppled from their throne after 86 400, Volt Bank and Up all made moves to pass on one or both of the RBA cuts to savers.
Volt Bank was the latest to take the axe to its savings account, slashing the maximum interest rate by 25 basis points from 1.90% to 1.65% on Tuesday. This follows a 25 basis point cut earlier in the month, which saw Volt Bank’s rate available on balances of up to $245,000 fall from 2.15% to 1.90%.
86 400 and Up also reduced their maximum savings rates by 25 basis points in March, bringing both down from 2.25% to 2.00% - although savers will need to meet monthly conditions in order to hit these maximum rates.
According to Mozo’s Banking Expert, Peter Marshall, those cuts are a result of the neobanks juggling between two priorities.
“What the neobanks are trying to do is attract new funds while also keep their costs down at a reasonable level,” he said.
“While it’s great to have lots of deposit customers, that has to be considered in the context that deposits are a cost to the business. They [the neobanks] have to make sure they’re getting enough revenue from their loan customers or other funding sources to cover those costs.”
“So it’s the balancing act that they have to do, and it’s why we saw Xinja at least temporarily withdraw their Stash product from the market. It’s impressive that they got close to half a billion dollars in deposits, but without having some loan revenue, it’s just not sustainable.”
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How good are neobank savings rates now?
Although not as far ahead of the game as they once were, Mozo data reveals the neobanks still sit on the upper end of the market.
For instance, despite making a total 50 basis point cut in March, Volt Bank has maintained its position as savings account leader among the no-strings attached options (available to new customers) in the Mozo database.
Similarly, 86 400 and Up continue to offer the highest savings rate in the Mozo database. However, the gap between them and their nearest competitors has completely closed.
Right now, three other savings accounts in the Mozo database offer ongoing maximum rates of 2.00%, with monthly conditions attached. They are:
- Bank of Queensland Fast Track Starter Account (for 14-24 year olds only)
- Bank of Queensland Fast Track Saver Account
- MyState Bank Bonus Saver Account
Are neobanks still worth it?
The short answer: yes, they’re still worth considering.
“You just need to keep your options open, and be prepared to go where there’s a better rate if you find that the rate you switched to a provider for is no longer available,” Marshall said.
He added that term deposits are another route to keep in mind, with rates “looking increasingly attractive when compared to at-call savings accounts”.
Just this week, neobank Judo Bank announced an increase to its 6-month term deposit to an ultra competitive 2.12%, joining a host of other banks that have boosted rates following the March emergency RBA cut.
Keen to find out more about these neobanks? Head over to our dedicated neobanks hub for the latest news and information, or compare some of your options below.