SYDNEY (Reuters) - Australia on Wednesday granted a new banking license to technology-driven business lender Judo Bank, the lender and the country’s financial regulator said, to improve competition in a sector dominated by four big banks.
The license allows Judo to compete against larger banks for deposits and use the funds to lend to small businesses, Judo Bank Co-Chief Executive Officer Joseph Healy said.
“The fundamental difference for Judo, is that we will be able to access the deposit market.”
As an authorized deposit-taking institution, Judo customer’s deposits are subject to the same A$250,000 government guarantee that protects deposits at the larger banks, Healy said.
The license allows Judo to operate without restrictions, the Australian Prudential Regulation Authority (APRA) said in an emailed statement.
Australia’s deposit and lending market is overwhelmingly dominated by four large lenders — Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group and National Australia Bank.
Research by the country’s top economic adviser has shown the market dominance of the Big Four lenders has been detrimental to customers, prompting the government to call for more banks to challenge the industry’s oligopoly.
A misconduct inquiry on Australia’s financial sector exposed instances of cash bribes paid to win mortgage business and fees charged to the accounts of dead customers.
“The reason why we built Judo was that we strongly believed that the banking market was not providing the service that small and medium size businesses were looking for,” Healy said.
“So we decided to build a new bank that would go back to banking as it should be, by providing a human service as well as a technology platform.”
Following criticism for failing to stimulate competition in the country’s finance sector, APRA last year granted its first license to an internet-only banking startup, Volt Bank.
Unlike Volt, Judo provides online-only services for depositors, but also uses relationship bankers to service the small and medium businesses it lends to.
Reporting by Paulina Duran; Editing by Shounak Dasgupta
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