Tech lessons in Up neobank success

Bendigo bank’s neobank operation Up is reeling in customers, but warns tech transformation for the majors won’t be easy.

Anson Parker, chief product officer of Up, the neobank arm of Bendigo Bank. Photo: Supplied

One of the architects of Bendigo Bank’s neobank Up has warned the massive systems uplift planned by rival banks will not be easy, noting customers demand modern banking platforms.

Up chief product officer Anson Parker said major technological transformations of banks were “notoriously complex and difficult to run on time”, although difficulty could vary depending how much a bank was seeking to change.

The comments come as Westpac, ANZ, NAB, and BOQ are all embroiled in major technological change, either rolling out new banking platforms or preparing to uplift existing systems.

Other banks, including ING, are also looking at refreshing their existing consumer banking interfaces.

But Mr Parker warned major transformations, including the likes of ANZ’s new banking platform ANZ Plus, were challenging to deliver and liable to see roadblocks as banks tried to deliver complex new systems.

Mr Parker noted Bendigo’s core platform was “very simple”, something Up had benefited from, as it plugged into the bank’s ledger.

“That’s not where you get innovation and disruption,” he said.

Mr Parker said the user experience was key to new banking platforms and attracting customers, with capabilities including real time feedback and transaction reporting key differentiators from incumbent banks.

“This is the thing that at times bankers don’t understand about Up,” Mr Parker said.

“Up has not necessarily innovated in the financial product space, we’ve never been interested in disrupting with crypto or changing how interest works.”

But Mr Parker said a good banking platform had to be coupled with traditional financial services, including lending, noting some neobanks which had concentrated on bringing to market slick systems had struggled.

“You need both sides of the ledger,” he said.

Up has benefited thanks to its tie-in with Bendigo Bank, which initially invested in the neobank alongside Melbourne-based financial provider Ferocia before acquiring the company in 2021.

Bendigo Bank bought Up operator Ferocia in August 2021. Picture: NCA NewsWire / Roy VanDerVegt

Since launching in 2018 Up has proven a success for Bendigo Bank with the neobank’s colourful platform proving a winner for attracting new borrowers and savers.

Digital deposits held by Up exceeded those in Bendigo’s accounts in 2019, with the bank reporting almost $1.78bn had been locked up by customers as at December 2023.

The lending arm of the neobank is also snapping up customers, with $155m in home loans settled by Up customers since launching the lending in July 2022.

All savings and loans from Up are settled on Bendigo’s balance sheet, which allowed the lender to park its cash for Bendigo to lend against prior to its launch of home loans in 2022.

Mr Parker said Up was able to lend and operate at a much lower cost compared to branch-based banks.

Bendigo said its cost of acquisitions for Up customers was tracking at $50, based on total marketing spend.

Mr Parker said the neobank benefited from lower overheads on customers, allowing Up to price its loans below rivals and cheaper than Bendigo.

Up also benefits from its use of a system from Tiimely, formerly known as Tic:Toc an Adelaide based lending platform, to approve and settle loans.

Bendigo also now offers Tiimely under the BEN Express label.

Mr Parker said Up was benefiting from the refinancing market, but had not piled into the mortgage wars, noting the lender was not writing loans below the cost of capital unlike others in the market.

But Mr Parker said banks had to offer before and after services to borrowers to maximise the benefits from acquiring customers.

He said Up High, a recently launched a paid subscription benefits scheme, was proving popular with the neobank’s customers.

Bendigo has tipped Up as a key strategic opportunity for the bank, with development of the digital lender marked as a top project by spend as the bank ploughs cash into growth and productivity uplifts.

Bendigo last week revealed a 2.3 per cent dip in after tax earnings for the 10 months to April, to $464m.