Neobank Judo reached $1 billion in deposits just nine months after receiving its license

via Business Insider

Judo Bank announced that it has hit $1 billion in term deposits in its first nine months of operation, Mozo reports.

And the neobank has been actively putting those deposits to work, announcing just a few days ago that it has lent more than $1 billion to small- and medium-sized businesses, according to News.com.au. Going forward, Judo anticipates an acceleration in deposit growth, with cofounder and co-CEO Joseph Healy expressing confidence that Judo will hit $3 billion in deposits by this time next year.

While the neobank is still well behind the major Australian incumbents in terms of deposits, the speed with which it’s reached the $1 billion milestone is impressive. The “Big Four” incumbent banks in Australia (CommBank, NAB, ANZ, and Westpac) are massive — NAB, for example, boasts a whopping $424 billion in customer deposits, and ANZ has a small-business loan book of $15 billion.

But contrast Judo, which only became an authorized deposit-taking institution in April 2019, with another neobank and its blistering trajectory becomes clearer: In the full year between February 2018 and February 2019, major UK neobank Monzo only grew deposits by £390.5 million ($512.8 million), from £71.3 million ($93.6 million) up to £461.8 million ($606.4 million)

Judo attributes its quick deposit growth at least in part to the higher interest rates it pays on deposits, which bodes well for the growth plans of other Australian neobanks. Judo says that its interest rate of 1.95% on six-month term deposits is significantly higher than major banks’, which offer 1.25%. It also says that paying this above-market rate has helped it raise its current deposit total.

This is good news for the future prospects of its fellow Australian neobanks like Xinja and Volt, as they both offer high-yield savings accounts boasting interest rates that are stronger than those offered by the Big Four banks. If strong rates on term deposits are driving deposits and customer acquisition for Judo, generous rates on regular savings accounts could similarly help other Australian neobanks steal customers from the Big Four.