In many countries, neobanks are thriving. Australia is not one of them. In fact, we would say Oz is where neobanks go to die.
If you think that’s an exaggeration, consider this: Just one major native digital Australian lender has survived for a decade. That would be Judo Bank. More on Judo in a moment.
Most other Australian neobanks are gone, while international online lenders have usually avoided the market – though Revolut is a notable exception.
The more successful Australia-founded digital banks, however, have teamed up with large incumbent lenders. 86 400 was acquired by the National Australia Bank in 2021. Up Bank was fully acquired by Bendigo Bank the same year.
Xinja wasn’t so lucky, collapsing abruptly in December 2020—though then banking regulation chief Wayne Byres said that the demise of Xinja was a “successful failure” because the neobank returned all customer deposits. Guess he is a glass-half-full kind of guy.
The latest Australian neobank to call it quits is in1bank, founded by Shanghai-born investment banker James Tong. Pitched as a “bilingual” (English and Chinese) digital bank for consumers and SMEs, in1bank announced it would end its banking business in late January and return all customer deposits, without providing an explanation.
Most Australian neobanks have failed or been acquired due to an inability to scale, high customer acquisition costs (especially in the retail segment), and a failure to convert deposits into profitable lending. Without a sizeable loan book to generate net interest income, their models have been unprofitable.
Part of the problem is that Australian neobanks have tended to directly take on entrenched incumbents, rather than trying to cultivate a niche with underserved market segments. The “Big Four” Australian banks (NAB, Westpac, Australia and New Zealand Banking Group, and Commonwealth Bank of Australia) hold massive market share, have improved their own digital offerings rapidly, including by acquiring digital banking startups, and have lower funding costs.
Judo Bank is an exception. It is the only Australian neobank to focus on a niche market with high demand and high margins: small and medium-sized enterprise (SME) lending. By eschewing the retail market (with the exception of term deposits), Judo has avoided the punishing customer acquisition costs that undermined other Aussie digital banking startups.
In the first half of the 2026 financial year, Judo posted an A$59.9 million profit, with deposits up one-fifth to $10.9 billion and its lending book up 15% to $13.4 billion over the period.
Although Judo’s market share is small—1% of business lending and 2% of small-to-medium enterprise lending—UBS analyst John Storey said Judo was “the fastest-growing business lender in the Australian market” and could double its loan book to A$20 billion over the next three years. While household borrowing in Australia is constrained by high interest rates and tighter serviceability rules, businesses are actively borrowing to fund growth, with lenders, including non-banks, providing more flexible, specialized, and accessible credit.
During Judo’s recent earnings call, CEO Chris Bayliss said, “I’m often asked, ‘What was the most significant challenge of the last 10 years?’ Without doubt, it was finding the intersection between a clear vision, converting that into an investment thesis, and operating as a regulated ADI. Initially, we traded off a lot of the investments in technology and process design to control our cost base and to get to profitability quickly.”
Bayliss added that Judo is confident that it can deliver a return on equity in the low to mid-teens, which he said will be the strongest of all listed banks in Australia.
While Judo has shown strong profit growth, investors remain cautious about the online lender, as reflected in a low share price of less than A$2. Investors remain concerned about SME credit risk in a high-interest-rate environment and intense funding competition with major banks.
Judo will have to continue its strong performance and prove it has staying power to assuage their concerns.