AMP to create digital bank aimed at small business

Sole traders included in mobile finance platform

AMP to create digital bank aimed at small business

AMP is set to launch a new digital bank division specifically designed to target the transaction needs of sole traders and small business.

The digital bank will be built in FY24 and launched in Q1 2025 and operate on a separate technology platform as a new division to AMP Bank.

AMP is working with Engine, the SaaS subsidiary of Starling Bank, a leading UK digital bank.

AMP will leverage Starling’s Engine technology platform to build the new digital bank offering under a Software as a Service agreement.

AMP’s digital bank to serve needs of small business, sole traders

The new bank will service sole traders and small businesses with 1 to 20 employees and will offer transaction and savings accounts. It is designed to help small business owners manage their finances from their mobile phones.

AMP chief executive Alexis George (pictured above centre) said the new offer built on AMP Bank’s strengths and addresses an “underserved and growing segment of the market”.

“Importantly, it will reshape the bank portfolio in the medium term to better position AMP for the headwinds the industry is facing when it comes to bank funding,” George said.

“In Engine by Starling, we have chosen a partner with a track record of success and will leverage their innovative technology platform, their highly successful go-to-market expertise and ways of working.

“By partnering with one of the most innovative and fastest growing digital banks we will be able to better serve Australia’s growing number of small businesses, and individuals, with their banking needs.”

According to PwC analysis, deposit balances from the sole trader and small business segment totalled nearly $220 billion as at June 20211. Out of 2.6 million businesses in Australia, these segments accounted for 2.5 million businesses on June 2022.

AMP gauges expected costs, profits of digital bank

The new digital bank division requires an investment of approximately $60 million across FY24 and FY25, which will be absorbed within current controllable cost targets and of which approximately $40m will be capitalised.

This near-term cost outcome reflects the repurposing of existing bank investment spend, as well as the positive impact of the broader ongoing business simplification program.

There is expected to be net profit after tax (NPAT) and return on capital (ROC) accretive for AMP Bank from 2027 onwards and there is not expected to be an impact on AMP’s previously announced FY24 and FY25 controllable cost targets.

This next step in the AMP Bank strategy also aims to lessen funding risks over the medium and longer term, with a focus on continuing to build a sustainable funding base.

Sean O’Malley, group executive, AMP Bank (pictured above left) said the rapidly growing Australian small business market presents a significant opportunity for AMP Bank.

“Working with Engine enables us to equip small businesses with the best digital tools to help them manage their finances efficiently and conveniently on their mobile phone whilst on the go,” O’Malley said.

Leveraging Engine’s expertise for AMP customers

Sam Everington, CEO of Engine by Starling (pictured above right) said Starling Bank had proven in the UK that it was possible to deliver a resilient and powerful digital banking platform that was valued by customers, as well as being highly scalable and operationally efficient.

“There are clear parallels between the banking markets in Australia and the UK, and we look forward to leveraging Engine’s expertise and technology for AMP customers,” Everington said.

In August, AMP announced its financial results for the first half of 2023.

The underlying NPAT for the period was $112 million, in line with the results from the first half of 2022.

This follows news in February that AMP Bank’s residential mortgage book grew by $2 billion while improving its net interest margin, the company revealed in its FY22 results.

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