Dosh seeks licence to become country’s first pure digital bank

Tuesday, 9 July 2024

Dosh co-founders James McEniery and Shane Marsh hope to have a banking licence in about 12 months.

The country could get its 28th bank after digital start-up Dosh announced it was applying for a banking licence.

Shane Marsh, Dosh co-founder, said Dosh was not planning on opening any branches, and would be a digital-only bank offering deposits, personal loans and home loans, the last focused on young people trying to buy their first home.

Once Dosh’s application is in, the Reserve Bank Te Pūtea Matua, which regulates banks, must decide whether it can join ANZ, ASB, BNZ, Westpac, Kiwibank and the 22 other banks, including the local operations of overseas giants like Bank of China and Bank of India.

However, Marsh expected it would take Dosh about a year to get a banking licence, which requires a start-up bank to have a minimum of $30 million in capital.

He said Dosh, which is part-owned by finance company Avanti, would be seeking capital from investors as it went through the process of getting a licence.

Marsh said Dosh aimed to bring competition to the banking industry with a digital-only app-based model where people bank exclusively online, largely through their phones.

“We just think the timing is right for consumers to have an alternative provider which is different,” he said. “We believe we can provide better value in terms of prices, and put more money back in the pockets of consumers.”

Dosh has been operating with digital wallet services and personal loans since 2021.

But its users have their money held in accounts at licensed banks, currently ANZ and BNZ.

Getting a banking licence would enable Dosh to hold money for customers directly, rather than having to contract with legacy banks to do so, Marsh said.

“This change will enable Dosh to compete with big banks for market share, potentially spurring downward pressure on banking prices across the sector,” he said.

Dosh was preparing to enter the home loan market with a focus on people striving to get into their first homes, Marsh said.

“We are working on a home loan offering. That’s an important next product for us because we see there’s a need for a differentiated offering from what the banks offer today, more supportive for young New Zealanders trying to get their first home, and get on the property ladder,” he said.

They have had a tough time with prices having risen so much faster than wages.

“They are losing hope,” Marsh said.

The Commerce Commission believes new digital ‘open banking’ services offer hopes of increasing competition in retail banking.

Overseas there had been more innovation in this market, and Marsh pointed to Australia’s Unloan, which is targeting younger home loan borrowers.

Marsh had been among those to address the Commerce Commission’s inquiry into retail banking at which the commission said New Zealand’s banks were some of the most profitable in the world.

The commission said it saw disruptive “open banking” start-ups like Dosh as being the key to bringing more competition, and potentially better priced loans and deposits.

Dosh is the trading name for MCA Investments. It is 30.86% owned by Marsh, 30.86% owned by McEniery, 21.21% owned by Hampstead Trustee, the investment vehicle for the wealthy Thornton family, 8.47% by Avanti, with some other smaller shareholders.

Although conversations with investors were taking place over the capital requirements for launching a bank, Marsh said: “We are confident we can meet the Reserve Bank’s requirements today.”