Sean O'Malley, group executive AMP Banking
AMP will invest A$60 million to launch a “new digital bank designed for small business”.
AMP aims to have this new banking offer in the market by the first quarter of 2025.
The digital bank division will be “built specifically for the transaction needs of sole traders and small business,” AMP said.
AMP will collaborate with Engine by Starling, the software-as-a-service subsidiary of UK digital bank Starling Bank, to develop the division.
AMP said the new digital bank division is “expected to be net profit and return on capital accretive for AMP Bank from 2027 onwards”.
The new division will offer transaction and savings accounts. AMP's appetite to lend to this cohort is unlear at this stage.
“It will be designed to provide tailored functionality and features to help small business owners manage their finances ‘on-the-go’ from their mobile phones,” AMP said.
“There is no digital first offering tailored for small business,” Sean O’Malley, group executive AMP Banking, told a briefing.
This is a big claim, with a number of neobanks and fintechs pursuing a similar vision.
AMP aspires to capture a market share in the SME segment of between three per cent and six per cent over time. It will also seek to target the mass consumer market.
“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,” Alexis George, AMP CEO said.
“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.”
AMP also provided an update on the AMP Bank outlook yesterday, and the market didn’t like the guidance and the SME banking initiative one bit.
“AMP Bank’s near-term performance will continue to be affected by current market conditions,” AMP said.
“Current market conditions indicate a net interest margin of approximately 125 basis points for FY2023, and NIM will continue to be under pressure in FY24.
“However, NIM is expected to be positively impacted in the medium and longer term by lower funding costs as a result of this initiative diversifying AMP Bank’s funding sources.
“AMP Bank growth is expected to be nominal in FY2024, as we continue to manage return on capital.”
AMP’s share price fell 15 per cent to 86 cents.