A fintech start-up, Volt Bank, is the first business to receive a new type of "restricted" banking licence as part of a government plan to boost competition in banking.

The Australian Prudential Regulation Authority on Monday granted its first licence under a scheme announced last year, which will allow start-up banks to operate under restricted conditions for a temporary period of time, before going through the tougher process of getting a full banking licence.

APRA granted its first restricted banking licence on Monday.

Initially, Volt will only be able to accept deposits worth a total of up to $2 million, so it will focus on testing its systems with staff members, with the aim of obtaining a full banking licence by the end of this year, which would allow it to deal with the public.

Volt says it will initially offer transaction accounts, savings products and term deposits, and and it is looking to harness technology to offer 'highly competitive" interest rates.

The business has raised $15.7 million in equity capital and will be led by co-founder and chief executive Steve Weston, a former head of mortgages at Barclays. The other co-founder of the bank, Luke Bunbury, is a former executive from St George Bank and Challenger Financial Services.

"Australians are crying out for new competition in banking, and that's what we aim to deliver," Mr Weston said.

The plan to allow "restricted" banking licences is similar to the model in the United Kingdom, where a series of digital "neo banks" have sprung up to challenge the established giants of the industry.

Another digital start-up, Xinja, has also flagged plans to gain a banking licence under the new regime announced in the budget. Xinja chief executive Eric Wilson said Xinja had raised a similar amount of capital to Volt and it was a "healthy sign" for the industry and customers that APRA had granted its first restricted licence.

Previously, a financial institution needed to have a minimum of $50 million in capital in order to call itself a bank, but the government announced plans to scrap this requirement in last year's budget.

Alongside promising to offer "competitive" interest rates, Volt is targeting customers through its data analytics, which it says will give consumers tips on how to save money or manage their finances.

“On an opt-in basis, volt bank will show customers if they can save money on monthly expenses

such as utilities or insurance and monitor daily spending to help customers stay within their

budgets," Mr Weston said.

He said the bank, which currently has 35 staff, would also allow customers to view their bank and credit card balances and transaction history across accounts held with other financial institutions - a key point of difference with other banks today.

After initially offering deposits and transaction accounts, Volt aims to offer consumer products including credit cards, personal loans and mortgages, and Mr Weston said in the long-term it was also eyeing small to medium enterprise banking.

It has so far raised capital from high net worth individuals, and Mr Weston said it was aiming to raise more capital from this source before tapping institutional investors and superannuation funds once it was more established.