Several new banks are poised to start in Australia, targeting niche markets — and your phone — and challenging the dominance of the established giants.

The big four have almost 85 per cent of the home loan market and rake in more than $30 billion in profit every year — and they're taking the upstarts seriously.

Disillusionment with the big banks in the wake of the royal commission could spur on the new players — but they also face hurdles of their own, like persuading people to make the switch.

So what's their pitch to you? How are they different? And could they make banking better?

Kevin Davies, a professor of finance at Melbourne University, has an idea of how the new banks might position themselves.

"A lot of them will say 'we are not hamstrung by the legacy systems and the bureaucracy of the big banks, and we can do innovative things'," he says.

"So you'll get lots of new entrants that will [offer] payment services, access to the payments system with new technology, electronic wallets and a whole range of other types of facilities, including things like debit card arrangements."

And because they have low operating costs, the idea is that the new banks will have lower fees, and be able to offer lower interest rates.

Building a bank from scratch

Xinja co-founder Van Le says the aim is to make banking fun and easy ( Getty: Evgeniy Kleymenov/EyeEm )

Van Le is a co-founder of Xinja, a bank designed to work entirely from your mobile phone.

"Think of it as a personal bank branch inside your app," she says.

"Really what we are looking to do is making it easy and fun for people to do their banking and manage their money.

"We are building Xinja hand-in-hand with customers, so we are shaping this around what customers tell us they want to see."

It sounds similar to a normal bank app, but Ms Le says there's a fundamental difference.

"Most existing bank apps provide an additional way to do your banking on top of phone banking, on top of going into the branch, on top of using internet banking," she says.

"It's very different when you design an entire bank branch to work entirely from the mobile app and nothing else.

"The lack of physical branches is intended to translate into a low-cost structure, which means that we can offer better services, better quality without customers necessarily needing to pay more for that."

A specialised approach

Joseph Healy is co-chief executive at Judo Capital, another challenger bank targeting small to mid-sized businesses, or SMEs.

It's a sizeable market, but Mr Healy says it's fallen off the radar of the big banks, which are focusing on household mortgage lending.

"As a result there are a lot of SMEs that are just not getting access to the capital that they need and deserve. We estimate that that gap in demand is approximately $80 billion," he says.

A big part of Judo's pitch is its specialised approach.

"We are placing emphasis on human capital, or on the people that we have hired into Judo. All of them are passionate about, and experienced in, banking SMEs," Mr Healy says.

The bank is also positioning itself as one that "believes in the importance of human interaction".

"In my previous experience, bankers would spend close to 80 per cent of their time managing the complexity and bureaucracy of the organisation, and around 20 per cent of the time dealing directly with customers," Mr Healy says.

"The way that we've designed Judo is that that ratio is the other way around."

And, the argument goes, this old-fashioned approach will lead to old-fashioned and more nuanced decision-making.

Convincing customers

A big challenge for the upstarts will be coming up with customers; getting people to switch banks is no easy feat.

"People aren't going to move banks to something new just for the hell of it," says finance journalist Alan Kohler.

"They are going to have to be really persuaded, either by a very powerful marketing message or a much lower price — or a combination of both of those things."

A lot of the new banks are going after millennials.

"[The new banks have] an opportunity to paint themselves as whiter than white, but also appeal to younger people who are possibly disillusioned with the big banks and what they are hearing about in the royal commission," Kohler says.

Is your money safe? A few tips from finance professor Kevin Davies: If it sounds too good to be true, it probably is

If it sounds too good to be true, it probably is Before making a deposit, check your money is covered by the Financial Claims Scheme

Before making a deposit, check your money is covered by the Financial Claims Scheme Always check you're dealing with an authorised deposit-taking institution, through the APRA website

Always check you're dealing with an authorised deposit-taking institution, through the APRA website Borrowers should closely check the terms and conditions associated with the loan contract

Borrowers should closely check the terms and conditions associated with the loan contract Pay particular attention to any "nasties" in the contract involving a missed payment

Pay particular attention to any "nasties" in the contract involving a missed payment Ensure there's good technology security, so you're not at risk of identity theft etc

Apps will be a big selling point — but Kohler notes that the existing banks are already doing pretty well in the digital space.

"It's not as if the new banks that are digital are coming up with new ways of doing things that are entirely different," Kohler says.

"Most of the big banks have got pretty good apps now, so it's not ... like the taxis getting attacked by Uber, which had a fantastic app that just killed them."

Ms Le is confident that people will give it a go, and says the most important thing is to deliver on the promise.

"Switching isn't something that happens easily but people are willing to try new things," she says.

"You do get the opportunity to win people's trust over time if you can demonstrate that you really will provide the service and quality that you say you will and you just keep demonstrating your ability to do that consistently over time."

Should the big four be worried?

The big four banks — Commonwealth, NAB, Westpac and ANZ — have dominated the sector for decades. ( ABC News: Michael Barnett )

The new entrants are seeking restricted banking licences, a class that came into existence after the Government moved last year to encourage more competition.

Essentially the requirements are the same — just scaled down to reflect the fact that these banks will be operating on a smaller scale, and likely with a restricted range of business.

Kohler says the big banks are taking the newbies "pretty seriously", and expects they will cause some disruption in the sector.

"I've lived through disruption in the media and I could see it coming," he says.

"You could see classified advertising coming, you knew it was going to hit the newspapers and so it did.

"So I really hesitate to say it won't happen — and it probably will to a large extent."

But because the big banks are "really on their game", the challengers will have their work cut out for them.

"They'll take some market share and they will probably make some money, but as for completely disrupting them and upending them the whole system, I think it's going to be really tough," Kohler says.

Judo has been trading for four months, and has more than 70 customers with total borrowings or total lending extended to them of around 70 million.

"We have ambitions to become a meaningful player over the next three to five years, I think a market share of around 5 per cent," Mr Healy says.

Xinja hopes to be able to offer full bank accounts to the public next year.