The coronavirus has more than halved the profits of some major banks, but one challenger can sniff an opportunity.

As the big four brace for a massive spike in bad loans, neo bank 84 600 is setting its sights on an aggressive expansion.

Since the bank started offering mortgages in December, Australians have borrowed $20 million of home loans from the digital-only challenger.

In an interview with The New Daily, 86 400 chief executive Robert Bell said the bank plans to have $2 billion of home loans on its books by the end of 2021.

Although the property market is struggling under the weight of the pandemic, Mr Bell said the bank’s focus on refinancing, coupled with its entirely digital mortgage application process, meant it was well positioned to achieve its 2021 target.

“The reality is the market for loans today is smaller than what it was [before the coronavirus], but because we’re new, because we’re really competitive, because we’re digital, we don’t see that having a big impact on us,” Mr Bell said.

The bank, which is majority owned by payments processor Cuscal and was granted a banking licence in July 2019, provides home loans via a network of 2500 mortgage brokers.

Rather than ask applicants to submit payslips and rental statements, the bank takes a snapshot of 12 months of transactions across all their accounts and categorises all their expenses and incomes.

It then conducts a desk-based property valuation, and makes a decision  based on all the data it gathers.

“There’s only one document they have to physically sign, and that’s because the state governments in most states require one document to be physically signed,” Mr Bell said.

“From application to approval, the fastest we’ve done so far is about two hours. It’s generally within 24 hours, which is an incredible experience for the brokers.”

86 400 CEO Robert Bell says the bank wants to help Australians gain control over their finances.

The application process is one of several features that Mr Bell believes makes the bank an attractive proposition to customers looking to refinance – a group that makes up 70 per cent of today’s new home loan market, according to recent spending data from illion and AlphaBeta.

Among other things, 86 400 sends customers bill alerts, displays money held in other accounts, and provides a free service called Energy Switch that scans a customer’s energy bill, cross references it against thousands of other bills, and lets them know if they could get a better deal elsewhere.

“It’s really hard to chase the highest savings interest rate, and you might be earning only $2 or $3 extra interest a year … but if you cancel a $15-a-month subscription, that’s $150 a year done, so [the upcoming bill predictor] is getting a lot of usage,” Mr Bell said.

Alongside a competitive savings rate of up to 1.85 per cent per annum, these features give 86 400 the edge over its competitors, Mr Bell said.

Which is perhaps why more than 170,000 account holders have entrusted the bank with almost $250 million of savings since it received its licence.

Mr Bell is confident the bank will continue growing throughout the pandemic, but the unfolding economic crisis could prove a challenge in one key area.

Last month, Morgan Stanley helped the bank raise $35 million from investors, taking the bank’s total capital raising to $90 million and bringing onto its shareholder register a superannuation fund, high-net-worth individuals, fund managers and family offices.

But because of strict capital requirements introduced after the global financial crisis, 86 400 might need investors to plough a further $200 million into the bank over the next couple of years – at a time when COVID-19 has rattled financial markets.

“It was probably a bit harder than it would have been if it [had taken place] three months earlier, but the investors that we’d brought on board, we’d been talking to for over a year anyway, so they understand the story,” Mr Bell said of the latest funding round.

“And the story hasn’t changed in terms of the absolute need for an alternative banking pathway for customers in Australia … for a bank that’s agile, uses modern technology, and has a really efficient cost base.”