Blaming the pandemic and a difficult capital raising environment, Australian neobank Xinja has decided to exit the banking sector in the country and focus on its share trading platform in the United States. The bank announced on 16th December 2020 that it will be closing all customer bank accounts, refund all customer savings and hand back its authorized deposit-banking institution (ADI) licence.
Xinja secured its ADI license from the Australian Prudential Regulation Authority (APRA) to roll out transaction accounts to customers just about a year ago. Previously, the neobank was licensed by APRA as a Restricted ADI in December 2018.
Xinja CEO’s words on terminating its services
Eric Wilson, neobank Xinja’s Chief Executive informed the customers of the bank via email that its been an incredibly tough call to terminate all banking services. Wilson added that after the pandemic, the capital-raising environment has been affected and he is convinced that it would be best for Xinja to move away from being a bank.
In the email, he further assured the customers that their funds are completely safe, they’ll be able to access their funds easily and have ample amount of time to transfer their funds from Xinja account to another bank account. The bank said it will be refocusing towards its US-focused share trading platform, Dabble. The trading platform was launched earlier in July and is focused at connecting Australian investors with the United States stock market with no brokerage fees and an annual subscription.
More on the neobank’s announcement
Neobank Xinja said it’ll give customers a 7-day notice before closing all the high interest Stash accounts. The fintech banned new customers from joining its platform in March this year. Effective immediately, Xinja bank accounts will no longer earn interest. All cards and payment facilities are to be terminated from January 15 2021. It also plans to close all empty bank accounts by December 30. The APRA said it’ll ensure all funds are returned to the depositors of Xinja.
Wilson also added that as Xinja held an ADI banking licence, its customers are covered under the Financial Claims Scheme. Under this government scheme, deposit holders of the bank are given a safety net of coverage up to $250,000, in case a bank fails to do so.
Neobank Xinja appealed majorly to Millennials. The fintech offered high interest on deposit accounts and “glow-in-the-dark bank” cards but it was unable to launch loan products to offset the cash burn. The bank held 2 equity raisings earlier in 2020 that sought to prevent layoffs and safeguard the bank’s balance sheet. Auditors of the neobank said in November that Xinja was “highly dependent” on raising additional capital to stay afloat.
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