A neobank has announced it intends to return all funds to depositors and ultimately relinquish its licence to operate as an authorised deposit-taking institution (ADI).
Xinja's choice to “exit the banking industry” and pursue other business opportunities has been described as a “commercial decision” by the group.
The Australian Prudential Regulation Authority (APRA) will closely monitor the return of deposits to ensure all funds are returned to Xinja depositors in an orderly and timely manner.
In addition to the return of deposit process, Xinja’s depositors remain protected by the Financial Claims Scheme (FCS).
Xinja was granted its full banking licence in September 2019, after having initially secured a restricted licence two years ago, in December 2018.
Within weeks of launching its digital bank account Stash on 15 January 2020, Xinja reported 15,000 customers had made $100m in deposits – “smashing its business plan many times over”.
The growth seemed to hold, with the group going on to report a “whopping” $200m had been deposited by over 20,000 customers within a month of launching its savings account.
Xinja continued to draw in depositors through offering and maintaining the highest interest rate available to savers, while the rest of the industry slashed theirs to protect their margins.
At the time, Xinja CEO and founder Eric Wilson said, “When faced with higher than expected deposit flows, and an RBA rate cut, most banks would just drop deposit interest rates, hurting existing customers while chasing new ones. That’s not what Xinja is about.
"Xinja offers a different way of banking, and that extends beyond technology to how we treat our customers.”
The group's move to now hand back its licence has been partially attributed to the pressure of sticking to its higher interest rate stance without having a lending product in the market to help balance the flow of funds.
