Australian neobank Xinja will withdraw its transaction and savings products and return its banking licence, blaming the exit on COVID-19, difficulties raising capital and the outlook of the local market.

Customers are being urged by the bank to withdraw or transfer their funds out of Xinja accounts “as soon as possible” in a process being closely monitored by the financial regulator.

The bank has reported having 25,000 customers and taking more than $400 million in deposits.

In a statement APRA said it is aware of Xinja’s decision to withdraw from banking.

“Xinja’s decision to exit the banking industry and pursue other business opportunities is a commercial decision for Xinja.”

The one time neobank says it will now focus on non-banking areas like share trading “should circumstances allow”.

Chasing capital

The digital only bank never released a lending product so was under continuous pressure to pay out on its high interest savings accounts, known as Stash.

In January 2018 the digital bank was the first in Australia to take advantage of new laws allowing equity crowdfunding, repeating the strategy a year later to help get Xinja up and running. 

In March Xinja said it had raised $70 million in total, from Australian and offshore investors and asked its customers to chip in more for a series D raise. But Australian law meant it could only seek money from customers that met the definition of sophisticated or wholesale investors. 

A few weeks later, after revealing it was not taking anymore customers for its high interest saving accounts,  Xinja announced it had secured $433 million from mysterious Dubai-based investment group

The lifeline included A$160 million immediately to Xinja, with the remaining A$273 million available to be drawn down in multiple tranches. But the bank appears to have had difficulty repatriating the funds.

Xinja raised more eyebrows in October when it announced it was closing down its product roadmap after missing self-imposed deadlines.

Its off

Today the Xinja website was updated with the following message:

“Xinja has decided to exit banking business and return its ADI licence.  As such, the Xinja Bank Account is being discontinued and the Xinja Stash account will be discontinued on 23rd December 2020.”

In an email to customers this morning Xinja CEO Eric Wilson said, “Obviously, this has been an incredibly tough call as all of us here wanted to be able to offer you a new, amazing way to bank, but after Covid-19 and an increasingly difficult capital-raising environment affecting who is willing to invest in a new bank, we are convinced that the best thing is for Xinja is to pivot away from being a bank.”

Digital darling

Xinja launched in 2018 promising to disrupt the majors with attractive rates and a snappy mobile app. Built entirely on cloud technology Xinja preached agility and customer experience,

It built a cloud based core banking platform in just 11 weeks using SAP which it said had the potential to “revolutionise banking”.

A few months later it received a restricted banking licence from APRA and less than a year later in September 2019 it had the full one, becoming an authorised deposit-taking institution and eventually offering transaction and savings accounts.

In July this year the banking startup said it was expanding into share trading with a trading platform called Dabble.

“We hope to refocus the business in other areas such as our US share trading product, Dabble,” the bank said today, “should circumstances allow.”

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