Xinja’s Australian Neobank Dream Comes to an End

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Euromoney, December 16 2020

Xinja, the neobank launched amid an Australia banking crisis and with a vision to be different, has announced it will quit banking just a year after being licenced to start.

“Please note that Xinja has decided to exit banking business and return its ADI (authorised deposit-taking institution) licence,” said a note on the bank’s home page on the morning of Wednesday December 16, under its usual headline ‘How money should be’.

Two products, the Xinja Bank Account and Xinja Stash Account, will be discontinued on December 23, the bank said.

I first interviewed founder Eric Wilson in 2017, as Commonwealth Bank of Australia was reeling from scandals in its life insurance and financial planning arms, and momentum towards a reputation-shredding royal commission gathered pace.

Wilson himself had come through the ranks at National Australia Bank, running one of its subsidiaries, National Australia Trustees.

A combination of that role and the stories his father-in-law told him about being a bank manager in small bush towns for the Bank of New South Wales 40 years earlier had ingrained in him a sense that banks ought to be doing better with people’s trust.

“The position of a trustee is the highest form of legal obligation you can get,” Wilson told me in Sydney that day. “We managed about A$1 billion ($758 million) of vulnerable people’s money, people who have been hit by a truck or had a brain injury and couldn’t manage it themselves.”

He didn’t see that trust being reflected in modern banking.

“Over 20 years, my industry has not behaved well,” he said then.

He had been discussing the matter with a friend, he recalled; in the end that friend had told him: “Stop whinging and start a bank.”

He did, teaming up with several former Macquarie bankers and others with experience of starting banks in the UK.

Cool banking

The next time I met him, in April 2018, it was clear that the idea of a bank doing things differently had struck a chord: Xinja became the first financial institution in Asia Pacific to raise equity through crowdfunding.

It would go on to raise a total of more than A$5 million through that route, alongside A$45 million from private and institutional investors.

The team was different – and almost cool.

Wilson projected decent calm, while customer innovation officer Van Le was an image of progressive urban style.

Photos from that time of them alongside treasurer Verity Froud look like album covers – Le in ripped jeans, Wilson seated on the wooden benches of a city wharf in the sunset.

But could they actually run a bank?

It took another year before the Australian Prudential Regulation Authority (Apra) granted Xinja Bank an unrestricted banking licence in September 2019, after which Xinja launched a saving account called Stash, and said it would add loan products in the first quarter of 2020, starting with overdrafts, then personal loans and home loans.

But that was the problem.

By the time Covid dislocated everything and everyone, Xinja was paying out plenty of interest in its savings products, but unable to start a lending business.

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Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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