Neobank Xinja closes as COVID bites capital-raising ability
Neobank Xinja has announced it will close all accounts and hand back its banking licence after struggling to raise capital during COVID-19.
In an email to customers Xinja said it would discontinue its bank account service and its Stash accounts.
Xinja's US share trading product Dabble will continue if circumstances allow.
Key dates for the for the closure of some features are listed below.
Xinja's CEO Eric Wilson said the business was pivoting away from being a bank.
"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 COVID19 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," Mr Wilson said.
"We'd like to reassure you that your funds are completely safe, and you'll be able to easily access your funds and have ample time to transfer them to another account."
Wilson said because Xinja held a banking licence, its customers were covered by the government's Financial Claims Scheme.
Under the scheme, deposit holders are given a safety net of coverage up to $250,000 if a bank were to fail.
"We'd like to reassure you that your funds are completely safe, and you'll be able to easily access your funds and have ample time to transfer them to another account," Wilson said.
"We are working with The Australian Prudential Regulation Authority (APRA) who are closely monitoring Xinja's return of deposits to ensure everything goes smoothly and safely."
- 14th December: interest on Stash accounts accrued up to and including this date
- 15th/16th December: final Stash interest payment made and Stash accounts no longer earn interest
- 16th December: instant top up no longer available
- 23rd December: Stash accounts closed – inbound payments of any kind no longer accepted
- 30th December: Xinja starts to automatically close all bank accounts that are empty
- 15th January: cards and payment facilities no longer working from this date
A neobank (or new bank) is a totally digital banking system that does away with traditional banking services such as bricks-and-mortar branches.
The theory behind a neobank is that because it is run completely digitally, it does not carry the same operating overheads of traditional operators.
This means (theoretically) they can offer better interest rates and lower fees due to lower expenses.
Neobanks are run almost exclusively from an app on your smartphone, and often offer services such as debit cards.