Popular Australian digital-only bank Xinja shutting its doors

Australian-based digital-only bank Xinja has announced it’s handing over its banking licence and has given customers one week to transfer their funds out of their accounts before they’re closed for good.

The relatively new ‘neobank’ at one point offered the highest interest rates on the market with a turnover of 2.25 per cent before it started incrementally decreasing from May onwards before eventually announcing their decision to shut up shop entirely on Wednesday.

In their official statement, the bank revealed that its high interest rate “Stash” savings accounts would be closed by Wednesday, December 23, before all cards and payment facilities would cease entirely by Friday, January 15. It also assured customers that their money was safe under government protections, and the process was being monitored by the prudential regulator.

“Xinja is already safely executing the return of customers’ deposits, which will continue over the next couple of weeks,” the message read. “The Australian Prudential Regulation Authority (Apra) is closely monitoring Xinja’s return of deposits to ensure that funds are returned in an orderly and timely manner.

“Under the terms of the product, Xinja is giving its customers the required seven-day notice before closing the Stash Account and will be encouraging them to transfer any funds out of bank accounts as soon as possible. The Xinja App and support teams will be available to help customers make the transition during this period.”

In the more personal letter sent directly to customers, CEO Eric Wilson said he was devastated that the decision had to be made. “I’d also like to say a huge thank you for opening a Xinja Bank Account in the first place, and I’m gutted not to be able to continue this service for you, but I hope you might consider using us if we launch new services next year,” he wrote.

The “new services” could be referring to the bank’s plans to refocus on other areas in the market, such as its partnership with Dabble. Dabble is a share trading platform that gives customers access to thousands of US shares and exchange traded funds (ETFs) for a low monthly subscription fee.

However, this idea of “free” short-term trading has long been under scrutiny from money experts, who say it’s more like gambling than trading. In July, Scott Phillips, chief investment officer at The Motley Fool, tweeted against the “free US brokerage” scheme, calling it “a drug: addictive and boundary lowering/reducing”.

In a separate statement about the bank’s closure, Apra noted that the bank’s move to exit the banking industry and pursue other business opportunities was a “commercial decision”. The national watchdog added that it will ensure the bank returns all funds to depositors and relinquishes its licence to operate as an authorised deposit-taking institution (ADI) in a timely manner.

Customers of the bank are also protected under the government’s Financial Claims Scheme (FCS), which ensures accounts of up to $250,ooo per person, per institution, will be returned to them if an institution collapses.

The final interest for Stash accounts was accrued up to and including December 14 and has already been paid out. Meanwhile, customers who fail to transfer funds out before the cut-off date of December 23 will have it done automatically for them by the bank.

By December 30, all empty bank accounts will automatically close, meaning customers don’t have to do anything themselves, so long as all their money has been taken out, before all cards and payment facilities are shut off by Friday, January 15.

Since its launch, the neobank has been under fire for its hard-and-fast business strategy, which resulted in the institution accepting a $433 million lifeline from Dubai-based World Investment Group (Wig). According to its financial statements throughout the year, the bank was highly dependant on raising additional capital to fund its development after a net loss of $36 million in 2019, which reduced its net assets to just $25 million for the year ending June 30, 2020, despite the company raising $55 million during the year.