By Oliver Smith on Friday 18 December 2020
Offering sky-high interest rates, plus a lack of capital led to Xinja’s decision to stop being a bank.
Earlier this week one of Australia’s high-profile, and high-interest, digital banks finally decided to call time on its heavily loss-making enterprise.
Xinja refused to cut the 2.25 per cent it was paying savers until May 2020, long after rivals and incumbent banks had slashed rates following the Reserve Bank of Australia’s decision to move to rock-bottom rates of 0.25 per cent.
However, a bumper A$433m funding announcement earlier in March 2020 before Covid-19 really struck reassured many savers. However, it’s clear from Xinja’s statement this week that not all was well behind-the-scenes.
“After a year marked by Covid-19 and an increasingly difficult capital-raising environment, and following a review of the market in Australia, Xinja has decided to withdraw the bank account and Stash (savings) account and cease being a bank. This was an incredibly hard decision,” Xinja said in a statement.
“We hope to refocus the business in other areas such as our US share trading product, Dabble, should circumstances allow.”
As part of the decision, Xinja will also be returning its banking licence to the Australian regulator.
Xinja insists that deposits and savings are safe and that customers have ample time to withdraw from their accounts before they are closed on 6 January.
However, time will tell whether this high-profile player’s retreat from the market will ultimately be positive as the sector matures.