Reason for Australian bank’s flop
Digital-only bank Xinja will close its savings and transaction accounts, saying the pandemic had stifled its ability to attract new investors.
The neobank, which launched in 2019, said on Wednesday it would close its Xinja bank and stash accounts, saying capital raising initiatives had become impossible because of the economic impacts caused by the coronavirus pandemic.
At the beginning of 2020, Xinja advertised a lucrative 3 per cent savings rate on its deposit accounts that was initially retained after the Reserve Bank clipped the cash rate twice in March due to the lockdown.
Xinja said the decision was in part to direct resources to focus on the development of its US share trading platform Dabble.
"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 for Xinja is to pivot away from being a bank," Xinja said in a statement.
Xinja said it would hand back its banking licence to the Australian Prudential Regulation Authority.
Customers' money will be transferred to another banking account. The federal government guarantees up to $250,000 of someone's funds if an institution collapses.
Xinja had marketed itself as a neobank that would disrupt Australia's banking sector. The company was initially planning on offering home loans by the middle of 2020.
Its other major competitors were Volt and Bendigo Bank-backed digital bank Up.
Originally published as Reason for Australian bank's flop