Xinja plans non-banky surprises as APRA greenlights bank licence

  • By Christine St Anne

Xinja is now the fourth neobank to receive its full bank licence from the prudential regulator, with the budding bank already rolling out a transaction accounts with plans for ‘unbanky surprises’. 

Other banks include 86400, Volt Bank and Judo Bank 

On Monday, APRA announced that it had granted Xinja its full bank licence. Xinja was granted a restricted banking licence in December 2018. 

Xinja CEO Eric Wilson said he was both “excited and terrified” in equal parts but is excited about the outlook for the new bank. 

“It’s enormously exciting that Australians have a new, independent bank," Xinja CEO Eric Wilson said.  

"It’s time Australia's very old banking model was disrupted. We are 100 per cent digital, and we want people to have a real alternative to the incumbent banks,” Wilson said. 

“We want to give customers a real choice to be able to be with a bank that looks after them.” 

On Monday, the bank also announced the launch of its transaction accounts – accessed via its app and comes with a Xinja Debit Mastercard. 

It will soon launch ‘Stash’ or savings accounts as well as some “other fun, unbanky surprises”.

Here Wilson noted that the business is still testing the ideas around these unbanky offerings, but these services will focus on helping people saving and invest. 

Xinja has already garnered customers – distributing more than 12,000 prepaid cards, which are in use on average in 17 countries per day, and over 28,000 people have already signed up for Xinja. 

Existing prepaid card customers and those already on the waitlist will be the first to get access to Xinja’s new bank accounts.

It has raised more than $5 million in two equity crowdfunding campaigns in January 2018 and January 2019.

Xinja also plans to rollout lending products with overdrafts and personal loan products planned for launched in early 2020. By the middle of that year, mortgages will also be launched. 

Wilson acknowledges that the big banks dominate the mortgage industry and also have the advantage in terms of costs of funds. 

However, at the same time Wilson adds that they also have large overhead costs.

“We don’t’ have the cost of legacy systems or branch costs. Our cost of operations is much lower. 

“Once we build our [mortgage] book, we will be well placed to even compete in terms of cost of funds. Then it will be really interesting.” 

The bank is currently developing a mortgage broking strategy to help drive its mortgage business. 

We also want to reward people who stick with us. That turns the current model on its head

“We will be giving our mortgage brokers access to the same innovative technology as our customers” 

RFI Group data to date has revealed that consumers still lack the awareness of neobanks

However, Wilson believes that its customer proposition particularly around ethics will boost consumer awareness. 

Xinja Bank is shaking things up. Its ‘ten golden rules’ include making money but (rule  number 4): “we don’t lie to our clients in person or in marketing. If our grandmother would think it was wrong, then it is. We aim to make lots of money ethically and we are proud of it.”

Xinja won’t offer credit cards because the only way to make money “… is when your customers make poor decisions,” Wilson added

“We also want to reward people who stick with us. That turns the current model on its head – the existing banking model offers higher saving rates to new customers but ignores those people who have been loyal.

“We also hope to be able to use data for risk assessment that allows us to offer better lending rates for good financial behaviour.”

Wilson also believes that the neobank is not a millennial play. 

"We have customers aged from 14 to 96. It's all about attracting people who want a good deal and are comfortable with transacting on their phone." 

The Xinja team has grown to around 65 permanent staff, guided by a board that includes advisor Jason Bates, co-founder of UK neobanks Monzo and Starling; Thomas Vikstrom, a former leader of Tesla’s engineering team, and Brett King, who is a former advisor to the US Obama White House on the future of banking.

Speaking from the US, King said: “It’s wonderful to see Xinja delivering on its promise and continuing to lead the Aussie challenger bank pack.”

Bates added: "I have every confidence Xinja will follow in the footsteps of the neobanks that are changing the face of banking in the UK and Europe."