The prudential regulator says Xinja Bank’s licence is now unrestricted, prompting the neobank to immediately launch new transaction accounts into the market on Monday, as it seeks to attract Millennial customers away from the major banks with a data-driven, digital-only offering.
Xinja joins four other new banks to win licences after passing scrutiny by the Australian Prudential Regulation Authority: 86400, Volt Bank and small business lender Judo Bank. Another new digital bank, Up, is using the licence of Bendigo and Adelaide Bank.
Xinja’s entire banking system is run in the cloud, using software and storage provided by global tech giant SAP; the bank maintains no computer servers of its own.
With each of the neobanks taking different approaches to products, Xinja has provided more detail of its intended offering: it has launched transaction accounts via its app, which come with a debit Mastercard. It said it will soon launch savings accounts, to be called “Stash”, and it plans to add lending products in the first quarter of 2020. It is understood the first loans will be overdrafts, and it will then move into personal loans and then home loans.
Xinja is targeting technologically savvy customers in the 25 to 45 demographic and founder and chief executive Eric Wilson said it would look to deliver “hyper-personalised services that leverage customers’ data in their interests”.
The new arrivals come after APRA changed its licensing regime in response to the 2017 federal budget, in which the government asked the regulator to be more supportive of banking competition.
Xinja, which launched in May 2017, has around 65 permanent staff and around 12,000 prepaid cards in the market. Xinja said 28,000 people have signed up. It therefore has a long, long way to go with customer acquisition before it becomes a concern to the major banks, who have millions of customers and believe the start-ups will struggle to provide services distinct enough to lure customers away.
Commonwealth Bank has already launched a competitive response to the neobanks, updating its banking application – which attracts 5 million log-ins each day – with enhanced data analytics, including more personalisation.
Xinja has raised $45 million from private and institutional investors and more than $5 million via crowdfunding campaigns. It was previously licensed by APRA in December 2018 as a “restricted ADI”, allowing it to hold a total of just $2 million in deposits while it tested systems and processes under APRA’s scrutiny. But in licensing Xinja to operate as an authorised deposit-taking institution (ADI) without restrictions under the Banking Act of 1959, APRA is now comfortable with its processes. Mr Wilson described the APRA process as “incredibly thorough”.
“We have been really busy building the best systems, to the highest standards authorities rightly set, to get our bank up and running,” he said.
There are no neobanks currently operating under an unrestricted licence but it is understood APRA is considering several applications. Foreign neobanks like Revolut are also targeting the Australian market.