‘Everyone has a plan until they get punched in the mouth’: How Xinja got smashed by COVID-19, and how it plans to get back up

Xinja CEO Eric Wilson
  • Prior to COVID-19, Australian neobank Xinja was on top of the world, having sealed a $433 million investment from Dubai World Investors.
  • However, with the pandemic putting that deal on ice, Xinja has been forced to shore up local equity as it rides out one of the most uncertain economic periods in Australia’s history.
  • Meanwhile, it’s set to launch a share trading platform before conventional products like mortgages or personal loans.
  • Visit Business Insider Australia’s homepage for more stories.

In the lead-up to its launch, Xinja talked a big game about how it was going to change the way we banked.

Fast forward the better part of a year, and the company and its rivals in the neobank sector find themselves in the midst of a global pandemic no one saw coming.

“I’m not going to say for one moment that COVID hasn’t smashed us around a fair bit,” Xinja CEO Eric Wilson told Business Insider Australia. “It was Mike Tyson who said, ‘everyone has a plan until they get punched in the mouth’. We’ve been punched hard and we’ve had to make a new plan.”

COVID-19 has certainly managed to pack a powerful punch. Just prior to the pandemic, Xinja looked like a title contender, having wrapped up a heavyweight $433 million investment from Dubai-based Emirates World Investments. As countries across the globe locked down, the deal — claimed to be one of the biggest ever for an independent Australian startup — was quickly put on ice.

The one-two combo looked to lay Xinja out on the mat. Having maintained a market-beating savings interest rate of 2.25% with no strings attached, it had already been bleeding cash and now had a major source of funding frozen.

Xinja has taken some advice from former heavyweight boxing champion Mike Tyson. (Donald Kravitz, Getty Images)

The bank, along with other deposit-taking institutions, accepted JobKeeper support but still had to make five “very difficult” layoffs.

“They were pretty much people who were directly related to areas that were heavily impacted by the coronavirus, and one of the obvious ones there is foreign exchange and travel products,” Wilson said.

The situation demanded an injection of cash. A quickfire $10 million local funding round put the company back in the fight while Wilson waits for the Dubai money to come through later this year.

“We think it’s all on track and we have got no reason at all to believe that they’re still anything but super committed,” he said.

If it can commit. The funding, which will see the United Arab Emirates (UAE) investors take a 40% stake in the digital bank, is still subject to regulator APRA and foreign investment board approval.

The pandemic has disrupted the whole banking sector, but neobanks face some of its biggest hurdles.

Laboured boxing analogies aside, the big banks haven’t found the situation much easier, as a treacherous economy undermines their own footing. Australia’s biggest institutions have $260 billion in debt sitting frozen in their loan books, a good chunk of which doesn’t look like it’s going to be repaid anytime soon.

There’s a silver lining for the country’s neobanks, which don’t have to worry about growing bad debts due to the simple fact that only one, 86 400, has moved into credit at all.

But fledgling digital banks face their own unique challenges, like developing products that go beyond fundamental savings and transactions accounts or – in the case of Volt – scuttling a public launch.

Xinja CEO Eric Wilson
Xinja CEO Eric Wilson

Keen to get any revenue stream coming into the business, Xinja revealed it’s been secretly working on an integrated US share trading platform for customers to grow their wealth. Called Dabble, and due to launch in the coming weeks, it’s one of many ways Wilson says Xinja will change banking.

“My hope is we’ll soon see a whole bunch of neobanks like us spring up and they will be offering all sorts of really innovative and interesting financial products,” he said. “That’s the next stage of neobanks, where they become this great big financial ecosystem where customers can go and get everything they need in a really competitive fashion.”

It comes while Xinja and other neobanks are still running behind on fundamentals. While they will soon be able to buy Tesla shares, Xinja customers still can’t do something as simple as scheduling regular payments.

Wilson insists the neobank hasn’t forgotten about traditional banking products.

“The reason is we’re trying to do it all at once,” Wilson said. “We have four development pipelines running right now, as we work on personal loans, mortgages, Dabble and another project as well.”

“We’ve been working on Dabble for seven months and the honest answer it was easier to get out the door than the full end-to-end lending platform technology we’re trying to bring in,” he added.

The others, Wilson insists, are worth the wait, with personal loans to undergo internal testing in around six weeks and mortgages pencilled in for the end of this year or the start of next.

“It’s going to be faster, easier and a lot less punishing than applying for a home loan at the moment with a major bank is,” he said, though remaining tight-lipped on the detail.

“It’s going to be about dealing with the emotions of buying a house rather than just the mathematics.”

While it has certainly made the journey of neobanks a lot more treacherous, the pandemic hasn’t changed their ultimate destination.

“It takes time to truly innovate but we’re getting there,” Wilson said.