After (finally) securing its full banking licence, neobank Xinja opens for business

Aussie neobank Xinja has finally been granted its licence to operate as an authorised deposit-taking institution (ADI) by the Australian Prudential Regulation Authority, and launched its transaction account product, ushering in a whole new era in the challenger bank saga.

Founded in 2017 by Eric Wilson and Van Le, Xinja already has about 12,000 customers using its prepaid credit card product, and 28,000 on its waiting list.

And the startup is making good on its promise to start rolling out products as quickly as possible, Wilson tells StartupSmart.

On the day the licence was issued, it was signing up its first full bank account customers by 12.30pm, he says. Xinja’s ‘stash’ savings accounts are also due to be rolled out soon.

“It’s a wonderful day,” the co-founder says.

“We set out a couple of years ago to try and change the industry, to revolutionise it … finally, we’re there now.”

The licence is a milestone that’s been a long time coming for Xinja. It has held its restricted ADI licence since December last year.

Back in 2017, the startup was the first Aussie startup to take advantage of the new equity crowdfunding legislation, raising $2.4 million. This remained the biggest-ever raise using this method until Xinja beat its own record, raising $2.6 million in March this year.

It has also raised about $45 million from private and institutional investors.

Just last week, Xinja took fifth spot in LinkedIn’s Top Startups 2019 list — although fellow neobanks Volt and Judo both ranked even higher, in third and first place respectively.

“The watershed moment”

Xinja becomes the latest in a string of challengers to receive a full ADI licence, and to bring a product to market.

Up was the first neobank to come to market in October last year, although it’s fully backed by Bendigo Bank, and therefore was able to bypass the APRA approval process.

In January, Volt became the first independent bank to secure its licence, and small business lender Judo was hot on its heels, securing its own licence and rebranding from Judo Capital to Judo Bank.

In July, 86 400, a contender backed by payments provider Cuscal, secured its own ADI licence.

European unicorn Revolut has also announced it is rolling out its beta service Down Under.

However, Wilson says Xinja’s ADI approval could mark a turning point for Australian neobanking.

Although Volt was first to get its licence, “they haven’t been able to get a product out”, he says.

“I’m really, really proud to say it’s us. We’re really happy to be out there, and hopefully, this is the watershed moment.”

Wilson has always welcomed competition in banking. He’s looking forward to the space heating up, he says. And not only through the new players.

“If we’re really lucky it won’t just be us — it will force the other incumbents to raise their game as well,” he says.

This would be “a brilliant outcome”, he adds.

“Of course, we want to build a big business and be successful … but this industry desperately needs shaking up and desperately needs fixing.”

What he doesn’t want to see, however, is new offerings backed by big banks offering more of the same, wrapped up in shiny new ‘neo’ packages.

The introduction of more competition will keep the independent neobanks, and the big four, on their toes, he says.

“The greatest threat to that, however, is seeing those new brands of banks that are pretending to be independent when they’re not.”

He urges customers considering opening a new account to do a bit of digging, and to find out who the shareholders of their new bank actually are.

“Make the effort to have a quick search on the website — although sometimes you have to search quite hard — to find out who actually owns these businesses,” he advises.

It’s not about the money

It’s taken two-and-a-half years, and a lot of work, to get Xinja to the point where it can start running as the bank Wilson envisioned, and the bank he left a well-paid job to build.

“The only thing that keeps you going and that keeps your team going is to have a real fundamental reason for what you’re doing. A belief,” he says.

While Xinja is a for-profit business, it was founded with a mission to help get people out of debt and to help people make their money work harder for them.

“These are the things that we started for, and that people here are definitely passionate about and want to get on with,” the co-founder explains.

“When we first started … it wasn’t about the money. I don’t know if I’m going to make any money from this bank, to be honest,” he adds.

“As a founder, there are some pretty dark times, and to get you through those, you’ve got to remember why you’re doing it.”

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