Australian neobank Xinja has pulled out and halted its banking operations owing to a tough capital raising environment amidst theglobal Covid-19 pandemic.
Xinja, a neobank based in Australia has shut its banking operations due to a tightened and tough capital raising environment due to the coronavirus pandemic.
Xinja was launched in 2017 as the first neobank in Australia offering high interest on deposits.
In November 2020, the auditors noted that the survival of the neobank is an ongoing concern as it was highly dependent on raising fresh capital and has decided to shut the shop. The neobank has surrendered its authorized deposit taking license and closed all bank accounts with effect from 23 December.
The neobank in a statement on its website said, “After a year marked by Covid-19 and an increasingly difficult capital-raising environment, and following a review of the market in Australia, Xinja has decided to withdraw the bank account and Stash (savings) account and cease being a bank. This was an incredibly hard decision. We hope to refocus the business in other areas such as our US share trading product, Dabble, should circumstances allow.”
Xinja has asked its customers with a 7 day notice before closing their stash account and transfer the funds out of the neobank to other bank accounts as soon as possible. The neobank said, their teams will be available to help and support the customers to make the transition happen.
According to reports, customers are facing difficulties with the product as debit cards are being rejected at POS and online terminals.
The firm said, “”We are receiving reports that Xinja debit cards and apple pay and google pay facilities are no longer being accepted.”
“We are in conversation with Mastercard about this and will let customers know as soon as we have an update. Meanwhile, there is no problem with your transferring funds out of your accounts via the Xinja app or making direct payments from the app.” It added.
It will now return hundreds of millions of dollars worth of customer deposits. While Xinja said it would give customers “ample time” to transfer money out of its coffers, it encourages them to do it before January 6.
Clearly, the shutdown phase is now in full swing, with Xinja asking customers to cancel any direct debits “as soon as possible” and with pay and card functions ceasing on January 15. All deposits stopped earning interest from Monday.
Although the CEO and co-founder Eric Wilson had in many ways led the charge, raising the profile of neobanks and promising they would finally help inject competition into Australia’s long-held banking oligopoly.
Plenty of people bought into the vision. Xinja managed to close two record-breaking equity crowdfunding rounds, raising $5 million from thousands of small investors, investors who may now have lost their stake.
But things began to sour in 2020. Without a lending product, Xinja was haemorrhaging capital as it paid out more than $7 million in interest payments a year without any revenue streams.
Another record investment, $433 million from a Dubai investment group was meanwhile delayed, due ostensibly to the onset of the coronavirus pandemic as well as foreign ownership limits.