Xinja Bank to hit pause button on opening new savings accounts so it can look after existing customers

Xinja Bank to hit pause button on opening new savings accounts so it can look after existing customers

Xinja Bank, Australia’s independent neobank built entirely for mobile, will pause opening new savings accounts so it can look after existing customers following the RBA’s rate cut and unprecedented inflows.

Xinja Bank will hold the Stash savings account interest rate at a market-leading 2.25%, no strings attached. Interest is paid from the first dollar, up to $245,000, calculated daily and paid monthly.

On Tuesday, the Reserve Bank of Australia cut the official cash rate by 0.25 percentage points to 0.50%.

“As always, Xinja wants to break the traditional banking model,” said Xinja Bank chief executive and founder Eric Wilson. “When faced with higher than expected deposit flows, and an RBA rate cut, most banks would just drop deposit interest rates, hurting existing customers while chasing new ones. That’s not what Xinja is about.

“We are holding our rate steady, at 2.25%, but hitting the pause button on customers opening Stash accounts.”

Mr Wilson said the Stash rate is a variable rate, which means it can go up and down.

“However right now, in what are turbulent times, we want to stand by the rate we have offered,” he said. “We won’t drop the rate on Stash accounts now, just because the RBA has dropped the cash rate and demand is much higher than expected.

“But there are three things we have to balance: the RBA rate cut makes it more expensive for Xinja to hold deposits at the same rate before the launch of our lending program; there has been an unprecedented uptake of Xinja Bank by Australians; and now, how we – as a new bank – manage the costs of those deposits.

“Managing those costs as a new bank in a way that cares about existing customers means pushing the pause button on opening new Stash accounts for a while.

“When we make new Stash accounts available again, new customers who have only a transaction account will get first access.”

While home loan rates have fallen, Big Four bank comparable savings rates, for funds held at call, have also dropped to well under 1.0%. For savers, lower interest rates represent a loss of income.

“We think looking after our existing stash account customers and putting a pause on new stash accounts is the fairest way all round,” Mr Wilson said.

“Xinja offers a different way of banking, and that extends beyond technology to how we treat our customers.”

APRA granted Xinja Bank its full bank licence in September 2019. Xinja opened transaction accounts the same day. It already had an app and had launched a prepaid card. In January, it launched its Stash savings account.

Having built a bank from scratch, starting in May 2017, it now has over 25,000 customers, 43,000 accounts and more than $350 million in deposits.

Xinja Bank is like no other Australian bank. It uses the latest technology; there are no bricks and mortar branches, and no costly old-style IT to maintain and patch. It keeps costs as low as possible to offer the best savings rates, and soon, better lending rates, to customers.

Like any other bank in Australia, Xinja Bank is covered by the Financial Claims Scheme, with deposits up to $250,000 protected by the Australian government.

Xinja Bank will launch personal loans and home loans later this year.