Australian ‘neobank’ Xinja clears regulatory hurdle

APRA grants restricted banking licence to Xinja

The Australian Prudential Regulation Authority (APRA) has issued a restricted banking licence to Xinja — a digital-only bank with a focus on mobile.

APRA in May this year released an information paper that outlined a new restricted banking licence. The creation of the new restricted authorised deposit-taking institution (ADI) framework was foreshadowed by a 2017 discussion paper released by the regulator.

APRA said that a Restricted ADI licence would allow an organisation conduct a limited range of business activities for two years while they build their capabilities and resources.

“The Restricted ADI framework is designed to balance the competing objectives of encouraging competition while maintaining safety and stability in the financial system,” APRA chair Wayne Byres said at the time.

“By making it easier for aspiring ADIs to enter the market, APRA hopes to see consumers benefit from enhanced competition and potentially innovative new business models,” Byres said.

“However the limitations imposed on Restricted ADI licensees ensure the public can retain confidence that the safety of deposits with all ADIs is adequately safeguarded.”

In addition to Xinja — which today said it would also operate as ‘Xinja Bank’ — ARPA in May issued a licence to Volt Bank.

Under the terms of the licence, Xinja can hold up to $2 million in deposits (with no single customer allowed to have an aggregate balance of greater than $250,000).

“We are super excited and this announcement confirms our belief that Xinja represents the new way of banking in Australia,” said Xinja co-founder and chief executive Eric Wilson in a statement.

“It brings us one step closer to fulfilling our purpose, which is to help people make more out of their money.”

The company says it already has more than 22,000 customers. It currently offers an app and prepaid card that can act as a travel card in 70+ countries.

In February the  Australian Securities and Investments Commission granted it an Australian Credit Licence, allowing it to offer home loans. Xinja has also applied for an Australian Financial Services Licence (AFSL) from the regulator.

In November, Xinja said that it had gone live on SAP Cloud for Banking. The platform is a combination of SAP S/4HANA Finance, SAP Banking (Loans and Deposits) and SAP Payments Engine, running on SAP Cloud and managed by SAP Cloud Application Services.

The bank is also using IRESS’ home loan platform.

The newly minted bank has raised $17 million from two fundraising rounds, and is aiming to raise $10 million to $20 million in its third round.