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A neobank has announced its plans to return all funds to depositors and relinquish its ADI licence.

Xinja Bank, which was authorised to operate as a restricted ADI in December 2018 and was granted a full banking licence by the Australian Prudential Regulation Authority (APRA) in September last year, has announced plans to withdraw its transaction and savings account products and return its authorised deposit-taking institution (ADI) licence.

“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,” Xinja said in a statement.

“We hope to refocus the business in other areas such as our US share trading product, Dabble, should circumstances allow.”

Xinja said it was already returning customers’ deposits, which will continue over the next couple of weeks. 

Under the terms of the product, Xinja said it is giving its customers the required seven-day notice before closing the Stash account and will be encouraging them to transfer any funds out of bank accounts as soon as possible.

The Xinja app and support teams will be available to help customers make the transition during this period.

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APRA noted the announcement and said it was “closely monitoring” Xinja’s return of deposits to ensure that funds are returned in an orderly and timely manner.

“Xinja’s decision to exit the banking industry and pursue other business opportunities is a commercial decision for Xinja,” the regulator said in a statement.

“As Australia’s financial safety regulator, APRA will closely monitor the return of deposits to ensure all funds are returned to Xinja depositors in an orderly and timely manner.” 

Xinja’s depositors remain protected by the Financial Claims Scheme, APRA added.

Earlier this year, the neobank had ceased offering its savings product to new customers in a bid to ease funding pressures and preserve its savings rate.

Speaking at the time, Xinja Bank chief executive and founder Eric Wilson said that it had suspended its Stash savings account offering to new customers, in order to maintain its 2.25 per cent rate for existing customers in light of the latest cut to the cash rate from the Reserve Bank of Australia and “unprecedented inflows”.

“As always, Xinja wants to break the traditional banking model,” Mr Wilson said in March.

“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 per cent, but hitting the pause button on customers opening Stash accounts,” he said at the time.

In March, the bank had also launched a capital raise to build its capacity for customer lending.

[Related: Neobank slashes savings rates]

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