Australia may soon have its first ‘neobank’ with the arrival of Xinja, a digital-only firm which hopes to gain its banking licence and eventually expand into home loans.
Xinja is a full service digital retail bank built for mobiles and mirrors the ‘neobanks’ popping up globally in the UK, US and Europe, CEO Eric Wilson told Australian Broker
The phrase, neobank, was coined in the UK and refers to a bank without any traditional infrastructure such as branches or legacy IT systems that often plague even the newer non-major banks, he said.
An executive with National Australia Bank for four years, Wilson eventually moved on in December 2015 as he felt technology could provide better outcomes for banking customers and staff.
“There are all sorts of wonderful things we can do with technology to serve customers that perhaps the larger legacy banks can’t because they have the old legacy systems in place.”
Over the past year and a half, Wilson has been working to establish Xinja and is currently talking with APRA and ASIC to gain a credit and banking licence.
“The next nine months are around the technology build. We’ll be building our first product and releasing it after six months – a pre-paid debit card – which obviously we can do without a banking licence.”
Wilson hopes Xinja will become an ADI within a year, start taking deposits in 18 months, and begin offering mortgages in 18 to 24 months.
Half the Xinja team have banking backgrounds including an ex-treasurer from Macquarie and a chief risk officer who held the same role at one of the non-majors.
“What’s really interesting is the other half of my team are, quite deliberately, not bankers but from very high customer care industries,” Wilson said. “My customer innovation director, Van Le, is a human design expert. She builds companies around what customers need, what their problems are, and how we solve them.”
At the time of writing, Xinja had raised just under $3m in funding in a single funding round held in the beginning of May which closed after five days.
Speaking about digital only mortgages, Wilson said that while this technology was not offered by all lenders across Australia, it is quite common elsewhere.
“If you look overseas, where a lot of our technology is coming from, you find that there are a number of entirely digitised processes often using brokers. It’s not about replacing brokers because I think we still need that intelligent, rational review of products on the market. It’s about the ability to have an end-to-end process where you don’t have to speak to someone if you don’t want to.”
While Xinja was yet to make a decision around working with brokers in the future, Wilson said there was no reason not to utilise the third party channel.
“More than half of Australian mortgages are done through brokers. They provide an important, rational decision-making process. We think we’re going to have an utterly incredible product so why would we deny ourselves that channel? Brokers have a really important part to play.”
With Xinja in the process of pre-registering customers now, Wilson asked brokers to register on the bank’s website and give their feedback in that way.
“We’d be fascinated to talk to brokers to find out what their financial needs are,” he said. “It would be great to get their feedback and build Xinja with brokers in mind as well.”
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