Fintech lender Xinja has been granted a full banking licence by APRA, announcing that it will look to launch lending products from early next year and outlining its support of the broker channel.
Xinja Bank, which was authorised to operate as a restricted ADI in December 2018, has now been granted a full banking licence by the Australian Prudential Regulation Authority (APRA).
As such, Xinja Bank Ltd now holds a licence to operate as an authorised deposit-taking institution (ADI) without restrictions under the Banking Act 1959.
The digital bank is designed for mobile and has already reportedly had more than 28,000 people sign up to use it.
Given the granting of its full licence, the bank will today be rolling out bank accounts to early customers.
Speaking of its new licence, former NAB executive and Xinja founder and CEO Eric Wilson commented: “It’s enormously exciting that Australians have a new, independent bank.
“It’s time Australia’s very old banking model was disrupted.
“We are 100 per cent digital, and we want people to have a real alternative to the incumbent banks. We want to give customers a real choice to be able to be with a bank that looks after them.”
He continued: “This has been an incredibly thorough process,” Mr Wilson said.
“We have been really busy building the best systems, to the highest standards authorities rightly set, to get our bank up and running.
“And we have been in constant contact with our customers and investors, many of whom have been on board since the beginning, when all we had was a solid idea about what we wanted to deliver in banking and a bunch of slides to explain it. Our customers have helped us develop, define and refine what we offer.”
According to Mr Wilson, the new transaction accounts will be accessed solely via the new Xinja app and come with a Xinja Debit Mastercard® – and will soon launch Stash, or savings accounts.
Home loans to roll out next year, broker channel a priority
The neobank said it also has plans to add lending products in the first quarter of 2020, including home loans.
Speaking to The Adviser, Mr Wilson reiterated the lender's wish to partner with the broker channel for distribution, highlighting the value of the channel.
Mr Wilson told The Adviser: “We will be looking to deliver overdrafts, then personal lending and home loans, most likely in that order. We have done a proof of concept for the technology to back those and they are looking good. So, we are looking to launch end of the first quarter 2020 for home loans, using that technology.”
While the CEO outined that users would be able to “fill in the application, take a photo of the documentation and press send” on their mortgage application through the app, he added that he would wish to launch the mortgage product through the broker channel,
“We are aiming to have credit decisioning done in eight minutes. So from application to unconditional approval, it could be just eight minutes.
“We hope that is an attractive offer for brokers as well, to have that kind of feedback and unconditional offer for a number of their clients.”
He continued: “So, we are really focusing on the technology and the infrastructure behind the mortgage product at the moment but my preference, personally, would be to launch straight to the broker community.
“Brokers provide more than 50 per cent of mortgages these days and the advice they give borrowers is critically important. If we are not able to launch with brokers straight away then we would be doing it very rapidly afterwards, as soon as possible, because it seems to me that, if you can't put your product in front of a broker then perhaps you're not convinced of its competitiveness.”
Mr Wilson added that Xinja is still building its mortgage product but would plan to build a broker portal in due course.
“What is important to us is that our mortgage product is low fee, very transparent and easy to apply for - both direct and for brokers - and, if someone is rejected for a home loan that it is very clear and transparent as to why that is.”
Xinja has said that it aims to have risk-based pricing based on a "segment of one”.
Mr Wilson told The Adviser: "Typically, at the moment, if you hold a mortgage for a long period of time, you don't tend to get the sharpest rates as the attractive rates are reserved for new borrowers. It's the opposite of a frequent flyer card in that, the longer you stay with them, the worse deal you get. So we will be looking to correct that and make sure that isn't the case for Xinja's borrowers.
“Not only will we reward out customers, but will be able to price mortgages and loans for individuals, rather than just generally. So we'd like to get to a point where the Xinja mortgage rate isn't a market rate of XX per cent but the Xinja mortgage rate is one that is created for you, personally, based off what we know about your lending background and your data through our AI and technology. So that ability to provide a segment of one is really important for us and we are working very hard to make sure we develop the technology and put it into place,” he said.
“The idea isn't that we have to insert human beings into every stage of the credit decision process, but we will have excellent data and an excellent credit decisioning engine that will allow us to make those decisions automatically.
“That is what we are focusing on; the idea that you should be able to get an unconditional approval (or rejection) in seven to eight minutes, rather than two to three weeks, which is the length of time some Austrlaians are waiting to get their mortgage decisions.”
While the neobank has said it would offer loan products, it has revealed that it won’t offer credit cards because the only way to make money “is when your customers make poor decisions”, Mr Wilson explained.
The founder of the cloud-based bank continued: “We don’t have bricks and mortar branches or old technology that we are constantly patching to meet the needs of customers,” Mr Wilson said.
“Our costs will be significantly lower than traditional banks. But it’s not just about technology: our purpose is to help people make more out of their money and get out of debt faster. And if we stick to that, we will succeed.”
He concluded: “Banking has been boring for too long. We fundamentally believe that if you make managing your money engaging, people will get better at it.”
The growing neobank space
Xinja Bank now employs approximately 65 permanent staff, guided by a board that includes adviser Jason Bates, co-founder of UK neobanks Monzo and Starling; Thomas Vikstrom, a former leader of Tesla’s engineering team, and Brett King, who is a former adviser to the US Obama White House on the future of banking.
Speaking from the US, Mr King said: “It’s wonderful to see Xinja delivering on its promise and continuing to lead the Aussie challenger bank pack.”
Mr Bates also commented, saying: “I have every confidence Xinja will follow in the footsteps of the neobanks that are changing the face of banking in the UK and Europe.”
Fellow fintech lender 86 400 welcomed the news of Xinja’s bank licence, with CEO Robert Bell stating: “Congratulations to the team at Xinja on securing their licence. We’re big believers that more choice is good news for Australians and the banking sector as a whole.”
Mr Bell added that 86 400 had also recently rolled out its full transaction and saving accounts to customers who had signed up for early access and will be “launching nationwide imminently”.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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