Australian digital bank Xinja turns away new savings customers

Move comes after Reserve Bank of Australia cuts interest rates.

One of Australia’s upstart digital banks, Xinja, has paused the opening of new savings accounts, following a 0.25 per cent interest rate cut by the country’s central bank.

On Tuesday the Reserve Bank of Australia (RBA) reduced interest rates to 0.5 per cent in response to concerns over coronavirus.

Eric Wilson, Xinja’s founder and CEO, explained in a blog post that following the rate cut the bank had seen “its biggest couple of days ever for new customers”.

“Like any business Xinja has to keep control of its costs and when a bank gets lots of deposits and the RBA cuts interest rates, that makes costs go up.”

Rather than slashing its own 2.25 per cent rate “hurting existing customers while chasing new ones”, Wilson said Xinja will continue paying its existing customers while turning away new business for the time being.

The move doesn’t come at the best time, yesterday Xinja opened its Series D funding round for sophisticated investors, of which 40% or A$20m has already been invested.

In January we reported that Xinja, along with challengers Judo Bank and 86 400, had accrued over A$1bn in personal term deposits, boosted by their high interest rates.

Xinja says it’s hoping to start opening Stash accounts again in a couple of months—possibly when coronavirus fears decline and rates normalise—at which time existing Xinja customers will be given priority in opening new accounts.