Interview: Eric Wilson, Xinja – upbeat Down Under

Eric Wilson, Xinja

In an exclusive interview, Eric Wilson, founder and CEO of Australian neobank Xinja, discusses European challengers, the flaws of the big four, and how his father-in-law inspired him.

The glory of the gold medal. The honour of victory. Most people aspire to being first and claiming the sweetest prize of success.

Located Down Under but eternally upbeat, Sydney-based Xinja has emerged from the shadows to unveil its plans for a mobile-only digital bank.

It is the nation’s first neobank, and if all goes to plan, it should be the first one to get all the required licences to start operating and take on the dominant players.

Of course, businesses always have competition. In March, Melbourne-based Judo Capital officially unveiled its banking plans as it targets Australia’s SME sector.

Judo says it aims to become the country’s first true “challenger bank” for SMEs, based on the models delivered by UK challengers such as Aldermore, Shawbrook and OakNorth.

But Xinja is not thrown by Judo’s moves as it is already a few steps ahead.

In May 2017, Xinja raised in excess of AU$2 million ($1.5 million) in its first-round funding to launch a pre-paid debit card as a precursor to establishing Australia’s first fully digital, independent neobank built for mobile. The bank will have no bricks and mortar branches.

In February, Xinja edged forward as it was granted an Australian Credit Licence (ACL) from the Australian Securities and Investments Commission (ASIC).

Soon after that, in March, it unveiled its prepaid travel and spending card and app. It has also just raised about AU$15 million ($11.6 million) in a Series B raise which will close shortly with AU$2.5 million ($1.9 million) of this coming from Australia’s first equity crowdfunding offer.

Few could dispute it’s been making progress.

Flowing

When FinTech Futures spoke to Wilson he was in the middle of two key funding raises (in France and Singapore).

The Series C raise will commence in the next couple of months. Wilson notes that it’s “just starting to have those conversations now” and it’s aiming for a further AU$15-20 million ($11.6-15.5 million).

While those figures and funding are crystal clear, do the people he meets understand the idea of a neobank straight away?

Wilson says: “In Europe and the UK, where there’s the likes of Monzo, Starling and N26, it was an easier conversation immediately. They asked about plans.

“But in Southeast Asia and Australia, people asked what’s a neobank, and why do we need another one. We have the big four in Australia – ANZ, CBA [Commonwealth Bank of Australia], NAB [National Australia Bank] and Westpac.”

Abuses of power

Wilson praises the regulators in Australia but did have some pointed words for the big four banks.

He was keen to stress that they constitute an “oligopoly”. And with that, there are “abuses of power”. Wilson says: “We are seeing that with the Royal Commission into ‘Misconduct in the Banking, Superannuation and Financial Services Industry’.”

To give you some background, in the aftermath of the global financial crisis, the Financial System Inquiry found ANZ (as one example) knew more than 80,000 Australians lost billions of dollars due to the collapse of managed investment schemes, poor financial planning advice and other misconduct.

The plan is for the big banks to think about why these failings happened and what they have done to fix them and stop them from happening again.

In Wilson’s view, the Australian Treasury is pushing the regulator to let more entrants in.

While there is no love lost for the titans, it’s a very different matter for fellow challengers.

As you may know, Jason Bates, Monzo’s co-founder, joined the Xinja board last year.

When asked if Xinja models itself on Monzo, Wilson explains: “There’s no commercial relations with Monzo” – aside from Bates on the board – “but we admire Monzo and its culture and community. We would love to mimic that and bring it to Australia”.

“We have spoken to other neobanks” – and “that’s quite typical – we are trying to help each other out and revolutionise banking”.

Near not far

In terms of the future, then over the next few months it should get its final licence.

Its home loans were released in April as a beta product. The bank licence may be obtained in Q2 this year – possibly June. As soon as that pops up, Xinja will immediately launch current accounts.

The bank has 24 staff at moment – but he can see that “easily doubling by next year”. As an example, he cites Starling Bank which is two years ahead of Xinja, and has 200 staff.

To give you some more stats, then Xinja’s prepaid card was released three weeks ago and it has a waitlist of over 5,000 people.

Wilson explains that it is “deliberately not fixing timelines beyond six months as it’s hard to say at this stage of development”. That’s fair enough.

We also discussed the marketplace concept which has swept across the fintech world.

“This is interesting to me as the concept is much more developed in London than in Australia. We should be in a position to create it and it’s very high on our list of priorities.”

Targets in practice

Some of the newer banks seem to set their sights on the millennials. Not so with Xinja.

“We’re targeting everybody – we’re interested in 19 or 90.”

He adds: “If you look at the demographics for the more mature neobanks, it’s not necessarily 18-25. It tends to be 22-48, and it’s quite widespread. We are not just offering a current account. We also offer prepaid cards and home loans, which tends to skew the demographic up the chart.”

For its tech, its banking platform is used on a Software-as-a-Service basis. He didn’t want the vendor to go on record as they were in the middle of negotiations.

Xinja can also offer APIs to use and has a mortgage origination platform, and the latter is supplied by Australian fintech specialist Iress. Wilson says this platform can approve mortgages in 20 minutes. Applicants should get a non-conditional offer – which in comparison to the traditional process “usually takes two to three weeks”.

Again, it will have competition here. Last year, Australia-based start-up Tic:Toc launched an online home loan platform, offering customers approval in 22 minutes.

Tic:Toc is backed by Bendigo and Adelaide Bank, as well as the State Government in South Australia, which approved a $900,000 grant through its Investment Attraction Agency’s (IASA) Economic Investment Fund.

Marketing smokescreens

With the advent of open banking, a lot of the large banks have been partnering with fintechs. Does he see that as a threat to the Xinja model and would he team up with the mighty quartet?

He first answers with another comment on the less-than-fab four: “We have had a Productivity Commission in Australia and the government says competition was stifled by lots of different brands but all owned by three or four businesses. It’s called a ‘marketing smokescreen’ to hide a lack of competition, and that worries me a bit.”

But quite a few firms do talk to big banks. Think of Atom and Holvi – and their acquisitions by BBVA.

For Wilson that won’t be happening. He did work at NAB for four years, as CEO of National Australia Trustees, and as an enterprise programme director of Future of Financial Advice Reforms.

“The big four are now direct competitors. We wouldn’t accept money from them as that’s not appropriate. We are keen to avoid them as their brands are under attack at the moment via the Royal Commission. It’s all a mess at the moment.”

There is little respect, but there is a lot of admiration for the people who inspired him to create Xinja.

“My father-in-law was an old school community bank manager in a little town in the middle of nowhere. He was a trusted part of the community and people went to him for advice. He lent appropriately and made sure no one got into trouble.

“He and I talked about that on a number of occasions. He’d ask ‘why isn’t banking like that?’. It used to be, even when I started in financial services. But it’s not anymore. People are being lent too much. They are treated like a number and there’s no service.

“He was right. I was working at NAB’s National Australia Trustees, and they had an even higher level of responsibility and accountability. He got in my ear and the more I saw it, I finally came to a point that I didn’t want to lend my strengths to that but fix it. I want to put bankers back in the centre of the community and bring some humanity back.”

There was also plenty of input from Bates. Wilson has known him for 20 years now, and he encouraged him to start a bank.

But Wilson is under no illusions about this journey.

“It’s an achievement if it works. Without doubt it’s the most difficult and stressful thing I have ever done. But also the most joyous and worthwhile. People write to me and say we will hold you to your promise that you will act ethically and in a good way. It’s a little terrifying to have this responsibility but also rewarding.”

What’s in a name?

Xinja’s a cool and catchy name, and naturally has origins in the word “ninja”. Wilson points out he and his staff liked the name Money Ninja. But really they wanted something beginning with “X” and via marketing testing, Xinja came out ahead.

By “complete chance” the name Xinja means “fortunate house” in pidgin Chinese. A stroke of good fortune.

Ninjas in feudal Japan would have skulked in the shadows, eyeing up their target, planning their deadly move.

Xinja left stealth mode some while back, and is now making its ambitions loud and clear about taking on the big four and shaking up the Australian banking scene.

It is no longer silent. It merely seeks to silence its rivals.

The article is also featured in the May 2018 issue of the Banking Technology magazine. Click here to read the digital edition – it is free!