Because Xinja is a bank, its deposits up to $250,000 are guaranteed by taxpayers via the government guarantee which applies to authorised deposit-taking institutions.

In seven weeks since Xinja began offering its 'Stash' accounts, 41,000 new accounts have been open by 25,000 customers. Xinja's official Twitter account insinuated that this was a product of "unprecedented demand", jokingly comparing the suspension of new accounts to the coronavirus-related rationing of toilet paper by retail giants.

But the move was really aimed at staving off a cash burn. Analysis of the start-up’s financial statements reveal its overheads are costing about $2 million a month, as it recorded a loss of $21 million in the year to 2019.

Xinja said it has raised over $300 million of deposits – which means its annual interest costs are around $6.75 million.

It is understood the level of deposits, which far exceeded expectations, has seen Xinja approach its minimum regulatory capital ratio. Xinja would not comment on whether APRA insisted that it turn off new accounts until more regulatory capital is raised.

The interest rate of 2.25 per cent being offered by Xinja is even more attractive to yield-starved savers following the wake of the Reserve Bank's emergency official rate cut this week, which led to even more deposits flooding in on Wednesday before the decision was made on Thursday to switch off the product.

"We are not CBA - we cannot take unlimited deposits forever," Mr Wilson said. "That means you get two choices. You either cut the interest rate or limit the amount of deposits you can take. If we didn't do that, we could be looking at capital crunch territory in six months time."


Xinja has commenced a Series D round via crowd-funding platform Equitise, seeking funding from sophisticated investors with a minimum buy in of $20,400. It is understood it has already raised $20 million from the process. It previously raised around $70 million from investors, but the bank will need to significantly lift its capital raising efforts if it wants to materially grow deposit levels.

It is understood Xinja is required to hold Tier 1 capital of 12.5 per cent, so is holding more than the minimum level.

"We have more money than we need," Mr Wilson said. "We may not be in a hurry to turn it back on. We aimed to raise this amount of money in two years, and we raised it in 50 days.

"Lending is the next thing for us - we need to get lending done."

The company has been active in seeking media coverage which Mr Wilson said was five times greater than its nearest competitor.

'Temporary breach'

In Xinja’s most recently disclosed Pillar 3 report, it said had about $16.8 million of capital at December 31 on $24 million of risk weighted assets.

Xinja has previously disclosed during the annual reporting period to 30 June 2019 its net asset position was $8.5 million and had "temporarily breached its capital adequacy requirements" set by the Australian Prudential Regulation Authority.


It is understood the breach relate to the way in which GST was accounted for and was quickly rectified.

A senior banker with expert knowledge of the fintech market, who asked not to be named, said the move suggested Xinja may have launched prematurely.

"I can see why they have paused," he said. "They didn't want to drop the rates understandably because they would look no better than the big banks, so they had no choice but to drop deposits.

"But I'm frustrated because it looks amateurish, when the new guys need to be building a professional new banking sector."

While he praised Xinja's reported $300 million deposit haul over a short period of time, the banker said the pause reflected badly on the company's corporate strategy, particularly given the very public trumpeting of its success.

"It's an old story," he said. "You start to claw market share and get hooked on the drug and suddenly it blows your operations up and you need to stop it."

One analyst said the new fundraising valued the start-up at $230 million, giving it a similar valuation to the 54-year-old Auswide Bank, which has a $3 billion loan book.

Though it aimed the capital raising at wholesale investors, Mr Wilson said in an e-mail to customers that it had lobbied to remove asset restrictions on companies seeking equity crowd-founding be lifted, to allow more investors to own shares in the business.

Correction: An earlier version of this story said another neobank, Volt, was planning a launch for Thursday and this was delayed. Volt will be launching in coming weeks as it always planned to.