The initial investment has been made at a $235 million valuation, the same as Xinja's ongoing Series D round. Binding agreements were signed late last week, despite the mayhem in markets brought on by the coronavirus, following two years of negotiations.

Xinja CEO Eric Wilson said business plans would be reassessed in light of the massive market dislocations but the new funding would allow it to take on the major banks in deposits and lending.

"It's a large sum of money, designed to help us grow our business. This will include new engineers, technology and marketing, and will also help us take more deposits and grow a strong lending book, while maintaining a very strong capital position," he said.

The COVID-19 chaos would prompt Xinja to "review our strategy on a weekly basis". he added.

"The reality is things are changing so fast and everyone will be keeping a close eye on where they are going."

World Investments will become a substantial shareholder in Xinja, and approval from the Australian Prudential Regulation Authority will be required at the time the next tranche is drawn down, when it goes over a 20 per cent ownership threshold. Pricing for the additional drawdowns by Xinja will be renegotiated.

After the Reserve Bank of Australia's first cash rate cut this month, Xinja refused to reduce the 2.25 per cent deposit rate it has used to lure new customers. It closed deposits for new customers, continuing to take deposits from existing customers.


It has more than 45,000 accounts, and deposits have grown to around $450 million with existing customers topping up balances as major banks slice savings rates.

Its overheads are costing about $2 million a month; Xinja recorded a loss of $21 million in the year to 2019. Because it has not started to lend yet, it has to pay out interest to customers but cannot earn anything on making loans.

On $450 million of deposits, its annual interest costs are around $10 million, offset by returns in a portfolio of investments including government bonds. It plans to launch personal loans in June – and home loans later this year.

Mr Wilson said despite the big capital injection, the neobank would not be turning deposits straight on again.

"I know everyone thinks we are bonkers for it, but we will continue to turn deposits on and off when we need them," he said. "As we need deposits to lend when lending comes online we will open them up again."

He confirmed Xinja was never told at any point by APRA to stop taking deposits, and the decision to close its accounts for new savers was not due to any capital ratio requirements.

World Investments considered investing in Xinja's earlier series A, B and C funding rounds. But seeing itself as a "supercharger", it decided to wait until Xinja's launch, so it could see growth rates in January and February, before committing funding.

"They felt launch went so well and we got great customer acquisition," Mr Wilson said.

The deal was brokered for Xinja by First Penny Investments.

Xinja's deposits up to $250,000 are guaranteed by taxpayers via the government guarantee, which applies to authorised deposit-taking institutions. It received its licence from APRA six months ago.