Neobank slashes savings rates

Xinja will cut the interest rate on its Stash savings account to 1.8 per cent from 2.25 per cent, after previously being forced to freeze the opening of new accounts to keep delivering that rate for existing customers.

“We held the rate at 2.25 per cent despite successive rate cuts from the Reserve Bank, and we are probably the only bank to have done that,” said Xinja chief executive Eric Wilson.

“We thought it was the right thing to do to protect our current customers rather than chasing new ones, and we achieved it through hitting a pause on opening any new Stash accounts.

“However, it is a variable rate, and we can’t ignore two Reserve Bank rate cuts indefinitely. That said, our rate remains very competitive, and without conditions that banks typically apply to higher interest rate accounts.”

The neobank has only recently begun the rollout of its new Stash account and was targeting $1 billion in deposits by the end of the year after record-low rates caused a rush of $200 million in funds to the start-up in less than a month.

“No more new Stash accounts means no increase in cost to Xinja, and means we can protect the interest rate for people already with a Stash account,” Mr Wilson said in March. “…When faced with higher than expected deposit flows, and an RBA rate cut, most banks would just drop deposit interest rates, hurting existing customers while chasing new ones. That’s not what Xinja is about.”

Xinja is still planning to launch a host of new products, including personal loans in August.

[Related: Refinancing activity surges amid COVID-19]