Xinja holds savings rate despite RBA cut

Neobank Xinja will stop taking new customers for its interest accruing savings account in an attempt to not drop rates.

A customer using a neobank Xinja debit card. Picture: Supplied.

Neobank Xinja will stop taking new customers for its interest accruing savings accounts in order to avoid cutting deposit rates for existing clients, while managing deposit costs.

Xinja chief executive Eric Wilson told The Australian the decision to hold the savings rate at 2.25 per cent for its Stash deposit account was an attempt to maintain customer loyalty before launching its first lending products later in the year.

The move comes as financial institutions across the sector are widely expected to cut rates on savings products, following the Reserve Bank of Australia’s decision on Tuesday to slash the cash rate by 25 basis points to a record low of 0.5 per cent.

Mr Wilson said the “unusual” move to stop taking new customers would enable it to honour the savings rate it advertised when launching the deposit account in early January.

“We won’t drop the rate on Stash accounts now, just because the RBA has dropped the cash rate and demand is much higher than expected,” Mr Wilson said.

The bank also noted the pause on new savings account customers would act as a mechanism to hedge the increased costs associated with providing a higher rate in a low interest environment.

Its savings account has attracted close to 25,000 consumers since its launch, with deposit inflows already exceeding $350m.

The bank initially had a 12-month deposit target of $120m for the product.

Mr Wilson said the lack of new customers was not a concern, as the it did not need to raise any more in deposits until it begins lending.

Xinja is planning to launch its lending products in the middle of the year.

“We think looking after our existing Stash account customers and putting a pause on new

stash accounts is the fairest way all around,” Mr Wilson said.

The savings rate on the bank’s deposit accounts is a variable rate and can be subject to up and down movements.

Mr Wilson said the bank would reconsider its savings rate if the Reserve Bank decided to cut further.

“There has been no decision made at this point,” Mr Wilson said.

“If we still haven’t reopened the Stash account, we would probably try to keep it as it is.”

New customers who have signed up for transaction accounts will get first priority for savings deposit accounts.

The federal government guarantees up to $250,000 on all deposits to Xinja accounts.