Neobank Volt has become a victim of tightening investment market announcing it will shut down after struggling to raise capital.
The online-only retail bank was the first challenger brand to receive a new banking licence in 2019.
A statement posted on its website today announced it is closings all deposit accounts and will hand its licence bank to the Australian Prudential Regulation Authority (APRA).
Around $106 million is held in deposits at Volt by 6000 customers, down from $113 million in April.
Customers have been told to stop using their accounts and withdraw any funds before July 5.
“Volt has made the difficult decision to close its deposit taking business and has commenced the process of returning all deposits to its account holders,” the statement said.
“The interest rate on all accounts has been set to zero.”
The bank had been reportedly on the hunt for $200 million in a Series F, having raised $100 million in 2021 and $50 million in 2020.
Unable to find fresh backers, Volt’s board, chaired by Graham Bradley, pulled the pin on the bank. Around 140 people were employed by Volt, and staffing has stripped back to those needed to wind up the fintech.
Volt co-founder and CEO Steve Weston said the Volt team “is deeply disappointed to have reached this point”, will sell its mortgage business and has the capital to refund customers.
“In reaching this difficult decision we have considered all options but ultimately, we have made this call in the best interest of our customers,” he said.
“Volt has executed a transaction to sell its mortgage portfolio and begun the process of returning all deposits to customers in full. The company has the necessary liquidity available at hand to facilitate this process.”
Weston added that Volt has taken steps to reduce all expenses and let go of staff, except those required to support deposit returns and the sale of remaining assets.
APRA, the financial safety regulator, said it will closely monitor the process to ensure funds are returned “in an orderly and timely manner” to Volt depositors.
“Volt’s decision to exit the banking industry and pursue other business opportunities is a commercial decision for Volt,” APRA said in a statement.
Deposits are protected under the Australian Government Financial Claims Scheme which guarantees deposits up to $250,000 per account holder.
A changing landscape
Three years after a flurry of neobanks began to emerge, amid an opening up of licencing regime to encourage competition, and hype over a new era that would change banking, few challengers are left standing on their own. Volt is the second major failure after Xinja 18 months ago.
SME lender Judo Bank is a rare success, having raise $284 million for $1.6 billion valuation last year on its way to a public listing.
Among more recent arrivals Alex remains, having raised $20 million series C last September. It received its full banking licence 12 months ago.
Xinja closed in December 2020 having burned through $70 million in investor funds.
Last year saw Dom Pym’s Up Bank and parent company Ferocia sold for $116 million to ASX-listed Bendigo and Adelaide Bank in August while 86 400 was acquired by NAB in January 2021.
Despite billing itself initially as a “next-generation neobank”, ASX-listed Douugh, launched in 2016, has focused on wealth management in the US. The company announced earlier this month that it was one step closer to releasing its long-awaited financial “super app” in the Australian market. Meanwhile, Douugh’s (ASX:DOU) share price has fallen 86% since listing to $0.015 cents.
Back in 2019, when APRA granted Volt its full banking licence, Weston said it was “a huge responsibility, as we will set the tone for a new era of banking”.
Neobanking rethink needed
Dr Dimitrios Salampasis, fintech leader at Swinburne University said he’s not surprised by Volt’s closure, despite pioneering the space.
“There are multiple contextual readings in relation to this announcement and unfortunate development. I was always sceptical as to how Volk Bank having been given the first mover advantage was never actually able to properly go live and scale its business,” he said.
“I believe that we are observing major shifts in neobanking business models with neobanks struggling to differentiate and compete with existing incumbent offerings and in principle offering products and services that are neither competitive nor generating proper and sustainable revenue.
Dr Salampasis said that one problem the neobanks face is that in times of crisis trust is put on established players.
“Marketing and tech-driven innovation is important but they are not the ones that will ensure a sustainable and robust business model. Unique value propositions are the ones that actually ensure long-term success,” he said.
“I do not believe that neobanking is dead but serious rethinking and re-conceptualisation is necessary both from an entrepreneurial and regulatory innovation standpoint.
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