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Australian neobank Volt goes to the wall

Australian neobank Volt goes to the wall

Australia's first fully-licenced neobank Volt is to shut down - giving customers barely a week to withdraw their deposits - after failing to pick up sufficient funding to support the business as a going concern.

Volt Bank is one four Australian neobanks approved by the Government with a view to increasing competition in the retail banking market. Xinja Bank threw in the towel in December 2020, while 86400 was flogged off to National Australia Bank. Of the four just Judo Bank remains.

The shift to digital caused by the global Covd pandemic forced the incumbent banks to up their game, nullifying the online edge of the new market entrants. At the same time, rising interest rates have made borrrowing more expensive amid a VC flight from loss-making fintechs that has hit market valuations across the sector.

A year ago, Volt raised A$85 million, with mortgage broker Australian Finance Group (AFG) (AFG.AX) paying A$15 million for an 8% stake. Volt returned to the market this February with hopes of raising another A$200 million but failed to find many takers, a person with knowledge of the plans told Reuters.

"We have considered all options but ultimately we have made this call in the best interest of our customers," Volt founder and CEO Steve Weston says."The entire Volt team is deeply disappointed to have reached this point."

The company had A$113 million ($78 million) in deposits and A$80 million of home loans as of April.

Customers have been told that they need to withdraw their funds from their Volt bank accounts before the 5th of July 2022

"It is recommended that all customers stop using their accounts immediately," says the company. "Volt will start closing accounts from the 5th of July 2022 so please ensure you have withdrawn all your funds to leave a balance of $0 in all accounts before then.

"Volt is doing everything possible to return the deposits in an orderly and timely manner. The Australian Prudential Regulation Authority (APRA) is closely monitoring this process. In addition to this, deposits are protected under the Australian Government Financial Claims Scheme which guarantees deposits up to $250,000 per account holder."

Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 29 June, 2022, 18:16Be the first to give this comment the thumbs up 0 likes

Tch tch... Surprising that Volt didn't get a White Knight in the form of a Fast Follower Bank, as dozens of fintechs have managed to in the past in what I call the FI Innovation Playbook

A Finextra member
A Finextra member 30 June, 2022, 08:141 like 1 like

Retail banking is in the developed world countries well suited for remote services, i.e. digitalisation and thus open for newcomers to offer services in competition with thetraditional "brick-and-mortar + digital" providers. For the general public the retail bank services are of low interest and only a minority of customers are attracted by the "neo-banks" offers since the traditional provider services are "good enough". Thus the neo-banks fail to attarct enough customers to make ends meet. In connection with the interest rent increases post Covid19 the vestors that have financed the neo-bank ventures, have realized this and are now less inclined to continue to fund the loss making neo-banks. All the "smart money" is moving to greener pastures and the option for loss-making neos is to close down. The same thing has also happeneed for the"neo-payment providers" . Next fintech business sector up for a shake-down is BNPL due to coming regulations that will increase cost of operations and cap revenue streams.