Australia’s first APRA-licenced neobank, Volt Bank, has announced it will exit banking and hand back its ADI licence after failing to meet a recent capital raising target.
“With regret, we are announcing that Volt will be closing its deposit-taking business and intends to return its banking licence,” the neobank announced on its website today.
The bank cited a “challenging” post-pandemic global economic climate for its collapse, noting that it was “unable to secure the funding needed to continue”.
“Our priority now is to ensure account holder funds are returned to account holders as soon as possible.”
Volt added that it has commenced the process of returning deposits “in full” to customers, with banking regulator APRA also noting that it will “closely monitor” the process to ensure depositors receive their funds “in an orderly and timely manner”.
Earlier this year, Volt sought an equity injection of around $200 million as part of its Series F funding round push; in mid-2021, the neobank pursued – with some success – a more modest Series E target of $85 million.
During the Series E round, Volt drew a $15 million investment (representing a 7.6 per cent stake) from local mortgage aggregator Australian Finance Group (AFG), a partnership that would also see Volt extend its banking-as-a-service (BaaS) offering to AFG clients. This included the creation of a new digital mortgage product, ‘AFG Home Loans Sparc’, backed by Volt funding and its BaaS platform.
However, it was clear not all was rosy for Volt, with the neobank’s holding company reporting a $27 million loss in the six months to October 2021. Ballooning tech and employee costs represented the bulk of its expenses, with substantial investments directed to further developing its BaaS platform.
Volt becomes the second Australian neobank to hand back its ADI licence, with Xinja’s sudden exit from banking in late 2020. Xinja suffered a similar fate to Volt, also failing to secure adequate capital to sustain its operations.
In November 2018, the Steve Weston-led Volt became Australia’s first-ever digital bank to receive a restricted ADI licence from APRA.
Granted its full licence in January 2019, Volt pivoted from a largely customer-end service provider to a white-label or “embedded” banking services provider, enabling other customer-end innovators to leverage its BaaS offering (itself backed by Temenos’ core banking platform).
During its time in the sun, the neobank established partnerships with Railspay (the Australian arm of fintech developer Railsr, formerly Railsbank) and its local distributor, money management platform Parpera, as well as separate deals with Australian Mortgage, BTC Markets and AFG, offering its infrastructure and ADI licence to partners who would then provide and oversee front-end customer services.
As part of its exit process, Volt said it has “taken steps to reduce all expenses and staff numbers, other than those required to support the orderly return of deposits and pursue a realisation of the value of our remaining assets”.
Weston, a Barclays and National Australia Bank alum who co-founded Volt with colleague Luke Bunbury, said his team was “deeply disappointed to have reached this point”.
“We are enormously grateful to everyone who believed in what we were trying to achieve and worked tirelessly to make Volt a success.”
Additional comments were sought from Volt but not provided before the publishing date.
