A third Australian neobank has been forced to close, effectively ending the idea of new competition for the existing big four banks and their smaller regional rivals in Australia.
The Volt neobank joins Xinja which shut it doors at the start at the start of last year and the sale of 86400 to NAB late in 2021.
The reason? Not enough money, the impact of the pandemic and the desire of Australians to be associated with safe large financial groups – even though they might not like them.
Australia’s neobank sector took off in 2019, when the Australian Prudential Regulation Authority (APRA) issued authorised deposit-taking institution licences to start-up banks targeting the lucrative retail banking sector.
Volt announced Wednesday that it will shut down and hand back its licence to the banking regulator, APRA after struggling to raise the capital it needed to continue operations.
Volt said in its statement that it had notified the APRA of its intention to close its deposit-taking business and return its licence.
The bank said the decision was taken by the board after reviewing recent progress in global capital raising initiatives which were unsuccessful in raising the additional funds it needed to support the business.
“In reaching this difficult decision we have considered all options but ultimately, we have made this call in the best interest of our customers,” Volt CEO Steve Weston said.
“The entire Volt team is 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.”
The neobank told customers in a website message that due to the “pandemic and the current challenging global economic climate we were unable to secure the funding needed to continue”.
Volt also urged all customers to withdraw their funds before July 5, when the bank will start to close accounts.
Interest rates on all accounts were set to zero on Wednesday and customers were advised to stop using their accounts immediately. Transfer limits were increased to $250,000.
Over 8,000 customers had started accounts with Volt, and 6,000 of those accounts had money in them. The company has just over $100 million in deposits and around $100 million in mortgages. The company had around 140 employees.
Volt said on Wednesday it had executed a transaction to sell its mortgage portfolio and started returning all deposits to customers in full.
“The company has the necessary liquidity available at hand to facilitate this process,” the statement read.
“APRA is closely monitoring the return of funds and all customer deposits held with Volt remain safe and are guaranteed by the government up to $250,000 per account holder under the Financial Claims Scheme.”
APRA said on Wednesday morning that Volt intends to return all funds to depositors and “ultimately relinquish its licence to operate as an authorised deposit-taking institution”.
“Volt’s decision to exit the banking industry and pursue other business opportunities is a commercial decision for Volt,” APRA said in a statement.
“As Australia’s financial safety regulator, APRA will closely monitor the process to ensure funds are returned to Volt depositors in an orderly and timely manner.”
News of Volt’s closure had little impact on bank shares – for example the shares in the market leader, the Commonwealth dipped half a per cent yesterday to end at $93.
