Neo-lender Volt Bank is handing back customer deposits and will exit the banking industry, it has been revealed.
In an announcement on its website, the neobank – which was the first Australian RADI and an accredited data recipient – has said it is closing its deposit-taking business and intends to return its banking licence.
The decision has reportedly been taken by the Volt board after it “reviewed recent progress in capital raising initiatives globally which have been unsuccessful in raising sufficient additional funds to support the business”.
“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,” it said in a statement.
It currently has over 6,000 customer deposit accounts, and $106 million in total funds returned to customers.
Customers need to withdraw their funds from their Volt bank accounts to a nominated bank account with another financial institution before the 5 July 2022, after which time it will start closing accounts.
The interest rate on all accounts has been set to zero.
Deposits are protected under the Australian government Financial Claims Scheme that guarantees deposits up to $250,000 per account holder.
Volt has executed a transaction to sell its mortgage portfolio and begun the process of returning all deposits to customers in full. The company said it has the necessary liquidity available at hand to facilitate this process.
Volt chief executive Steve Weston said: “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 added that Volt 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.
The bank thanked its customers, team members and investors who supported the business from its inception.
Mr 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.”
Customers are being advised to stop using their accounts immediately, stating that if an account is a term deposit, there will be no break costs in relation to the early closure of the account.
It continued: “You do not need to contact us to close your account. Volt will close your accounts once all money has been transferred out. We will not close accounts while there are funds in your Volt account.
“Volt is doing everything possible to return the deposits in an orderly and timely manner.”
APRA ‘closely monitoring this process’
The Australian Prudential Regulation Authority (APRA) has said it is “closely monitoring this process”.
It noted the announcement by Volt Bank Limited (Volt) that it 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,” it 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.”
Volt Bank has become the latest neo-lender to hand back its licence in recent years.
In 2021, Xinja Bank completed its return of customer deposits and transferred the remaining tail of deposits to National Australia Bank (NAB) after making the shock announcement that it would hand back its banking licence and cease offering banking products.
At the time of the announcement, Xinja had 37,884 customers with 54,357 individual deposits worth more than $252 million.
Following Xinja’s exit, APRA brought in “stronger requirements” for those wishing to be granted a banking licence.
New banking entrants now need to launch both an income-generating asset product and a deposit product before they can secure a full licence, under APRA’s new standards.
APRA has now said that, before a bank can even gain a restricted ADI (RADI) licence, new entrants will need to present a business plan, as well as a plan to meet the prudential framework for new ADIs within a period of two years, including launch of products, and a contingency plan, that includes at least one option to execute an orderly and solvent exit from banking.
Similar to Xinja, Volt Bank had launched a savings account but its long-awaited mortgage had been long coming.
It had acquired fintech mortgage manager Australian Mortgage – formerly known as Australian Mortgage Marketplace – as part of its move to roll out a digital mortgage offering.
The deal, which settled for an undisclosed sum, was expected to see Australian Mortgage’s technology power the lending component of Volt Bank’s banking-as-a-service platform and deliver the challenger bank with “a multi-channel revenue capability, purpose-built to rapidly scale lending volume”.
The digital mortgage solution was to be distributed through Australian Finance Group (AFG), as part of Volt’s new alliance with the group, with AFG brokers piloting the product (“AFG Home Loans Sparc”) ahead of a full launch – which was expected this year.
In recent years, the bank had also been focusing on banking-as-a-service and partnerships.
For example, in the last year it had teamed up with fellow fintech Frollo, to build and launch a banking-as-a-service (BaaS) app, as well as undertaking a partnership with AFG to launch “the first BaaS-powered consumer products to go live in the Australian market”.
It had also sought to tap into crypto investor demand by teaming with digital currency exchange BTC Markets, to offer bank accounts to its 325,000 customers.
More to come.
[Related: Brokers to shape new AFG-Volt mortgage]