First neo-bank Volt Bank to close: $100m returned to customers

Neo-bank Volt Bank will return over $100 million in deposits to customers and hand back its banking license to the prudential regulator, marking another unsuccessful attempt by a startup to break into the Australian banking market. Customers were told to withdraw their funds by 5 July.

In a statement released early Wednesday, Volt said the decision was taken by the board after failing to raise sufficient additional funds via a capital raising 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.

According to April’s Australian Prudential Regulatory Authority statistics, Volt Bank had $113 million of deposits. That number is said to now be around $106 million held by 6,000 customers.

“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.”

The neobank was out in the market earlier this year, seeking to raise $200 million via a Series F transaction. That followed a capital raising in 2021 in which Australian Finance Group participated in an upsized $100 million raising. And in 2020, Volt raised $50 million in a cut-priced raising.

Volt was the first neobank to gain a banking license in 2019 after the rules were loosened to encourage competition.

Its decision to shut shop and return deposits to customers is the second-high profile failure of a neo-bank to build a sustainable competitor.

It follows the high-profile collapse of another neobank Xinja that APRA chair Wayne Byres called a “successful failure.”

Xinja had rapidly accumulated deposits through an ambitious marketing campaign and an attractive interest rate, but it struggled to deploy the funds through loan products.

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