The digital bank that ‘wanted to change the world of banking’ will close next week.
Australia’s first online-only bank Volt Bank is set to close next Tuesday, returning A$100m in deposits to customers and handing back its banking licence.
The neobank that wanted to change the world of banking’ has been forced to close after failing to secure enough funds in its latest raise.
Volt was seeking to raise A$200m in a Series F round that started in February to support its plans to write mortgages.
“We just couldn’t raise the level of capital we needed to.”
Now, around 6000 customers who banked with Volt have been told to urgently withdraw their funds ahead of the company starting to close accounts on 5 July.
Volt became the first start-up to gain an Australian banking licence, in January 2019, and now follows the way of rival neobank Xinja, which collapsed in December 2020 after paying customers interest on deposits before it earner income from lending.
“I sincerely hope that we do see disruptive competition because we need it, but banking is a capital-intensive game and we can’t sway away from that,” Weston said.
“I don’t think this is the end of the neobanking experiment, but we were at a very unhelpful time to raise capital. If you want to be a bank and you want to scale up, you are going to need a lot of capital, and if you don’t [raise it], you are not going to be able to grow.”
The $200m Volt was looking for would have got it through the year, but another $1bn of capital would have been necessary to fund its planned mortgage growth through to 2024.
It was expecting to break even at the end of next year, and differentiated itself from other neobanks as it was building BaaS infrastructure to provide loans and deposits to partners including mortgage brokers.
“I heard so many times from large global investors that they liked the Volt story and thematics including banking-as-a-service and the team, and if we had been before them before September last year, we would be making a different decision,” Weston said.
“We tried. We went around the world talking to investors. It tears your heart out.”
Volt is hoping to sell its mortgage approval technology system to recover shareholder funds.