Australian neobank Volt is set to close its virtual doors and return all deposits alongside its banking licence due to a major shortfall in fundraising efforts.
Volt Bank was unable to raise sufficient funding in order to continue its operations after a recent fundraising campaign. In a statement on Wednesday 29 June, it said it would cease to accept deposits and would also return its banking licence.
Customers need to transfer all funds out of their accounts and into a nominal account held by another financial institution. They have been given less than a week to facilitate this transfer with the neobank closing all accounts from Tuesday 5 July. To make the transfer process easier for its depositors; the daily transfer limit was increased to A$250,000 (£142,000).
While the accounts will continue working until 5 July; the interest rate on all Volt accounts was immediately set to zero on Wednesday. All interest accrued up until that point will be deposited into their account by the end of Friday 1 July.
Under scrutiny
The Australian Prudential Regulation Authority (APRA) is closely overseeing the closure. In its own statement, APRA said it would ensure that all funds were returned to Volt account holders “in an orderly and timely manner”.
Volt says it has the liquidity available to ensure that all deposits are returned; without requiring the use of the Australian government’s Financial Claims Scheme, which guarantees deposits of up to A$250,000 (£142,000) per account holder. It has reduced all of its expenses and staff numbers to the minimum amount, while keeping on the amount necessary to continue the return of all deposits.
The neobank has blamed the shortcomings of its fundraising campaign on the effects of the pandemic and the current challenging global economic climate. However, Angel Zhong, associate professor of finance at RMIT University, suggested there may also be more factors to play a role in the downfall of Volt, in an interview with SBS News.
Zhong commented: “The demise is associated with declining investor and consumer confidence, unsustainable growth models and traditional banks accelerating digital finance offering.”
Sad ending for Volt
Four challenger banks – Volt, Xinja, 86 400 and Judo Bank – launched following a 2018 inquiry into Australia‘s banking sector and a change in restrictions that made it easier for fully online banks to receive licenses. Xinja closed 19 months ago and 86 400 was acquired by NAB leaving Judo the last one standing.
Steve Weston, CEO of Volt, 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.
“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.”
