A digital bank in Australia has failed, costing 140 employees their jobs and causing 6,000 customers to rush to withdraw their money before next week.
After failing to gather enough money to stay viable, Volt Bank said on Wednesday that it was stopping its deposit-taking operation and would return its banking license.
According to the neobank’s website, “Volt has made the tough choice to terminate its deposit taking business and has started the process of repaying all deposits to its account holders.”
Before July 5, 2022, “customers must transfer the money stored in all Volt accounts to a nominated bank account with another financial institution.”
Volt CEO Steve Weston said the company’s collapse was a “very sad day” when the bank was first introduced in 2017.
“As a team, we’ve created something that Australia really needs to create financial competition in the market.”
According to him, Australia today just lacks the technology and capacity that we have.
But in order to transport that to a public launch, we need fuel for the automobile, and in order to buy fuel, we need money.
And in the current market, raising the amount of money we required to scale up was a task that we were unable to complete.
Customers’ transfer caps have been raised to $250,000, and users are advised to stop utilizing their accounts right away.
Volt has deposits totaling more over $100 million.
As a bank, Mr. Weston claimed his company required significantly more capital than others, but it was a difficulty “we were unable to overcome.”
Since February, the company had hoped to obtain $200 million, but problems related to the COVID-19 epidemic had significantly hampered its efforts.
The deposits of the funds are being watched over by APRA, the Australian Prudential Regulation Authority.
The business received its banking license in 2019, making it the first startup in Australia to do so.
The high-profile neobank’s demise follows Xinja, whose banking operations failed in December 2020.
In that situation, Xinja began paying interest on deposits before making money through lending.
Xinja effectively reverted its business model to financial tech and successfully refunded all deposits to account holders.
Neobanks don’t have any physical branches; they only conduct business online.
Other neobanks have performed better, with NAB purchasing the curiously called 86400 in 2021 for $220 million.
Through a series F round that was announced in February, Volt had been attempting to collect $200 million in investor funding.
However, as the global economies slowed this year, the investors it had lined up started to withdraw their money claiming unstable financial markets.
If you want to become a bank and scale up, you will require a significant amount of cash, and if you don’t [raise it], you won’t be able to expand.
We simply weren’t able to raise the amount of financing we required,’ Mr. Weston told the AFR.