Neobank Volt will shut down and hand back its licence to the banking regulator after struggling to raise the capital it needed to continue operations.
The digital bank, which was granted a licence in 2019, said in a statement on Wednesday that it had notified the Australian Prudential Regulation Authority (APRA) of its intention to close its deposit-taking business and return its licence.
On its website on Wednesday morning, Volt was urging all customers to withdraw their funds before July 5, when they will start to close accounts.
Interest rates on all accounts were set to zero on Wednesday and customers were advised to stop using their accounts immediately. Transfer limits were increased to $250,000.
The neobank told customers on its website that due to the “pandemic and the current challenging global economic climate we were unable to secure the funding needed to continue”.
Over 8000 customers had opened accounts with Volt, and 6000 of those accounts had money in them. The company has just over $100 million in deposits and around $100 million in mortgages. The company employs 140 people.
In a statement, the company said the decision was taken by the board after reviewing recent progress in global capital raising initiatives which were unsuccessful in raising the additional funds it needed 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 chief executive Steve 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.”
It comes after the closure of rival neobank Xinja in January last year, after it failed to raise enough money, and the sale of 86 400 to NAB.
Volt said on Wednesday it had executed a transaction to sell its mortgage portfolio and started returning all deposits to customers in full.
“The company has the necessary liquidity available at hand to facilitate this process,” the statement read.
“APRA is closely monitoring the return of funds and all customer deposits held with Volt remain safe and are guaranteed by the government up to $250,000 per account holder under the Financial Claims Scheme.”
Steps have been taken to reduce expenses and staff numbers, other than those required to support the return of deposits and pursue a realisation of the value of remaining assets, the company said.
APRA said on Wednesday morning that Volt 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,” APRA 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.”
Analysts have been questioning the future of Australia’s neobanks as challengers to the traditional players after two of the four startups which received banking licences were effectively put out of action.
Australia’s neobank sector took off in 2019, when the Australian Prudential Regulation Authority issued authorised deposit-taking institution licences to start-up banks targeting the lucrative retail banking sector.
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Source: Thanks smh.com