Volt Bank returns deposits and banking license

Neo-lender Volt Bank hands over deposits from bank customers and will exit the banking industry, it has been revealed.

In an announcement on its website, the neobank – which was Australia’s first RADI and an accredited data recipient – said it was closing its depository business and intended to surrender its banking license.

The decision was reportedly made by Volt’s board after “reviewing recent progress in global capital raising initiatives that have failed to raise sufficient additional funds to sustain the business.”

“Volt has made the difficult decision to shut down its deposit business and has begun the process of returning all deposits to its account holders,” it said in a statement.

It currently has over 6,000 customer deposit accounts and $106 million in total funds returned to customers.

Customers must withdraw funds from their Volt bank accounts to a designated bank account at another financial institution by July 5, 2022, after which they will begin closing accounts.

The interest rate on all accounts has been set to zero.

Deposits are protected by the Australian Government’s Financial Claims Scheme which guarantees deposits up to $250,000 per account holder.

Volt executed a transaction to sell its portfolio of mortgages and began the process of returning all deposits to customers in full. The company said it has the cash to facilitate this process.

Volt Managing Director Steve Weston said, “In making this difficult decision, we considered all options, but ultimately we made this call in the best interest of our customers.”

He added that Volt has taken steps to reduce all expenses and headcount, other than those necessary to support the orderly return of deposits and continue realizing value from our remaining assets.

The bank thanked its customers, team members and investors who have supported the company since its inception.

Mr. Weston said: “The entire Volt team is deeply disappointed to have come to this. We are extremely grateful to everyone who believed in what we were trying to achieve and worked tirelessly to make Volt a success.

Customers are advised to stop using their accounts immediately, noting that if an account is a term deposit, there will be no breakage fees associated with closing the account early.

He continued, “You do not need to contact us to close your account. Volt will close your accounts once all money has been transferred. We will not close accounts while there are funds on your Volt account.

“Volt is doing everything possible to return deposits in an orderly and timely manner.”

APRA “closely monitors this process”

The Australian Prudential Regulation Authority (APRA) said it was follow this process closely.

It noted the announcement by Volt Bank Limited (Volt) of its intention to return all funds to depositors and eventually relinquish its license to operate as an Authorized Depository Institution.

“Volt’s decision to exit banking and pursue other business opportunities is a business decision for Volt, he said in a statement.

“As Australia’s financial security regulator, APRA will closely monitor the process to ensure that funds are returned to Volt depositors in an orderly and timely manner.

Volt Bank has become the latest neo-lender to surrender its license in recent years.

In 2021, Xinja Bank completed the return of customer deposits and transferred the remaining tail of deposits to National Australia Bank (NAB) after making the shock announcement that it would surrender its banking license and cease offering services. banking products.

At the time of the announcement, Xinja had 37,884 customers with 54,357 individual deposits worth over $252 million.

After Xinja was released, APRA brought in higher demands for those who wish to obtain a banking license.

New entrants to the banking industry must now launch both an income-generating asset product and a deposit product before they can obtain a full license, under new APRA standards.

APRA has now said that even before a bank can obtain a restricted ADI license (RADI), new entrants will be required to submit a business plan, as well as a plan to meet the prudential framework for new ADIs in a two-year timeline, including product launch, and a contingency plan, which includes at least one option to execute an orderly and solvent exit from the bank.

Similar to Xinja, Volt Bank had launched a savings account, but its long-awaited mortgage was slow to arrive.

It had acquired fintech mortgage manager Australian Mortgage – formerly known as Australian Mortgage Marketplace – as part of its move to roll out a digital mortgage offering.

The deal, which settled for an undisclosed sum, was to see Australian Mortgage’s technology power the lending component of Volt Bank’s banking platform as a service and provide the bank with challenger “a multi-channel revenue capability, purpose-built to rapidly increase loan volume”.

The digital mortgage solution was to be distributed through Australian Finance Group (AFG), as part of Volt’s new alliance with the group, with AFG brokers piloting the product (“AFG Home Loans Sparc”) ahead of a launch complete – which was planned for this year. year.

In recent years, the bank has also focused on banking as a service and partnerships.

For example, last year it teamed up with fellow fintech Frollo, to build and launch a banking app as a service (BaaS), as well as embark on a partnership with AFG to launch “the first consumer powered by BaaS”. products to be put online on the Australian market”.

It had also sought to tap into crypto investor demand by partnering with digital currency exchange BTC Markets, to offer bank accounts to its 325,000 customers.

More soon.

[Related: Brokers to shape new AFG-Volt mortgage]

Volt Bank returns deposits and banking license



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Last update: June 29, 2022

Posted: June 29, 2022




Annie Kane

Annie Kane

AUTHOR

Annie Kane is the editor of The Adviser and Mortgage Business.