Australian digital “neobank” Volt Bank, which has been partnered with Melbourne-based crypto exchange BTC Markets, has announced it’s closing down after unsuccessful efforts to raise an extra $200m in capital.

Neobanks, if you didn’t know, are banking institutions that operate exclusively online with no physical branches.

Volt, which was the first online bank to gain an Australian banking licence, released a statement on Tuesday revealing it will be shutting up shop, returning deposits and selling its mortgage book after failing to raise sufficient funds to support the business.

“Volt Bank Limited (Volt) is closing its deposit taking business and intends to return its banking licence,” reads the statement, adding:

“Volt has made the difficult decision to close its deposit taking business and has commenced the process of returning all deposits to its account holders… It is recommended that all customers stop using their accounts immediately.”

The digital bank specified that its customers will need to withdraw their funds from Volt bank accounts before July 5 2022.

We can imagine how traditionalists at the “big four” Aussie banks are feeling about this today, but regardless of that it’s certainly not a great moment for their recent market competitor – the great neobank experiment.

It’s not as eye-catching a demise as that of another Australian neobank, however. Xinja Bank, which rapidly disintegrated in 2020, burned through almost $100m in capital by offering, as it turned out, unsustainably optimistic interest rates on savings deposits. Those reached as high as 2.25% per annum at one point, according to Stockhead’s Eddy Sunarto.

Okay, so… that’s pretty low compared with the crypto industry’s interest-rate levels on the whole… although, ahem… the word “unsustainable” certainly springs to mind when pondering those, given recent events.

Volt Bank will reportedly be returning more than $100 million in deposits to its 6,000 customers. And the digital bank’s 140 staff will now, unfortunately, presumably be looking elsewhere for work.

Volt’s chief executive, Steve Weston, said all options had been considered before making “this difficult decision”, which was in the best interests of customers.

“The entire Volt team is deeply disappointed to have reached this point,” said the CEO. “We are enormously grateful to everyone who believed in what we were trying to achieve and worked tirelessly to make Volt a success.”

 

‘No material impacts’: BTC Markets

One of Australia’s leading crypto exchanges, BTC Markets, had been partnered with Volt Bank in what was described as an innovative, world-first partnership between a traditional regulated financial institution and a crypto platform.

The crypto exchange has also released a statement today, reassuring its customers that there are “no material impacts” to the company, and that it is “currently making alternative arrangements with another banking partner”.

BTC Markets CEO Caroline Bowler expressed her sadness at the demise of the neobank, particularly due to the strides the two enterprises had made together to bring integrated banking capabilities to market, and for Volt’s solid efforts to understand the crypto industry.

 

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