Customers of neobank Volt have been asked to withdraw all funds from their bank accounts before 5 July after the company today made the “difficult decision” to close down as it cannot secure the funding needed to continue.
With $113 million in deposits as of April - a number that pales in comparison to $219 million raised over its history - the announcement from Sydney-based Volt comes 19 months after competitor Xinja went down a similar path, demonstrating the complexity of delivering the challenger bank vision.
Volt was founded in 2017 - the same year that the banking Royal Commission kicked off, revealing practices from the Big Four Banks that sparked public disdain and desire from consumers to give new financial players a go.
Others that rose to the challenge include 86 400 which was acquired by National Australia Bank (ASX: NAB) and is now called ubank, Alex, BNK, Bendigo and Adelaide Bank (ASX: BEN) subsidiary Up and ASX-listed Judo (ASX: JDO).
As confirmed by the Australian Prudential Regulation Authority (APRA), Volt intends to return its banking licence and close its deposit taking business, citing the impacts of the pandemic and “current challenging global economic climate” as the reasons behind its demise.
The closure comes despite Volt having raised considerable funds over the course of its lifetime, including a $100 million Series E with participation from the Australian Financial Group.
Further, as reported by the AFR, Volt was rattling the tin to raise another $200 million as part of a Series F as recently as February this year.
This followed a rollercoaster period of raisings including more optimistic times in 2020 with an oversubscribed $70 million Series C equity funding round, bringing it closer to a planned IPO listing at the time. An ambitious Series D round aiming for a valuation of $285 million was downgraded to a $109 million valuation because of pandemic difficulties, in the end raising $50 million.
Today's news comes three months after competitor neobank Douugh (ASX: DOU) was thrown a lifeline and partnered up with US investor Long State which came on board as an equity partner.
That came after Douugh reported a $7.1 million loss in the six months to 31 December, leading auditor RSM Australia to declare “a material uncertainty which may cast significant doubt as to whether the consolidated entity will continue as a going concern”.
Co-founded by CEO Steve Weston, Volt has not been so lucky, and will start closing accounts soon - a process that APRA says it will monitor closely to ensure funds are returned to Volt depositors in an orderly and timely manner.
“With regret, we are announcing that Volt will be closing its deposit-taking business and intends to return its banking licence,” Volt said.
“Following the pandemic and the current challenging global economic climate we were unable to secure the funding needed to continue. Our priority now is to ensure account holder funds are returned to account holders as soon as possible.
“Volt will start closing accounts from the 5th of July 2022 so please ensure you have withdrawn all your funds to leave a balance of $0 in all accounts before then.”
Volt customers can read more about the impact of the planned closure here.
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