Australian bank Volt collapses with 140 workers losing their jobs

An Australian digital bank has collapsed, leaving 140 employees without a job and 6,000 customers racing to withdraw their money before next week.

Volt Bank announced on Wednesday it was closing its deposit taking business and will return its banking licence after it couldn’t raise enough funds to stay afloat.

‘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,’ the neobank’s website said.

‘Customers need to transfer the balances held in all Volt accounts to a nominated bank account with another financial institution before the 5th of July 2022.’

The bank was launched in 2017 with Volt chief executive Steve Weston saying the closure of the company was an ‘incredibly sad day’.  

‘We’ve built something as a team that Australia really needs to bring banking competition to the market. We’ve got technology and capability that simply doesn’t exist in Australia today,’ he said.

‘But for us to take that to a public launch, we need petrol in the car and by petrol we need capital. And in the current market, being able to raise the amount of capital that we needed to be able to scale up was a task that we couldn’t accomplish.’

The bank was launched in 2017 with Volt chief executive Steve Weston (right) saying the closure of the company was an ‘incredibly sad day’

Transfer limits for customers have been increased to $250,000 with members told to stop using their accounts immediately.

Volt has more than $100million in deposits. 

Mr Weston said as a bank, his business needed a lot more capital than others, but that was a challenge ‘we were unable to overcome’.

The company had been hoping to secure $200million since February but issues stemming from the Covid pandemic had caused a major setback.

The Australian Prudential Regulation Authority (APRA) is monitoring Volt customer accounts to ‘ensure funds are returned in and orderly and timely manner’.

The company was granted its banking licence in 2019, the first start-up in Australia to be granted one.

The collapse is the second of a high-profile neobank, following Xinja whose banking businesses folded in December 2020.

In that case, Xinja started paying interest on deposits before earning capital from lending.

All deposits were successfully returned to account holders and Xinja returned its business model to financial tech. 

Neobanks operate exclusively online with no in-person branches.

Other neobanks have fared better with the oddly named 86 400 being purchased by NAB for $220million in 2021.

Volt had been seeking to raise $200million in investor funding through a series F round launched in February.

But as worldwide economies stalled this year, the investors it had lined up began backing out citing uncertain financial markets.

‘If you want to be a bank and you want to scale up, you are going to need a lot of capital, and if you don’t [raise it], you are not going to be able to grow… We just couldn’t raise the level of capital we needed to,’ Mr Weston told the AFR.

Customers of the neobank have been urged to transfer their funds by July 5. Pictured are two woman enjoying a day out at Flemington Racecourse