Volt, Australia’s first online-only bank, closes due to fundraising issues

June 29 (Reuters) – Volt Bank Ltd, the first online-only bank to obtain an Australian banking licence, announced it would close, returning deposits and selling its mortgage portfolio because it had been unable to raise enough funds to sustain the business.

Its collapse is another blow to a business model that was heavily promoted by the Australian government and regulators after a 2018 investigation into misconduct in the financial sector led to relaxed rules for new entrants to the market. banking sector.

Rising inflation and interest rates this year have made it harder for online-only banks, known as neobanks in Australia, to compete with established lenders, making fundraising much more difficult.

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“We considered all options, but ultimately we made this call in the best interests of our customers,” Volt founder and CEO Steve Weston said in a statement.

“The entire Volt team is deeply disappointed to have come to this.”

The bank had A$113 million ($78 million) in deposits and A$80 million in mortgages in April, government data showed, a tiny fraction of the A$3 trillion mortgage market. The company said no customer would be left behind.

Volt is the third of four leading neobanks that were cleared in a first wave by Australian regulators to fold or be sold.

In December 2020, Xinja Bank surrendered its license due to fundraising issues, while another startup, 86400, was sold to high street lender National Australia Bank Ltd (NAB.AX) last year. Only private judo remains an autonomous business. He had A$5.5 billion in mortgages in April, according to government figures.

Just a year ago, Volt raised A$85 million from mortgage broker Australian Finance Group (AFG) (AFG.AX) by paying A$15 million for an 8% stake.

AFG said in a statement it was disappointed with Volt’s collapse, but added that its future earnings were not affected.

Volt returned to the market in February with a plan to raise an additional A$200 million, local media reported. A company representative was not immediately available to comment on the result Wednesday.

Australia’s prudential regulator said in a separate statement that it would closely monitor the process to ensure funds are returned to Volt depositors.

($1 = 1.4468 Australian dollars)

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Reporting by Byron Kaye in Sydney and Navya Mittal in Bangalore; Additional reporting by Alun John in Hong Kong; Editing by Edwina Gibbs

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