Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 465

The fall of Volt Bank removes another bank competitor

The board and management of Volt Bank, in their bombshell decision in June 2022 to hand back their banking license, have underscored the fragility in so many fintech business models in Australia. Banking is an incredibly heavy consumer of capital and even in the best run organisations it chews through mountains of pricey executive and consultant time.

From the outside, it seemed Volt - which weathered the storm of Xinja Bank’s chaotic demise in 2020 - was passing milestones and finding its footing, even the outline of a sustainable niche, in the crowded banking market in Australia.

The hard-working Volt board, fed up with the shrinking pools of capital worldwide for the briefly-fashionable fintech and neobank sectors, have resorted to retrieving whatever owner value they can, and carrying on with the remnants of its tech (via Volt Limited) that may challenge banks, without the unaffordable luxury of a banking licence.

Startups who plan to fund and flip

As unbelievable as it sounds, there was a period - let’s say around 2019 - when all manner of schemers and dreamers and their advisers sat around devising banking business models that were never intended to be a proper business. The poorly-founded belief was that, once and if licensed, the plan was to cash in. Just flip the license pronto.

Proponents of this madness, of which there may have been dozens, must have thought the process was mainly a case of ticking APRA boxes, then cutting and pasting the absolute minimum risk, prudential, operational and governance documents to creep over the line.

With no more than vapourware, these schemers intended to rustle up the minimum capital to get the APRA green light. Then, these hopefuls believed, they’d pocket the profits from the sale of their non-existent bank via a trade sale.

Only equally desperate and even less well-capitalised fintechs could have been in the target market. Of course, none of these operators got anywhere near the starting line.

Judo Bank is kicking on, even flourishing. Two licenced RADIs doing not much are Alex Bank and Avenue Bank. Alex is up and running, or dawdling. The Alex balance sheet is constrained by the low ball cap on deposits. It has until July next year to progress to a full licence. Avenue, 20% owned by Liberty Financial, has no deposits, no loans and no known plans to make its debut.

Volt was different

Volt’s management and board were never part of the ill-informed antics. A defining difference at Volt was the depth and experience among the top management team and on the board. 

Only half a dozen or so neobanks ever secured a license from APRA during this strange era. And there won’t be any more. Xinja self-destructed 18 months ago. Soon after Xinja tanked, Cuscal – the owner of 86 400 – astounded the industry with the well-considered (and highly profitable) sale of the bank to NAB, in January 2021.

Now Volt, less dramatically, is staging a strategic withdrawal.

Non-bank mortgage funder Resimac appears to be the buyer of the mortgage book of Volt Bank, which is exiting the industry. In a media release, Volt said it had "executed a transaction to sell its mortgage portfolio," but did not identify the buyer. Resimac declined to comment on a request to confirm or clarify its dealings with Volt. APRA data shows Volt had $80 million in housing loans at the end of April.

Through Volt Limited, which will continue trading even as the bank is wound up, Volt retains ownership of the intellectual property at the heart of the Australian Mortgage Management business, which it acquired a year ago.

Volt Bank clients - fintechs and others – are scrambling to identify and engage with alternative suppliers of a banking-as-a-service offering, and minimise damage to their own businesses. Volt devastated their BaaS clients by withdrawing their increasingly in-demand BaaS suite – including deposit products – effective immediately. Volt had five BaaS clients in production and another half dozen ready to on-board. The number of prospects in the pipeline is unknown, but likely to be plenty.

For clients such as money management platform Parpera, which was reselling deposit and card payments product to sole traders and very small businesses, the sudden cancellation is compromising for a fintech emerging from its start-up phase. Parpera ceased onboarding new members immediately and providing its services to members by 5 July 2022.

Who might the likes of Parpera go to? There is little depth in the banking-as-a-service domain in Australia. BAAS is, nominally, a (recent) strength of Westpac, but there are doubts the bank is eager to serve small fry and its systems may be too clunky (the bank counts heavyweights such as Afterpay and SocietyOne as clients). CommBank? Maybe, but fintechs by and large plan to profit from attacking the market share of the biggest banks.

The drastically short notice imposed on clients by Volt had some asking: why not a few weeks longer? The reason may well be that this is a function of APRA’s inflexible requirements, rather than any resolve of the Volt board for a hard stop. 

 

Ian Rogers is a seasoned industry commentator with more than 30 years’ experience and Founder of Banking Day. This article is general information.

 

RELATED ARTICLES

What's next for bank hybrids?

Reputations hit hard at the Royal Commission

Bank limitations create opportunities for non-bank lenders

banner

Most viewed in recent weeks

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Welcome to Firstlinks Edition 602 with weekend update

Markets are undergoing a mini-crash and there’s a whiff of fear in the air. The challenge for investors is emotional rather than intellectual, and here are three rules to ensure that your portfolio remains on track.

  • 13 March 2025

Designing a life, with money to spare

Are you living your life by default or by design? It strikes me that many people are doing the former and living according to others’ expectations of them, leading to poor choices including with their finances.

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.