"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, Tuesday," Volt Bank's website said.
The neobank's eight board members, including former HSBC Australia Chief Graham Bradley, voted to close the virtual doors because it had failed to raise enough funds to support its plans to write mortgages. Volt will leave its 140 North Sydney headquarters employees without a job.
Neobanks or challenger banks are financial technology (fintech) firms that offer apps, software and other technologies to streamline mobile and online banking. In January 2019, Volt became the first local stand-alone digital bank to secure a full banking license from the Australian Prudential Regulation Authority.
"All interest has been accrued to your account up to the 29th of June 2022 when the interest rate was changed to zero. This interest will be paid to your Volt account on the 29th of June 2022 except for the Save and Spend accounts which will be paid on the 1st of July 2022," the bank said in a statement.
Vol Bank founder and CEO Steve Weston told Banking Day that he feels gutted for the team and customers who have supported the business.
"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.
He added that the company was able to crunch the mortgage approval process to a matter of hours and minutes. He pointed out that to commercialize that platform, "it is needed to have a lot more capital that they weren't able to get."
Volt tried to raise $200 million in investor funding through a "Series F" round launched in February. But due to the current stalling of worldwide economies, investors began backing out due to uncertain financial markets.
The bank reportedly has more than $100 million in deposits. To ease the transition of money to a different bank account quickly, it increased the daily transfer limits to $250,000.
Financial safety regulator Australian Prudential Regulation Authority assured the public that it will closely monitor the process so that funds are returned to the bank's customers in an orderly and timely manner.
Melbourne-based fintech Maslow founder Kane Jackson is concerned about the fallout for fintechs, given the quality of the bank's management and staff.
"It costs a bank a lot to implement a strategic pivot and deviating from your original strategy means losing that first action strength. In the current environment, investors seem to be saying there's no room to test an alternative strategy," Jackson said. (Related: The next Great Depression begins: Bank run in China being ignored by Western media could be precursor to massive economic collapse.)
Australian firms collapsing post-pandemic
The neobank currently joined a long list of companies that slumped due to the current global crises. The Australian government used to provide stimulus packages and low-interest rates, but these are no longer available.
Another challenger firm, Xinja, closed down in December 2020, citing the pandemic as the reason why it is not able to attract new investors.
A start-up called Send, which delivers groceries in under 10 minutes across Melbourne and Sydney, went into liquidation at the end of June, leaving 300 jobs at risk. An administrator's report found the company had spent a glaring $11 million in just eight months.
Australian construction companies have also stopped operation this year, including Gold Coast-based Condev and Probuild.
Last week, Fin Tech Boomer reported that Melbourne-based Snowdon Developments is on the brink of collapse. Sources revealed that the employees have not been adequately paid since October and half of them resigned already. Creditors, who have been chasing the company for $2.5 million, are demanding the Supreme Court of Victoria to force the company to go into liquidation "on the grounds of insolvency."
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