‘Rips your heart out’ – Volt founder opens up on bank’s demise

George Lekakis

Volt Bank founder and chief executive Steve Weston says he is “gutted” for staff, customers and shareholders by the collapse in investor support for his company. 

The bank’s eight-member board, chaired by former HSBC Australia kingpin Graham Bradley, pulled the plug on the business at a meeting on Tuesday night after they concluded that the bank could not win sufficient additional capital to propel the new business model.

Weston and his management team have been trying to reposition Volt as a banking-as-a-service supplier after they abandoned the original vision of becoming a distributor of retail financial services and life-cycle products to Australian consumers.

In January 2019 Volt became the first local stand-alone digital bank to secure a full banking licence from the Australian Prudential Regulation Authority.

That licence will be handed back to the regulator on 5 July, with Volt entering a formal process of returning deposits to account holders under APRA supervision.

In an interview with Banking Day on Wednesday morning, Weston said he felt a profound sense of disappointment about the bank’s fate.

“I feel gutted for our team and customers who have supported the business,” he said.

“It just rips your heart out because we know we’ve built an outstanding banking platform.

“However, without capital a bank cannot operate – without the petrol you can’t start the engine.

“At the end of the day we realised we had run out of runway in terms of capital.”

More than 140 staff located mostly at the company’s North Sydney headquarters will lose their jobs before the end of July.

Weston said that the feedback from longstanding investors about the strategic business shift had been positive, but that regulatory restrictions on bank shareholdings meant that the bank had come under pressure to find new sources of capital.

He indicated that some of the established investors might have been ready to deepen their investment in the bank, but couldn’t owing to the 20 per cent cap on ownership stakes in local banks.

Weston says he never lost belief in the viability of the banking-as-a-service model. 

However, he acknowledged the task of attracting support from new investors had grown insurmountable this year amid the turmoil sweeping through local and international capital markets.

“The technology we’ve got is outstanding – for example we’ve been able to crunch the mortgage approval process to a matter of hours and minutes,” he said.

“For us to commercialise that platform we needed a lot more capital that we weren’t able to get.”

Several founders of fintech startups are viewing Volt’s demise as a bellwether moment for the sector as businesses struggling to turn profits try to tap skittish investors for more support.

Kane Jackson, the founder of Melbourne-based fintech Maslow, is concerned about the fallout for fintechs more generally, 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 you are going to lose that first action strength,” he said.

“In the current environment investors seems to be saying there’s no room to test an alternative strategy.”

Jackson believes Volt’s closure is distinguishable from most other fintech washouts in Australia where the heaviest contributors to failure were errors made by senior management.

“Volt was run by some of the smartest people I know in the emerging financial services sector,” he said.

“Steve believed in the business he was selling to investors and customers and you could see everything they did to promote the business was authentic.”

Australia’s fintech industry faces a deep cull as investors re-appraise their backing of startups, particularly in crowded market niches such as the buy now pay later sector.

Volt’s decision to pull up stumps is likely to put more pressure on several banking aspirants – Avenue Bank and In1Bank – which currently hold restricted banking authorities from APRA.

The difficulty encountered by Volt in getting new capital might indicate that the business roadmaps for these banks will need to be reviewed.

It might also cast doubt over ASX-listed Novatti’s prospects of securing a banking licence. 

Novatti previously expected to secure a licence by the end of November 2021, but APRA has not yet announced a decision on the payment company’s application.

The delay could come at a cost to Novatti after it revealed in a shareholder presentation in February that around A$10.5 million of investment in the banking vehicle was contingent on APRA issuing the licence by 30 June 2022.

In November last year Novatti’s managing director Peter Cook said he was upbeat about securing the licence.

“While we aimed to achieve regulatory approval by the end of November this year, we are advised by the regulator that the assessment of our application remains ongoing,” he said at the time.

“We remain committed to working proactively with the regulator in these final assessment phases and continue to be confident of being awarded a licence.”