Volt Bank has today become the first of Australia’s neobanks to be granted its authorised deposit-taking institution (ADI) licence from APRA.
It’s the first retail challenger bank to receive an ADI licence since the early 2000s and comes eight months after Volt was granted its restricted banking licence, a pathway which was introduced in May last year to give start-ups a leg up into the banking industry.
The full licence removes restrictions concerning the size of deposits Volt could accept. The bank says it will progressively roll out a full suite of consumer deposit and lending products during 2019 including savings and transaction accounts, term deposits, personal loans and home loans.
Already in 2019, Australia’s banking start-ups have been jumping through regulatory hoops and actively raising capital, building war chests to take on the big four banks.
Designed for mobile and without any brick and mortar branches, the insurgents are hoping to win over Australians’ hearts and wallets with a relentless focus on the customer.
According to research from CB Insights, digital banking adoption among consumers and small businesses is at an inflection point, driven by favourable tech regulations, an uptick in mobile adoption and shifting customer demographics. Globally start-ups disrupting retail and commercial banking attracted US$1.7 billion in venture capital in the first 10 months 2018.
Volt has raised over $45 million in equity capital via multiple funding rounds. This includes an $8.5 million investment from Collection House Limited that was allotted today. Its Series C round – which is hoping to raise $35 million – is currently open and “well progressed”.
Xinja – $24.2m and counting
Neobank Xinja is taking a less conventional route for raising capital.
The bank, which was granted its restricted authorised deposit-taking institution licence (RADI) in December is currently conducting its second equity crowdfunding campaign, which allows individual investors to buy a stake in the company for as little as $255.
Opened last week, Xinja raised more than $500,000 in the first nine hours of its current equity crowdfunding campaign and is hoping to raise up to $5 million. At the time of writing, Xinja had raised over $1.2 million.
To date Xinja has raised $24.2 million. Its backers include crowdfunding participants, retail investors and a group of high net worths and families in Australia and internationally.
86 400: from stealth to beta
86 400 — named for the number of seconds in a day and (pronounced eighty-six, four-hundred) — emerged from stealth in June last year. Throughout the second half of 2018, the company has completed beta testing of its app and debit cards.
Responding to the news of Volt’s full licence, Robert Bell, CEO of 86 400 said: “Congratulations to Steve and the team at Volt, having just received a full Australian banking licence. It’s an exciting time in Australia and the start of a new era in banking. Australians deserve alternatives to the big four banks, and having new entrants such as 86 400 and Volt is positive.”
Having chosen to skip the restricted licence step, Bell said, “86 400’s full licence application is progressing as expected and we look forward to making our own announcement in early 2019.”
The company is fully funded and backed by Cuscal, Australia’s largest independent provider of end-to-end payments solutions. Although the price tag attached to building the bank over the next three years is north of $250 million. The busines says it will commence conversations with prospective investors in early 2019, with a view to adding additional shareholders in the second half of 2019.
“A huge responsibility”
Volt co-founder and CEO Steve Weston said “with the right team on board, it is possible to start building a bank from scratch and receive an unrestricted licence within the regulator’s two-year time frame.”
“To have received our ADI licence before any other new entrant gives Volt Bank a competitive advantage over challenger banks looking to follow in our footsteps. We also acknowledge that this is a huge responsibility, as we will set the tone for a new era of banking,” Weston said.
Volt also plans to offer banking services to small business from 2020. The company has also unveiled Volt Labs, an app-based online community that lets customers provide feedback which will be used to as a forum as an early-stage test market for its latest innovations.