In Australia, neobanks are struggling to establish themselves in the face of the 4 major traditional banks that dominate the market. Over the past 2 years, 3 of the 4 existing Australian neobanks have had to close their operations.
Australian neobank Volt drops the curtain
Australian neobank Volt is the third of four neobanks on the market to go out of business in less than two years. Before it, neobank Xinja ceased operations at the beginning of 2021, and neobank 86 400 was acquired by National Australia Bank.
As of July 5, Volt is no longer accepting deposits and is surrendering the banking license it was granted in early 2019. It must transfer outstanding loans to other banking institutions, and return deposits totaling A$100 million to its customers, under the supervision of the Australian Prudential Regulation Authority (APRA), the Australian regulator.
Volt's decision follows the failure of its latest fundraising round, which was expected to raise A$200 million (around €131 million) for the neobank.
Investors increasingly difficult to attract
Australian neobanks aren't the only fintechs experiencing increasing difficulties in raising funds. Around the world, investors are becoming more cautious. Rising inflation, rising interest rates and an uncertain economic climate are leading them to focus on the most profitable start-ups, which are still in the minority.
In Australia, access to private equity is even more restricted than in Europe, and the banking market is highly concentrated, making it even more difficult for fintechs to obtain financing.
Furthermore, the Australian banking market is dominated by 4 traditional banks: Commonwealth Bank of Australia, National Australia Bank (NAB), ANZ and Westpac. This lack of openness to competition had led APRA, in 2018, to ease the criteria for obtaining banking licenses to attract new players.
A decision that has not been enough to transform the market: to date, only one neobank, Judo, has managed to stay in business despite losing half its value since its IPO at the end of 2021.