Volt Bank has become the first of the Australian challengers to be granted a full Authorised Deposit-Taking Institution (ADI) licence, in the same week as bagging a seemingly bizarre $8.4 million investment from ASX-listed Collection House.
Volt was the first Australian neobank to receive its restricted ADI licence in May last year, however, since then, we have seen the launch of Up — affiliated with Bendigo Bank — and Xinja release its prepaid debit card product and embark on a second equity crowdfunding campaign.
Speaking to StartupSmart, Volt co-founder Steve Weston said the digital bank is well on its way to catching up, with plans to progressively start launching its own banking products, including transaction and savings accounts, and personal and home loans.
“We focused on getting our full licence first, and then we will be able to issue our own prepaid cards and debit cards, and we will be able to do lending on our own balance sheet,” Weston says.
While Xinja’s approach is a “perfectly sensible way to go to market,” Weston says, their rival has been fairly high-profile, while Volt has been happy to operate under the radar.
“Our stance from day one has been not to talk about it, we’ll just show people,” he says.
“We’ll talk about it when we have something very close,” he adds.
Investing in compassion
Previously, Volt’s funding has come primarily from Australian high-net-worth individuals and family offices, as well as from some private investors in the UK, Hong Kong and Singapore.
However, the $8.4 million investment from Collection House marks the first investment from a listed company.
It may initially seem like a weird pairing, but Weston calls the investment “a natural fit”.
Collection House is taking a more customer-centric approach to debt collection, he says, using data and technology to help build a profile of the people it’s receiving payments from.
It’s allowing customers to self-nominate how much they repay, improving the likelihood they will make the repayments, and turning the traditional approach institutions take to debt collecting on its head.
Through the partnership, Collection House will offer Volt as a recommended money-management tool, while any loan repayments missed by Volt customers will be managed by Collection House.
Weston himself was somewhat sceptical at first. But, once the leadership teams met and discussed the ways the technologies could complement each other, “it was almost and hand-in-glove type relationship”.
“A big change coming to Australia is being able to help people who are in a vulnerable position,” whether that’s because they’ve lost a job, are unable to work because of mental or physical illness, or just having money issues.
“People who are behind in their repayments by definition are suffering from some sort of vulnerability,” Weston says.
“The sorts of capabilities that Collection House are building to help customers in a vulnerable position, we will look to leverage as well.”
Weston accepts Australia is running a little behind the times in the neobank stakes, however, having been based in the UK until 2016, he had been closely watching the progress of European challenger banks such as Monzo and Revolut.
Ultimately, Volt will be operating with “a lot of similarities” to these success stories, he says.
“We have looked at every neobank on earth that we could find and studied what they have done well,” he adds.
“Where we think that’s relatable to the Australian market, there’s a good chance we will be doing it.”
However, Weston has also been paying attention to regulation overseas, and sentiment towards traditional financial institutions.
In the UK, the big banks had been facing reputational issues just a few years before the royal banking commission hit Australia. Weston saw the discontent in Europe and predicted things would go the same way Down Under.
So, when legislation allowing for digital banks was passed in 2017, he was first in line to take advantage of it.
“Being prepared to start a digital bank was certainly something front-of-mind when the government made it possible,” he says.
The biggest challenge
For other fintech startups on the path of disruption, Weston’s advice is to focus on the people around you.
“Get the right people on the bus,” he advises.
“The right advisors, the right team members — make sure you’re recruiting not just for technical skill but for attitude,” he adds.
“You’re going to need help from all sorts of stakeholders, whether that be business partners, regulators or investors.”
It may seem obvious, but Weston simply advises founders to be kind to those people.
“It’s amazing what happens when you treat people well,” he says.
People think the challenge for fintech is around regulation or technology, and those things are “incredibly challenging”, Weston says, “but we work them out”.
You need a lot of capital to run a bank, and “that’s challenging, but you get there”, he adds.
“The most difficult challenge, by a significant way, is creating an environment where these incredibly talented people from different countries and different industry can do their best every day.
“That means giving them a voice, giving them clarity about decisions, having a bit of fun, while still working hard.”