It?s the micro rise that is now in freefall as Australia?s third and final ?original? neobank, Volt Bank, handed back its banking licence this week after almost 5-years in operation.
For those who don?t know what a neobank is, put simply, it?s a digital bank that operates with a banking licence through an app on a smartphone without any physical branches meaning lower operating and overhead costs.
The neobank market was valued at $34 billion in 2020, so why has the end of the pandemic spelled the end of neobank success in Australia?
There?s a few reasons.
Firstly, traditional banks are funded by customers? loans, whereas neobanks are funded by investors. Post-pandemic, investors? appetite for investing in technology companies has dried up.
On that note, NAB and Bendigo and Adelaide Banks swooped in to acquire 86400 and Up neobanks respectively? which made it hard for the likes of Volt to compete as rivals gained big bank backing.
And holding a banking licence also means neobanks have regulatory capital requirements which are much higher than that of other fintech companies.
While Volt had $100m in deposits and a mortgage book of a similar size, the company needed $200m in additional capital to operate this year, which they failed to raise.
But it?s not all sad news as fintech companies around Australia including Monoova and Wpay are rallying around staff and clients of the fallen neobanks by offering services and employment.