The formal licensing of start-up Volt Bank as an accredited bank marks a sea change in the banking industry, where challenger ‘neo banks’ are embracing lean technology and responsive customer service to take on the established giants.
Granted this month, the full banking license from the Australian Prudential Regulatory Authority (APRA) makes Volt Australia’s 37th authorised deposit-taking institution (ADI) – a significant milestone in its efforts to become a fully-featured bank.
Neo banks operate digitally only and do not have branches.
APRA last year revised its authorisation process by offering a Restricted ADI license – an interim accreditation that allows holders to conduct “a limited range of business activities” for two years as they build up their business to meet the requirements of full registration.
The new framework was designed to help fintech start-ups fast-track new financial-services models, with restrictions including the expectation that Restricted ADI organisations seek investment and build the resources and capabilities to meet APRA’s full prudential framework.
“APRA hopes to see consumers benefit from enhanced competition and potentially innovative new business models,” APRA chairman Wayne Byres previously explained. “However, the limitations imposed on Restricted ADI licensees ensure the public can retain confidence that the safety of deposits with all ADIs is adequately safeguarded.”
Volt Bank was the first organisation to receive a Restricted ADI license, and its rapid ascension to full accreditation is being seen as a transformative step for a company that has pegged its future on a range of cloud-based platforms including Temenos T24 Core Banking, Financial Crime Mitigation and Analytics running on the Temenos Cloud.
Use of a Temenos’s Australian Model Bank template – touted as being compliant with Australian ADI requirements – allowed Volt Bank to set up most of the core functionality it required, out of the box; a range of open-source APIs facilitate integration of new features as customers, and the business, require.
A partnership with PayPal will, Volt Bank hopes, streamline the process of customer acquisition by piggybacking on PayPal’s own authentication processes, strong brand, and built-in user base.
“Incumbent banks in Australia have grown complacent and benefited from the inertia that comes from the difficulty of changing banks,” Volt CEO Steve Weston said when announcing the choice of Temenos, noting that its cloud-based approach will allow the company to “adapt to the customers’ changing needs, reduce costs and innovate faster.”
“Our digital bank will be a trailblazer in a new era of banking and every experience we offer will be mobile-led, personalised and customer focused.”
The rapid approval of Volt – which was only established in October 2017 and now expects to fully launch in “early 2019” – reflects intensive work by Volt’s 90-strong team and a commitment to customer engagement marked by Volt Labs, a mobile app through which the bank has been engaging customers in brainstorming about the features that are most important to them.
Volt will initially offer savings and transactions accounts, term deposits, and foreign exchange; personal loans, mortgages, and credit cards will follow shortly thereafter.
Yet other banks are hot on its heels, with Xinja Bank Limited receiving a Restricted ADI in December and the China Everbright Bank Co granted approval as a foreign ADI.