Start-up Volt Bank has been given the green light to start accepting deposits from the public at large, after it became the first digital challenger bank to be granted a fully-fledged banking licence.
As policymakers seek to put more competitive heat on the big four, Volt became the first among a group of "neobanks" to be given an "unrestricted" deposit-taking institution licence by the Australian Prudential Regulation Authority (APRA).
Until now, Volt, like other "neo-banks," had been limited by the fact it only held a "restricted" licence. This meant it could accept no more than $250,000 in a single deposit, and a maximum of $2 million in total deposits, and effectively ensured the bank was in test mode.
APRA's granting of a full licence is a critical milestone, because it will allow the branchless Volt to push ahead with plans to roll out savings and transactions accounts, term deposits, personal loans, and home loans this year.
Other start-up banks that are seeking an unrestricted banking licence from APRA soon include Xinja, and 86 400, which is fully owned by payments company Cuscal.
Co-founder and chief executive Steve Weston said the fact Volt was digital-only and focused on smart phones would allow it to remove "speed bumps" experienced by customers, pointing to waiting times and fees.
“Against the backdrop of systematic failures and breaches of trust by incumbent banks, our
mission is simple; to empower people and make financial services easier. It’s about giving
Australians a fundamentally different banking experience, one that is honest and fair,” said Mr Weston, a former head of mortgages at Barclays.
Mr Weston has previously been critical of the common industry practice of banks charging new customers lower interest rates than their loyal clients - an issue that is the subject of growing debate in the market.
The company has 100 staff and it has raised $45 million in equity. Alongside its retail banking products, the start-up will offer budgeting and savings tools for smart phones, before expanding into small business banking in 2020.
Volt's board includes former Foxtel chief executive Peter Tonagh and former Tabcorp chief information officer Kim Wenn, and it has signed partnerships with PayPal and ASX-listed Collection House.
In a bid to boost competition from online players eyeing off the major banks' $30 billion a year in profit, the government has lowered the barriers to new start-up banks in recent years.
A 2017 rule allowed start-ups to obtain "unrestricted" licences, effectively banking p-plates, and APRA has removed a requirement that banks must have at least $50 million in shareholder capital.
Volt also said it would launch a "digital co-creation community" known as Volt Labs, which would allow customers to provide feedback and ideas about banking products.