Plan is to offer high-tech, high-touch premium banking services
B2B finance company Embedded has purchased the intellectual property of failed online bank Volt, which ceased operating almost two years ago, for $2 million.
Volt Bank announced in June 2022 that it was closing down after it failed to raise enough capital to expand.
Embedded’s announcement means that it will use Volt Bank’s product and technology platform to provide embedded finance applications for businesses, such as payment and credit services.
Embedded was established by TIP Group (ASX: TIP). In December 2023, Grant Thornton partner Said Jahani was appointed as the liquidator for BAAS Technology Limited and its related entities, previously known as Volt Corporation Limited.
Acquiring entity Embedded is backed by more than 30 Australian investors including names such as Gideon Silverman (Happenco), Andrew Rutherford, Paul Fielding, and Michael Chen (Spring Capital).
Embedded to use Volt Bank tech, expand offering
TIP Group senior partner Michael Baragwanath (pictured above) said Embedded aimed to integrate Volt’s technology into its embedded finance solutions, enabling businesses to offer frictionless payment and credit services within their existing customer and value chains.
Baragwanath said the acquisition of Volt’s intellectual property would deliver a high-tech, high-touch premium banking offering through funds management, advisory, broking and other networks.
“There is no doubt that the Volt/BAAS (Banking as a Service) Technology team have done an amazing job building a world-class product and technology platform,” Baragwanath said.
“Embedded has acquired the assets that Volt/BaaS invested over $200m to create. Our acquisition of the technology enables us to significantly expand our offering and bring forward timelines for service delivery to our current clients.”
Embedded's strategy includes launching a hybrid, digital-first premium banking service, tapping into its network for white label financial products that span deposits, lending, and payments.
Baragwanath said this would position Embedded as a unique player in the Australian BaaS landscape, boasting a contemporary technology suite sourced from Volt.
“There are very few banking as a service (BaaS) offerings in Australia, and none with the full contemporary technology stack that Embedded is able to offer now that it incorporates the Volt technology,” he said.
TIP Group, which managed the transaction to create Embedded, is a listed diversified wealth company with more than 600 employees, AI investments, local manufacturing and trustee services.
It also has a group of selected shareholders who collectively acquire shares through the “Teaminvest” network.
Baragwanath said BAAS Technology Limited's shareholders would receive a structured offer that could recoup up to 45% of their initial investment in Volt.
Volt Bank’s departure from the market
Founded in 2017, Volt rose to prominence as one of several challenger banks promising better customer service based on advanced financial technology.
The bank raised $219m, including a $100m Series E in 2021 with participation from aggregator AFG, which took a 7.6% stake in Volt.
Volt Bank was the first online-only bank to secure an Australian banking licence.
It announced in June 2022 that it was closing its deposit-taking business and returning its banking licence with the loss of 140 jobs after it failed to secure enough funds through a capital raising to support its plans to write mortgages.
Despite initial commentary that neobanks would challenge and disrupt traditional banking, digital-only banks haven’t been as successful as predicted.
Xinja stopped offering banking services in December 2020 and handed back its banking licence, while NAB purchased digital bank 86 400 (now known as ubank) in April 2021.
Along with business lending specialist Judo, the four challenger banks were the first start-ups to be granted banking licences by APRA.
The federal government and regulators had promoted a digital-only banking model after the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry led to a loosening of rules for new banking entrants.
Baragwanath said Volt's innovative technology and offerings were overshadowed by its inability to secure the necessary capital for growth, prompting a phased shutdown starting in June 2022.
The sale of Volt's intellectual property, finalised on Dec. 27, 2023, occurred during rising inflation and interest rate hikes, which have hit neobanks hard, making it challenging for them to keep pace with traditional banks.
Baragwanath said the solvent liquidation of Volt Group marked the final chapter in the company's wind-down, allowing for the orderly distribution of assets to shareholders after the settling of all its outstanding debts.
