Volt Bank (Volt) – which became the first neobank to be granted a restricted ADI licence in 2018 before gaining its full licence – has entered into a strategic alliance with aggregator Australian Finance Group (AFG).
The deal includes a $15-million investment from AFG into Volt, providing AFG with a 7.6 per cent shareholding in Volt Corp Ltd (based on Volt’s current series raising amount of $85 million).
The entry into the strategic alliance and investment by AFG is expected to complete after satisfaction of a number of conditions (with the $15-million investment held in escrow until satisfaction of the conditions).
As part of the alliance, Volt will provide AFG with its Banking as a Service (BaaS) offering.
This includes providing digital banking services and technology platform which will help power AFG Securities’ (the aggregator’s in-house lending division) credit decisioning.
According to AFG CEO David Bailey, the adoption of the fintech’s offering will help “drive further efficiencies, provide another layer of risk management, and improve the broker and customer experience”.
Speaking to Mortgage Business, Mr Bailey elaborated: “We will take parts of Volt’s platform around the credit decisioning piece, which we don’t have within AFG Securities, and embed that within our existing platform.
“So, we will effectively ‘rent’ that part of the technology from Volt to make the process much faster.”
Mr Bailey added that the decision to adopt a more tech-focused approach had been accelerated by the COVID-19 pandemic.
“Since the pandemic, we believe there is now a different expectation from customers in how they experience multiple types of services – not just financial services. The ability to streamline and make things more frictionless over time and improve the relationships with customers more digitally, has been one of the outcomes of the pandemic.
“We’ve certainly embraced that within our own [AFG] technology, with the rollout of a new CRM, for example, but there’s more to do from a lending perspective. Instead of building that ourselves, we thought we could partner with someone who was already doing it. And the neobank Volt is at the leading edge in terms of customer experience, so that is where the discussion started.”
He continued: “This alliance allows AFG Securities to harness Volt’s nimble banking solutions to deliver market-leading innovation and faster decisioning to our brokers and customers, accelerating the ‘time to yes’ for AFG Securities customers.”
As well as providing credit decisioning tech, the neobank will also offer its personal finance manager (PFM) app as a white label solution to AFG Securities’ customers as an AFG Securities-branded product.
Mr Bailey continued: “We’re not taking the whole Volt digital mortgage experience for AFG Securities, as we’re very comfortable with our team’s ability to service those brokers and manage those clients, but what we’re trying to do, as we grow our securities business, is make things more efficient and take out some of the some of the clunky points. And that is where Volt comes in.”
White label mortgage, referrals and AFG app for AFG brokers
As well as providing the credit decisioning technology for AFG Securities, the neobank will also provide a white label digital mortgage and PFM app to AFG brokers and their customers.
The digital white labelled mortgage products, which will be funded by Volt, and the app are both expected to be piloted by October, before rolling out more broadly in the first part of 2022.
The PFM app will eventually embed into AFG’s CRM to help improve the loan application process for AFG broker customers.
Mr Bailey told Mortgage Business: “We’re well aware that open banking has come in, and we’ve been thinking about how that might impact how our brokers interact with customers. So, another part of the transactions is that we will take the personal finance manager app which Volt is preparing for its own customers, and white label that as AFG so our broker customers can use it.
“That provides another tie-in for the customer to their broker. Ultimately, the app itself will then feed into our CRM, which will enable transactions and loan lodgements and selections to be handled directly through the PFM.
“That will take it a step further and provides that level of protection for brokers as well, because it makes sure that the PFM their customers are using is one which is secure and aligned to their aggregator/broking business as opposed to another financial services provider.”
He continued: “This agreement positions AFG brokers at the forefront of change. The development and availability of a PFM app is an important part of ensuring our brokers have the best opportunity to participate in the benefits of open banking as it builds across the market in the future.
“The relationship a broker holds with their customer is fundamental to their success.”
The CEO added that the provision of the new PFM app technology would “enhance that connection and ensure their customers’ interests are kept front and centre”, he said.
“We look forward to working with the team at Volt to combine our technology with the digital tools Volt has built to enable our brokers to continue to provide the personalised service the channel’s success is built upon, and to equip our brokers to succeed in an increasingly competitive digital environment.”
Volt founder and CEO Steve Weston said: “Volt is thrilled to partner with AFG to bring our digital mortgage offering to the market at scale. AFG are pioneers of the mortgage broking industry and touch one in every 11 home loans written in Australia. Their endorsement of Volt’s digital offering through this partnership and equity investment is a landmark moment for our company.
“Volt has distinguished itself by pursuing a Banking as a Service model, and the partnership with AFG is testament to demand for integrated and white label banking to improve customer relationships. The management of financial services is no longer the domain of a handful of large institutions. Volt wants to facilitate a future where a range of businesses, large and small, can deepen their customer relationships by supporting financial journeys,” Mr Weston said.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.