We Are Embedded chair Michael Baragwanath
The new business of Luke Bunbury, one of the co-founders of Volt Bank, has emerged as the buyer of all remaining assets of the failed bank.
Via his latest venture, We Are Embedded, Bunbury has announced that “we have acquired the assets of Volt/BAAS technology.”
Volt Bank is effectively being reborn as a non-bank offering much the same services as Volt, except targeted to smaller ADIs, financial planners and other non-banks.
The principal assets of Volt that appear to be relevant to Embedded is the ‘banking as a service’ tech stack that formed the heart of Volt’s strategy at the time of its demise.
Embedded has also acquired the IP to the bank’s Australian Mortgage arm, a business Volt acquired from AM’s founder Kym Dalton in mid 2021.
First registered late last year, this new outfit is a public company, which is unusual for a start-up.
ASX-listed Teaminvest Private Group is adviser to Embedded and holds a one per cent stake, with options to increase this. Among other things, TIP specialises in investments in Australian privately-owned businesses.
Michael Baragwanath, head of wealth and investment banking at TIP is chair of Embedded.
In a joint interview yesterday with Bunbury and Baragwanath, the latter explained their vision.
“We think there is a gap in the market for licencing banking technology” Baragwanath said.
“We see a gap in providing a high tech and high touch solution.
“When we look at the premium banking market, the major banks have pretty good tech, but not such good people. And they move them around a lot.
“Smaller banks have pretty poor tech, but better people.”
Baragwanath also made it clear Embedded believes it can optimise value in the Australian Mortgage IP.
“I’d like to see all home loans done in half an hour or in a day; at least some assessment in 24 hours, not weeks.
“We can achieve that by getting the technology licenced from Volt.”
First licenced on a restricted basis in late 2018, Volt Bank progressed to a full banking authority two years later.
In June 2022 Volt astounded the market by suddenly deciding to return its licence and return all deposits, at a time it seemed the bank was beginning to ramp up. Volt blamed a lack of investor support and struggles raising capital during what was (and remains) a bleak period for fintech and neobank start-ups.
For the next year and a half the board and remaining management of Volt Corporation (the holding company) supervised their own windup.
Finally, in late 2023, Volt’s board appointed Grant Thornton partner Said Jahani as liquidator, with Volt Corporation renamed as BAAS Technology Limited. The ASIC website refers to this as a “solvent liquidation.”
A frustrated Luke Bunbury, a friend of the other founder, Steve Weston, departed Volt in the early pre-revenue days.
Bunbury is something of a serial entrepreneur, though yet to be a successful one, with a couple of failed businesses (REVO and 1derful) behind him. Or three including Volt, though he was long gone by the time things turned sour for the bank.
Making the point that Bunbury “wasn’t exactly a raging success as an entrepreneur” Banking Day asked Baragwanath outright: “Why do you like him?”
“I think Luke excels at investor relations and scoping out large and complex customer solutions” he replied.
A critical element in getting Embedded up and running is a seemingly attractive offer to Volt shareholders to convert their investment in the bank to a shareholding in Embedded.
Volt had around 490 shareholders, described by Baragwanath as “representing many of the great and the good” in banking and finance in Australia. The original value of these Volt shareholdings ranged from as little as $25,000 to as high as $25 million.
The Embedded offer document to Volt shareholders, seen by Banking Day, contends that “the objective is to allow existing Volt shareholders an opportunity to participate in capitalising the company and to provide Volt shareholders a path to recover up to 45 per cent of their investment and, with future growth, offering the potential to recover 100 per cent of their capital and achieve capital gains.”
This is creative and, in the stretch version, fanciful stuff, highly dependent on Bunbury’s ability to “pioneer and license ground-breaking financial technology and regulatory systems [and] deliver a premium banking experience” to quote the offer document’s summary of the Embedded mission.
The offer document states that “the board believes that no more than $10 million is required to execute the business strategy” with the aim being to seduce those Volt shareholders that accept an initial share exchange “equivalent to 15 per cent of capital invested”, and to then collectively chip in the $10 million in two separate tranches.
The offer finally asserts: “Further capital raises, if required, will be at a valuation exceeding $140 million, which is consistent with the value of the assets irrespective of their purchase price.”
First pitched to Volt shareholders in late January, Embedded has extended the offer, with the share exchange and capital raising expected to be wrapped up in a couple of weeks.
Asked about the response to the offer so far, Bunbury said: “They appreciate the generosity of the offer.
“We’re lucky. We’ve got a low cost base, built on someone else’s work.”
Embedded’s exit strategy is to “deliver a liquidity event by trade sale or material investment, preferably by a new market entrant into Australia or as part of an international expansion plan.”
It is understood that while all creditors of Volt/BAAS are likely to be paid in full, at the end of the liquidation returns to any shareholders that pass on the Embedded offer will be nominal.