Tandem Bank to Lose License as House of Fraser Halts InvestmentBy
U.K. startup lender surrenders deposit-taking license to BOE
Chinese currency controls hit planned financial backing
Tandem Bank, a financial startup vying to crack the dominance of Britain’s biggest lenders, is to lose its status as a bank -- for now.
The lender surrendered its deposit-taking license won from the Prudential Regulation Authority little more than a year ago after House of Fraser, the Chinese-owned U.K. department-store chain, pulled most of its 35 million-pound ($43.3 million) investment because of capital controls in the Asian country. Tandem Bank will now re-apply “at the right time for our customers,” the London-based company said in a statement on Monday.
Tandem Bank is among a growing number of financial technology companies -- neobanks as they’re known in the industry -- that have won licenses from the BOE to offer branchless, mobile-phone-based banking. The new entrants face a battle to attract customers and investment in an increasingly crowded market.
“While this investment not completing is disappointing, it does not change our vision,” Chief Executive Officer Ricky Knox said in the statement. “We will no longer be launching savings accounts in the short term. Our app will still help our customers manage their money better and actually find them cash, and our fair credit card will launch in a few months.”
The cash injection fell through because of uncertainty over whether China’s State Administration of Foreign Exchange would approve the investment from House of Fraser, according to the statement. The store chain, bought by China’s Sanpower Group three years ago, invested 6 million pounds of the proposed 35 million pounds in December.
China started imposing additional restrictions for mainland firms buying offshore assets at the start of this year, underscoring the nation’s concerns about the potential for outflows of funds from the country. It’s still a priority for both House of Fraser and Tandem Bank to work together, the lender said in the statement. Other investors in the company include EBay Inc. founder Pierre Omidyar and venture capital firms Route66 and eVentures.
An official for House of Fraser wasn’t immediately able to comment.
Former Tandem Bank CEO Peter Herbert retired from the firm last month and was replaced by Knox, who started the company about three years ago. Although Tandem Bank won a license to take deposits from the BOE in November 2015, it came with demands applicable to all new lenders to secure investment, hire independent directors and mobilize computer systems within 12 months before it could take money from consumers.