Tandem completes Harrods Bank takeover to become Britain’s newest bank

By Ryan Weeks on Thursday 11 January 2018

Digital Banking

Digital disruptor’s splurge gives it a banking licence, £80m of capital and over 10,000 new accounts.

Digital disruptor’s splurge gives it a banking licence, £80m of capital and over 10,000 new accounts.

Tandem may once again be described as a bank. The digital banking app has completed its purchase of Harrods Bank, following approval from the Prudential Regulation Authority in December.

Most importantly, the deal gives Tandem a banking licence – something it was forced to abandon its pursuit of in May of last year, when a planned £29m fundraise fell through. Tandem needed the money in order to make up the regulatory capital required to begin accepting deposits, and so was forced to put its planned savings products on ice.

The acquisition of Harrods Bank gives Tandem £80m of equity capital, as well as a £375m mortgage book, over £400m of deposits and more than 10,000 new accounts. In other words, the app-based banking service is now fully equipped to begin accepting deposits and lending out money. 

“Building a good bank is incredibly important to us. And the acquisition of Harrods Bank means we can now confidently develop innovative services in line with our mission to make our customers’ lives richer,” said Ricky Knox (pictured), CEO of Tandem.

To date, Tandem’s activities have been centred on giving users a consolidated view of their finances and helping them to make savings. Tandem will be rolling out competitive savings products throughout 2018.

Speaking to AltFi, Knox provided further details on Tandem’s planned lending activities.

“We’ve inherited a £375m book and we’re going to continue with that mortgage business. We already have credit cards and we’ll be rolling those out in 2018,” he explained. “We have a loan product live on the back-end of our platform but we’re not originating loans yet, as we see loans as a complementary product.”

Knox sees loan products as part of user journeys, and plans to push them only when useful for customers. “We see ourselves as providing solutions to specific problems that customers have,” he said. He invoked the example of a large purchase on a credit card that Tandem could “sort out with a loan”.

The banking app first revealed it was looking to acquire Harrods Bank in August of last year. Banking licences are seemingly essential even in the new world of app-based banking. Monzo has had a licence in place for some time, as does Starling, while Revolut recently announced that it has applied for one.

But all three of these companies have raised significant sums of equity capital. How has Tandem – which has raised just £22m to date, according to Crunchbase – funded the acquisition of Harrods Bank?

“We were in the process of a fundraising when we were approached about the Harrods deal,” explained Knox. “There’s a combination of money in the deal – including new money and cash from existing investors.”

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