Speaking at FinTech Connect this week, Nick Bennett, chief operating officer of Tandem, said the bank is well poised to win the challenger race, with others focused on restrictive business models.
“This is more of a marathon than a sprint. Monzo have done a 100m dash, but over a longer race Tandem will start edging out.
“Monzo’s struggle right now is how to monetise their customer base – we have a lot more tools in our armoury because we offer more credit products, we couple customer growth and ready monetisation is a very compelling proposition and we have to prove that out,” said Bennett.
But it hasn’t always been plain sailing for the London-based challenger, which had its banking licence revoked following the failure to secure a £29m investment from House of Fraser. Tandem Money Limited, the company behind the bank, completed the acquisition of Harrods’ bank in early 2018 injecting £80m of capital.
“We only really hit the gas at the start of this year with the launch of our first product, the cashback card,” said Bennett. “I’d say that in terms of timing, we are underdogs and, relative to Monzo we’re running six to nine months behind where they are.”
For Bennett the key differentiator between Tandem and the other challengers is the business model: “Monzo and Starling are going for a narrower core proposition around the current account, with the latter branching off into banking as a service. Where we’re different is we’re offering a broader service, particularly around credit.
“That’s fundamentally why Monzo and Revolut need high customer growth, with Monzo recently saying they need one billion customers because a marketplace model that derives fee income demands that,” says Bennett.
When asked how much investment plays into challenger growth, Bennet said the success of Monzo and Starling has been instrumental for all challengers.
“I don’t look at Monzo or Starling and think, ‘oh dear, they’re doing really well’, for instance. Monzo, Starling and Revolut are all creating awareness which is no bad thing.
“It was a lot harder to raise capital two years ago as venture capital outfits found it hard to value challengers. Investment appetite has gone up and that’s driven by awareness around challengers and the opportunity they present,” said Bennett.
While Monzo recently raised £20m through their customer base – which Bennett believes is a loyalty play – Tandem too have raised £15m through Hong Kong-based, Convoy Group Holdings.
“The genuine difference is that we can leverage both sides of the coin. We have the ability to scale, we have the technology platform, low cost of customer acquisition, as well as more effective monetisation thanks to our credit products. We can leverage the bank component of our business in a way Monzo seemingly don’t want to. 2019 will prove that even more,” said Bennett.