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Challenger Banks Europe Spotlight

Another One Bites the Dust: Bank North Waves the White Flag. . . Who’s Next?

Over the last few years, the fintech industry has seen a huge rise in startups. Driven by the pandemic and people’s needs for digital finance, new business models were being announced left, right and centre across the world. Unfortunately, not all of these were able to find success, as Bank North becomes the latest to admit defeat.

Created in Manchester in 2018, Bank North was created to be a fintech-enabled bank. Having received its UK bank licence (Authorised with Restrictions, or “AWR”), it combined customised technology with the trust of face-to-face banking, and was built to disrupt the £150billion UK SME lending market with its business model.

Having previously completed a Series A funding round, where it raised £20.6million, Bank North was trying to find £30million to secure a full banking licence from the Bank of England, which would have allowed it to take deposits from retail savers. It was unsuccessful in doing so and as result had joined an ever-growing list of unsuccessful startups.

In a post on LinkedIn, Richard Baker, one of Bank North’s founders said: “I was an original co-founder of Bank North but left the day-to-day business over a year ago. As a shareholder we have just been informed (in a letter from the Board Chair) the sad news that the Manchester based neobank / challenger bank has failed to raise the capital it needed to progress from its ‘AwR’ banking licence to become a fully regulated bank.

“Our first thoughts have to be with the remaining colleagues who are losing their jobs, especially in these uncertain times, many of whom had only joined the business over the last year or so.

“Bank North had launched as a lending business – proving loans to SMEs – and apparently is now intending to sell its loan book with about a third of the headcount as part of its solvent wind down.

“Despite successfully achieving its ‘restricted’ banking licence in August 2021, the business had not yet launched its savings business to UK customers, so a further disappointment to its outsourced service providers.

“Many of us had put our heart and sole into making Bank North the success it was – a specialist lender to support UK SMEs – so the inability to raise further investment is a disappointment, albeit not unexpected given previous fund raising challenges along with the gathering uncertainty in investment markets.

“Finally, I just want to send my best wishes to all those good people directly and indirectly impacted.”

A variety of other players in the space responded to Baker’s post, expressing sadness about the news. David McCarthy, CFO at Atom Bank, said on LinkedIn: “I’m sure many have poured heart and soul into building this business over the years and it will be no fault of theirs that it has ended this way. Very best wishes to all affected.”

Will Davies, chief deposits officer at Ford Money, also commented: “Sorry to read this. I’ve had a similar experience and know how crushing it can be. Best of luck to all the team at Bank North.”

Is it all doom and gloom if a company doesn’t get its funding?
Luke Ladyman, co-founder and COO at Cheddar
Luke Ladyman, co-founder and COO at Cheddar

It is especially sad to see a company throw in the towel when the reason is a lack of funding. But does a failed funding round mean the company’s life has come to an end? The short answer is no.

We heard from Luke Ladyman, co-founder and COO at paytech Cheddar, who discussed his own experiences with securing funding and how fintechs should go about facing this type of adversity:

“From my own experience of launching a fintech startup, the best advice I can give to others struggling to secure initial funding is; digest the feedback being given by the potential investors and use this to understand what it is about your proposition that isn’t resonating.

“If a common theme starts to emerge, you’ll know where to focus your efforts. If not, then you may be speaking with the wrong investors. Focus on those that specialise in your space and understand the challenges your product helps solve.

“Cheddar’s experience with investors highlighted the need for startups to validate traction of the product with user data as much as possible. Ask yourself, how engaged are your customers? As opposed to how many customers you have. Or, how big is the market you’re going after in reality?

“As an early stage business, you’re not expected to have 1,000,000 installs or products sold, and therefore your remaining funds could be used on validating retention if not done already. The pending investment can be used for user acquisition and driving monetisation. Without engagement and retention, the funding conundrum will continue.

“I wouldn’t be afraid of asking for introductions from investors who may not be interested today. Investors may be able to suggest mentors or connections from within their network that can greatly assist the business. In our case, a suggestion from a VC that didn’t invest in the business completely changed our path for the better.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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