Loot, a banking services app pitched at millennials, topped up its seed funding round with an extra £2.5 million ($3.1 million), taking the total raised this year to £4 million.
The growth funding comes 5 months after the London startup raised £1.5 million to build a banking app for “Generation Snapchat.”
Loot is a pre-paid card linked to a money management app that lets people track and gain insight from their spending. The new version of its app will also feature savings tools and targeted offers.
CEO and founder Ollie Purdue, 23, told Business Insider that Loot has now built the product it promised in June and will use the fresh funding injection to attract customers.
He told BI: “We wanted the money to really start marketing heavily. It’s purely growth and customer acquisition money.”
Loot, which employs 32 people, will launch the new version of its app later this month and begin a marketing push after that. The startup currently has 5,000 customers, who will be moved to the new service, and a waiting list of 20,000 people.
Purdue says: “We actually managed to get people on our waiting list much cheaper than we expected. This raise is on the assumption that it will continue to be similar and we’ll need more money to do stuff like get the debit cards out there. When we go live we’ll be issuing 500 cards every day. As go live capacity, that’s quite good.”
Loot is operating in a crowded field, with a slew of app-only startup banks in Britain trying to win over millennial customers. It faces competition from well-funded startups such as Atom, Starling, Monzo, and Tandem, which have collectively raised hundreds of millions.
Purdue believes Loot has an advantage. The startup has chosen not to apply for a banking licence, instead using an E-Money licence and partnering with other companies to offer banking services.
Purdue says: “Financially it doesn’t make sense. We’re so much faster, so much cheaper to run. From a compliance perspective it’s no different. We’re working on products you would expect a bank to do because we can use other partners to do that.
“Out of the challenger bank world, we’ve got the most functionality. We’ve got our own sort code and account number system so any user can make a payment to anyone in the banking network. We use Faster Payments. We’ve got direct debits. We’ve got savings accounts as well built in. We call it Loot Goals, you add a savings goal and then we’ll tell you how much money you need to put in each day to reach that goal.”
Loot raised the £2.5 million from existing investors SpeedInvest and Global Founders Capital. Both are European (Austria and Germany, respectively) — did Brexit affect fundraising?
The EU vote “actually made it a stronger case not to go for the licence,” Purdue says. “Even when we hit scale next year, we still won’t because it financially won’t make sense. Monzo and Tandem have spent millions on getting this licence that doesn’t give them any extra functionality than we’ve got and probably can’t go through Europe. It’s pretty crazy.
“We will go international but it’s looking less and less likely we’ll go to Europe first. Europe’s quite a hard continent because every country is quite small and quite different. We’re looking to launch US next year.”
Loot’s service is free. The company takes a cut of all purchases made in shops on its card, a standard banking model, and plans to make money through offering targeted discounts and offers.
Purdue says: “One of the features we’re working on is called Compare, which goes live towards the end of the year. We’ll show your spending against the average person similar to you. Instead of just telling you how much you’ve spent on travel, we can tell you whether it’s good or bad. If it’s higher than average we would want to give you a discount to help lower that. We’re working on a network now to provide that.”
He adds: “If we’ve got a fully active user, we’ll make profit on them but it’s not enough to make the whole company profitable. We’re working on other financial products that tie into the core of the product. One example is we’ve got international transfers going live in January, we’re working on an overdraft feature — all of these sorts of things.”
Purdue says the startup will raise money again in the second quarter of 2017.
EXCLUSIVE FREE REPORT:
5 Top Fintech Predictions by the BI Intelligence Research Team. Get the Report Now »
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.