LONDON — House of Fraser’s Chinese owners have pulled £29 million of a £35 million investment in UK challenger bank Tandem over concerns that the Chinese government could object.
House of Fraser, which is owned by Chinese group Sanpower, announced in December that it was investing £35 million in Tandem, a London-based startup trying to build an app-only bank.
Tandem announced on Monday that Fraser Financial Services Limited is cancelling the second tranche of investment “due to uncertainty about whether China’s State Administration of Foreign Exchange would approve the transaction.” Sanpower is reportedly concerned about the Chinese government restricting outbound investment.
Beijing signalled plans to curb Chinese firms’ investment in foreign assets shortly after the Tandem deal was announced in December. Chinese companies invested £130 billion abroad last year but domestic economic growth is slowing, prompting the government to encourage more inward investment.
The financial service arm of department store House of Fraser has already invested £6 million in Tandem but it will leave the startup bank with a funding shortfall of £29 million. It means Tandem will miss the deadline for some requirements of its banking licence and have to reapply, according to City AM which first reported the news.
As a result, Tandem is delaying the launch of its savings product, which was expected imminently. The startup bank will shortly release an app to help people manage their money and credit cards are still expected later this year.
Ricky Knox, Founder of Tandem, says in a statement:
“While this investment not completing is disappointing it does not change our vision: to build a service that helps our customers improve their lives with money and a business that delivers long-term returns for our investors.
“The only change for customers is that 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. We will be in a position to quickly re-apply for our permissions to offer savings accounts at the right time for our customers.”
Business Insider reported last week that Tandem recently made around 10 redundancies in a bid to reduce its burn rate. CEO Peter Herbert also recently retired, with Knox set to replace him. Tandem says in Monday’s release that it will now look to restructure its business “to ensure a tight focus on delivering its customer vision and bringing its products to the market as quickly as possible.”
City AM reports that Tandem is looking for new investors after the pulling of the House of Fraser funding, which reportedly happened over the weekend. Tandem has raised £39 million to date from investors including eBay founder Pierre Omidyar.
Knox told Business Insider earlier this year that the House of Fraser investment was partly about pitching Tandem to the department store’s customers to help add value to the relationship. House of Fraser remains a strategic investor and Tandem says in Monday’s release: “The strategic partnership to make a new generation of financial services products available to House of Fraser’s multi-million customer base remains a priority for both parties.”
Tandem, founded in 2014, is one of a number of app-only banks set up in recent years. Others include Monzo, Atom, and Starling, which last week launched its mobile app and current accounts.
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