Ollie Purdue finished university only last year, but he’s about to launch a student money management startup that’s raised £200,000 ($US316,000) on the strength of little more than an idea.
Loot Bank is a smart money management app for students, linked to a pre-paid card. It’s launching in two weeks to coincide with the start of the new university year.
“The way it works is when you open it up it already tells you how much you can spend,” explains Purdue, who turned 22 last week. “It’s based on total balance, outgoings, and projected spending.
“This is the thing with students, every three months they will get £1,000 ($US1,580), or £1,500 ($US2,370), so the total balance is less important because if I open up the app it could say I’ve got £2,000 ($US3,160) but I don’t know if that’s £10 ($US15) a day or if I’ve got loads of money. For instance, I went out and bought a TV when I got my student loan and got sky-diving lessons. Actually I only had about £20 ($US31) a day.”
Purdue says half of all students download a money management app at uni, equivalent to one million students. He had the idea for the business while studying law at the University of the West of England and struggling with money management apps that were available.
After graduating last year, he took the idea to a “pre-accelerator,” called Fast Forward, in London that helped Purdue develop the idea.
“We met some really great guys there who helped us with the financing we need, the business plan, the contacts — I was straight out of uni and didn’t know anyone.
“They set up meetings and kind of leapfrogged us to the place where October last year we were in a good position as a business. It took from June to October to get that right. In that time, I met a lot of bankers to see what they think.”
Purdue built a prototype of the app with only three working buttons and took it to potential investors, one of whom was Nick Wheeler, the founder of shirtmaker Charles Tyrwhitt.
“I showed him the app,” Purdue remembers. “He actually took it off my hands at one point and he pressed the right button luckily.”
Loot Bank ended up raising £200,000 from Wheeler and 7 city bankers.
Loot’s pre-paid card will launch in partnerships with LSE, UEA, and Bath initially, as well as smaller marketing drives in universities like Buckinghamshire. Loot is targeting international students and is hoping to sign up 1,000 this year.
Purdue explains the difficulty international students face banking in the UK, saying: “You can’t open [a bank account] before you get here and even when you land it can take weeks or months.”
“We can sign a user up on our card on our KYC [known your customer, an anti-fraud and money laundering proceedure] process, but impose a limit of £2,000 ($US3,160), so they can still use their card on the day they get it even if we don’t know things like their address.
“We can onboard a customer in two minutes. We just need date of birth, name, email address — really basic. Then we can do stuff like scan their passport and post them a letter to verify their address later.”
It’s this ability to quickly sign up new customers, while also maintaining anti-fraud and money laundering protection, that has got big banks interested. Royal Bank of Scotland is one of three big banks in talks with Loot to launch a Loot-branded current account next year.
Purdue says: “Bigger banks, slower banks, they don’t make any money out of students and they don’t want to make a competing brand against us. It’s much cheaper for a bank to try and work with us than compete with us.”
Loot plans to make money by charging transaction fees on its pre-paid cards — such as 75p to withdraw cash — and through targeted offers within the app.
“We know where they’re spending their money, how much they’re spending,” he say. “We would never give your details to a brand, but we can say we’ll put your offer there and then track if it’s used, and if they go back and spend money. It’s kind of like an anonymous marketing tool.”
“We’re talking to five [brands] and we should have one by the time we launch. They’re all majors in different categories. One’s for clothing, one’s for groceries, one’s a coffee shop — it should be good.”
Loot Bank also plans to raise a series A round of funding next year — but first Purdue needs to get the first term launch out of the way.