Startup quasi-bank Loot has raised £1.5 million ($2.2 million) and is relaunching its app as a broader, millennial-focused banking product pitched at “Generation Snapchat.”
The London-based startup has raised the Series A round from Austrian early stage fund Speedinvest, which backed Finnish startup bank Holvi before it was acquired by BBVA, and Global Founders Capital, the VC fund headed by Rocket Internet founders the Samwer brothers.
Business Insider first reported Loot was close to announcing its Series A funding in April. The startup is a pre-paid card linked to a money management app that lets people track spending and gives them insight into what they are spending their money on.
Loot, founded by 22-year-old recent graduate Ollie Purdue, was originally pitched at overseas students because of its quick account opening time. It launched its service last September to coincide with the new university year. But Loot is now launching a new version of its app targeted at millennials more generally, not just students.
Founder and CEO Ollie Purdue told BI: “We noticed that the biggest comment on our version one product was: ‘I’m not a student, can I use this product?’ We thought that was really interesting.”
‘A lot of millennials are struggling to make ends meet’
The new app has features tailored to travel, shopping, and money management, meant to appeal to young people. Purdue says: “We are focusing our travel features on people who love impulse trips. You don’t have to worry about cash, you don’t have to worry about a spending card, you just take your bank account abroad with you.
“We focus our tech features for people who might be impulse buyers so we can keep them updates so they don’t have to keep track of their spending themselves.
“And we focus our money management on people who just want to know more about where their money is going. Maybe they keep checking their bank balance and it’s surprising or they don’t know what’s going on so they just want to know a bit more about where it’s going.”
The new version of Loot’s app forecasts future bills and spending based on past habits to give account holders an idea of how much they can safely spend. Users can also contrast their spending against others in their area or earnings range — are they spending more or less than average?
Purdue says: “The crazy thing is, we look at the big banks and the data in your accounts is still 3 days old. With Loot, it’s instant, you can always check it and update it.”
Oliver Holle, founder and CEO of Speedinvest, says in a release announcing its investment in Loot:
“Times are challenging especially for young people. A lot of millennials are struggling to make ends meet. Loot is helping Generation Snapchat to manage their finances in an easy and comfortable way and is making their lives easier and that’s why we invested in Loot.”
Purdue says Loot currently has 5,000 customers but is hoping to reach 50,000 by the end of the year after broadening out its service. He adds: “There are timelines that aren’t in our control. Stuff like card production sting every startup.”
‘We think the tech is all going to be the same in 6 months’
Loot is not the only startup trying to build a new bank or proxy bank pitched at the young. It faces competition from the likes of Mondo, Tandem, Atom, and Starling in the UK. All have raised far more than Loot.
Despite the crowded and competitive field, Purdue thinks Loot can differentiate itself: “Most of them [neobanks] are worried too much about tech. They worry too much about being the smartest bank, about being the most sophisticated bank. It isn’t really the focus for us.
“We think the tech is all going to be the same in 6 months, it’s going to get commoditised. We focus on the other things in your financial life. Obviously, we’re making sure we’re using the most advanced tech but we’re not building tech for tech’s sake.”
Loot is built using the technology of German card provider Wirecard, which also provides the underlying infrastructure of startups like Mondo and Curve, a debit card that combines all your debit and credit cards on one piece of plastic.
Purdue says Loot plans to launch targeted discounts within the app a month after going live with its new app and is in “late stages with a couple of brands, it should be nationwide.”
“One of the big things for us is being able to give you discounts on your spending. That’s not a fintech thing, that’s an e-commerce thing. If I always spend money in clothing shops, I don’t want an app to tell me it’s high or I should cut down — I’d rather it just gave me a discount.”
“If I wasn’t doing Loot I probably wouldn’t have signed up to any of the new banks. We’re in this bubble where we hear about them all the time. Categorisation is OK but if you’ve got a bank that’s helping you save money on coffee and maybe helping you find new coffee shops, that’s a big deal.”
“I think the team wants to throw a music festival… Do stuff Natwest couldn’t do, I think that’s our target internally.”
Unlike its competitors, Purdue says Loot won’t go after a full banking licence as new technology means it can offer most banking services on a pre-paid card.
He adds: “We’re looking at ways we can merge the financial data of your life with real life solutions and making your life better through. We never want to sell data but if there’s a way we can help both people, we can be that middle layer.”
Purdue says the £1.5 million will go on marketing the re-launched product and hiring more staff.
“As soon as we launch this, we’re going to be pretty aggressive on marketing,” he says. “We’ve got a base level of what we’ll spend on paid [advertising] and then the rest is completely experimental — we’ll try it, see what works. I think the team wants to throw a music festival, stuff like that. Do stuff Natwest couldn’t do, I think that’s our target internally. “