A new British challenger bank set up by a host of financial heavyweights, including the co-founder of Capital One, got its banking licence on Tuesday and is set to launch next year.
Tandem Bank is the second digital-only bank to be licensed by the Bank of England this year after Atom Bank, which became the first mobile-only bank to get a licence from the Bank of England in June.
Both will be regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Tandem’s co-founder Ricky Knox told Business Insider: “We’ve been amazed by the process, we’ve really found them incredibly accommodating. We’ve had a very smooth ride from the beginning.”
Knox has a long history in fintech (financial technology), helping to found international currency businesses SmallWorldFS and Azimo. Tandem will be a so-called neobank — a new, online-only, mobile-focused bank with no branches (although it will have call centres).
Knox has founded Tandem with Matt Cooper the co-founder of Capital One, the 10th biggest bank in the US. Cooper chairs the company.
Knox says: “We looked around all the sectors that were being disrupted and saw the next frontier being retail banking, the core business. We feel it’s going to be massively disrupted over the next 10 years.”
He adds: “The reason there’s an opportunity for a new digital bank is because there’s a new generation of people growing up who have very different relationships with their institutions. They want mobile banking.
“We think now is the time [to launch a digital challenger bank] and that’s driven by a generational, as well as a behavioural, shift. We’re looking to address the vast majority of the UK working population.”
Alongside Cooper, Tandem’s management and board features a host of other financial veterans who between them have served at GE Capital, Lloyds, Barclays, Williams & Glyn, and Santander.
“I always try and get the best talent from the industry to come and support me because I think it is absolutely massive,” Knox says. “If you want to really disrupt and really do something new, you have to really understand what came before.”
Knox and Cooper have been working behind the scenes on getting Tandem its banking licence since July last year and Knox says the company has raised a “quite a lot of capital” although wouldn’t say how much.
He did say that the company is currently in the process of raising a big round of funding “similar to Atom’s” — referring to Atom Bank, another pre-launch digital challenger bank that last week raised £45 million from Spanish bank BBVA.
Knox says Tandem differs from Atom in that it is more customer focused, rather than technology focused. He says: “We know their crew [Atom] pretty well. I think the really big difference between us and Atom is I think Atom are very focused on the mobile experience as the driver for everything they do.
“We’re very focused on customer outcomes and getting a much better deal for our customers. We come from different places.”
He adds: “It’s good that we have lots of guys entering the market. If I was a one man band trying to convince the UK to drop their bank, I think that would be a fiasco. Frankly, the more the merrier.”
London-based Tandem will launch to the public in the second half of next year with products including current accounts, credit cards, savings, and loans.
Knox says the plan is to use innovative products to drive customer adoption, saying: “We’re not assuming people are going to walk in and open a current account on day one, we’re assuming we need to build trust with the customer over time and solve pain points over time.”
He gives loans for a housing deposit as an example of the type of “pain point” Tandem will look to solve, saying: “Right now it’s pretty tricky to get a loan for a deposit, in fact banks actively avoid deposit loans.
“We see that as a really interesting pressing need that banks aren’t addressing right now because they say oh that’s not in my risk profile. It’s something we’ll definitely look to address.”