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Move by company will cut funding costs as it seeks to compete with rivals such as Monzo.
Cashplus, one of the UK’s oldest fintech companies, has become a full bank as it looks to speed up growth and position itself as a more sustainable and profitable competitor to rivals such as Tide and Monzo.
The company, which was founded in 2005, provides lending and digital current accounts for small businesses and consumers who are underserved by high street banks due to, for example, poor credit histories.
Cashplus previously operated under an e-money licence, which meant it could not lend out customer deposits and had to rely on expensive funding from other financial institutions.
Rich Wagner, chief executive of Cashplus, said: “We had some very unattractive lending terms from traditional high street banks — the new licence will take our cost of funds from nearly 10 per cent down to zero, and allow us to provide more widespread lending solutions for SMEs in a period where they need it the most.”
The company will immediately become a fully licensed bank, rather than having to go through a year-long restricted period as many banking start-ups do.
The move highlights rising competition in the small business banking market, as growing numbers of companies have shifted their focus away from less profitable retail customers. Digital banks Monzo, Starling and Revolut have put increasing focus on business customers after initially targeting consumers, while specialist competitors such as Tide have also been growing aggressively.
Despite the competition, Mr Wagner said Cashplus’s longer record would give it an advantage over newer start-ups.
“Our data on lending is extensive and the ability to have five to seven years of credit data on overdrafts, credit cards and the like from day one puts us in an advantageous position.”
Starling Bank and Revolut both began to break even on a monthly basis in late 2020, but none of the digital challenger banks have so far managed to report sustained profitability.
Cashplus reported a pre-tax loss in the last two financial years as it invested in preparation for its banking licence application, but was profitable on a pre-tax basis for the preceding six years, and has reported an operating profit for nine consecutive years.
Many of Cashplus’s business customers are newly formed companies, and the bank is hoping to benefit from an expected surge in start-ups as a result of the current economic downturn.
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