Millennial banking startup Loot raised another £2.5 million – Business Insider

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LootBank's founding team.

Loot founder Ollie
Purdue.

Level39/LootBank

Loot, a banking services app pitched at millennials, topped up
its seed funding round with an extra £2.5 million ($3.1 million),
taking the total raised this year to £4 million.

The growth funding comes 5 months after the London startup

raised £1.5 million to build a banking app for “Generation
Snapchat.”

Loot is a pre-paid card linked to a money management app that
lets people track and gain insight from their spending. The new
version of its app will also feature savings tools and targeted
offers.

CEO and founder Ollie Purdue, 23, told Business Insider that Loot
has now built the product it promised in June and will use the
fresh funding injection to attract customers.

He told BI: “We wanted the money to really start marketing
heavily. It’s purely growth and customer acquisition money.”

Loot, which employs 32 people, will launch the new version of its
app later this month and begin a marketing push after that. The
startup currently has 5,000 customers, who will be moved to the
new service, and a waiting list of 20,000 people.

Purdue says: “We actually managed to get people on our waiting
list much cheaper than we expected. This raise is on the
assumption that it will continue to be similar and we’ll need
more money to do stuff like get the debit cards out there. When
we go live we’ll be issuing 500 cards every day. As go live
capacity, that’s quite good.”

Loot is operating in a crowded field, with a slew of app-only
startup banks in Britain trying to win over millennial customers.
It faces competition from well-funded startups such as
Atom
,
Starling
,
Monzo
, and
Tandem
, which have collectively raised hundreds of millions.


Loot card

The Loot card in
action.

Loot

Purdue believes Loot has an advantage. The startup has chosen not
to apply for a banking licence, instead using an E-Money licence
and partnering with other companies to offer banking services.

Purdue says: “Financially it doesn’t make sense. We’re so much
faster, so much cheaper to run. From a compliance perspective
it’s no different. We’re working on products you would expect a
bank to do because we can use other partners to do that.

“Out of the challenger bank world, we’ve got the most
functionality. We’ve got our own sort code and account number
system so any user can make a payment to anyone in the banking
network. We use Faster Payments. We’ve got direct debits. We’ve
got savings accounts as well built in. We call it Loot Goals, you
add a savings goal and then we’ll tell you how much money you
need to put in each day to reach that goal.”

Loot raised the £2.5 million from existing investors SpeedInvest
and Global Founders Capital. Both are European (Austria and
Germany, respectively) — did Brexit affect fundraising?

The EU vote “actually made it a stronger case not to go for the
licence,” Purdue says. “Even when we hit scale next year, we
still won’t because it financially won’t make sense. Monzo and
Tandem have spent millions on getting this licence that doesn’t
give them any extra functionality than we’ve got and probably
can’t go through Europe. It’s pretty crazy.

“We will go international but it’s looking less and less likely
we’ll go to Europe first. Europe’s quite a hard continent because
every country is quite small and quite different. We’re looking
to launch US next year.”

Loot’s service is free. The company takes a cut of all purchases
made in shops on its card, a standard banking model, and plans to
make money through offering targeted discounts and offers.

Purdue says: “One of the features we’re working on is called
Compare, which goes live towards the end of the year. We’ll show
your spending against the average person similar to you. Instead
of just telling you how much you’ve spent on travel, we can tell
you whether it’s good or bad. If it’s higher than average we
would want to give you a discount to help lower that. We’re
working on a network now to provide that.”

He adds: “If we’ve got a fully active user, we’ll make profit on
them but it’s not enough to make the whole company profitable.
We’re working on other financial products that tie into the core
of the product. One example is we’ve got international transfers
going live in January, we’re working on an overdraft feature —
all of these sorts of things.”

Purdue says the startup will raise money again in the second
quarter of 2017.

NewMoney

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November 7, 2016 at 04:42AM