Tandem Bank is good at wooing the crowd. A few weeks ago it turned a pub into a bank, to make a point about how bad banks are at customer service. Then it announced it was giving free shares to customers in exchange for advice. But is it it a good investment?
Where do 'challenger banks' like Tandem fit into the alternative finance landscape. Banks and start-ups are becoming allies, so what is it that makes it a bank, rather than a Fintech company?
Tandem turned a pub into a bank: customers hated it.
First things first. Tandem has a banking license. It received one in November 2015 and is planning to launch in the second half of 2016. A banking licence is an expensive thing to acquire, but it helps.
Chris Skinner, who analyses the banking sector with piercing wit and an intolerance of nonsense, has little patience with ideas that challenger banks can avoid the attention of regulators. In his words, "Eventually, everything will become a bank", and he singles out three strategies that will not help:
- A business strategy based upon attracting consumers by not being a bank, is not sustainable.
- A business strategy based upon attracting consumers by looking like a bank, is not sustainable.
- A business strategy based upon attracting consumers by making banks more complex, is not sustainable.
Tandem seems to have avoided those three errors. Insteaed, it claims that it will set itself apart by doing something that banks don't do. "The banks don't help you manage your finance and that piece is where we are going," CEO Ricky Knox was reported as saying in a panel discussion at Money 2020, in early April.
Now, Tandem is planning a million pound equity raise from the crowd. We expect it to take place in the second half of May. Details are still being finalised, but this article on CNBC summarises the information that's already in the public domain.
We'll let you know more information when we have it. In the meantime, if you're interested in digital banks, we recommend this piece by Chris Skinner, which compares Tandem with Atom Bank and other British digital-only and challenger banks, along with similar institutions launching in Germany and across Europe.