Not many students leave university so fed up with their bank they set up a rival.
But that’s the story behind Loot, where Ollie Purdue decided that if Natwest could make money from the service he was getting, surely he could do better.
Almost three years later and Loot is one of a number of card–based, digital challenger banks that have emerged to challenge the established high street giants.
Millennials the focus
Just 24 himself, Purdue says Loot’s focus is firmly on 18-25 year olds - the millennials and students sector.
The plan is to make acquire customers cheaply by providing better functionality, such as running totals and budgeting, and services more tailored to that age group than the big five currently offer.
Loot took a big step last year when it set up its own current account.
Purdue says that means everything you can get from a mainstream bank current account is now available on a Loot card.
“The basic functions are exactly the same as a bank account.
“You get an account number and sort code, the same as any high street bank, and you can transfer in a salary, or student loan payment.”
Payment can be made through Apple pay or debit, or money transfers by using a picture of an existing bank card through a 3D secure window. International transactions also incur no added currency fees.
There are limitations. Loot does not offer a credit card facility.
Overdrafts are also not yet available, though this is something that should be remedied this year, Purdue says.
Deposits are held through an arrangement with FCA regulated e-money group Wirecard, which also means customer accounts are ring-fenced and secure.
That arrangement means Loot needs less capital but it also restricts it from lending, the area where banks traditionally make most of their money.
At present, Loot earns revenues from a charge on transactions and when money is transferred in from overseas.
So far, the arrangement with Wirecard has meant the company has managed to function and grow without the need for a bank licence.
But once it moves into overdrafts, a partnership with a company already with a consumer credit accreditation is likely.
The partner will provide the capital, which means lower margins but additionally Loot will not have the regulatory burden that comes with a full bank licence.
Currently, Loot employs around 40 people, split between London and Poland.
One million users by 2020 the target
A recent funding round raised £2.2mln and was led by Power Corporation and Austrian venture capital firm SpeedInvest.
It brought total funding to £6mln since Loot was established.
Purdue, who says he owns a significant controlling stake though less than a majority, adds the money will go to support the rapidly growing customer base and marketing.
More than 50,000 people hold accounts already and that number is growing at 12% per month with monthly transactions volumes rising even faster at 25%.
Another funding round is likely this year to keep up with the demand and its size will determine how fast Loot develops.
The aim is for one million users by 2020 by which time the bank should also be in profit.
At that point, Purdue and the other investors will consider the options. That might be an exit through a sale, IPO or to go for a banking licence.
A £15mln funding will get it to that point, but a £30m-40mln funding would do it quicker.
Why would an 18-year old go to HSBC?
“We are doing really well as a transactional banking account,” says Purdue, but adds to make sure customers who sign up now stick, Loot has to have a full suite of products.
And the prize is a big one with plenty of room for Loot and its rivals says Purdue.
“My thinking is that if we can make sure every 18-year old chooses between Loot, Starling and Monzo we’ve all won.
“We should make it a target than an 18-year old never wants an HSBC account, though I think we are already there.”