British lender Cashplus enters the big leagues of investment banking

  • The 15-year-old British fintech Cashplus has landed a full banking license.
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UK lender and provider of digital checking accounts for small businesses and financially underserved consumers is on the way to becoming a fully licensed bank, Financial Times reports.

Total Starling Company Accounts

Cashplus will face fierce competition in the SME banking market.

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Founded in 2005, Cashplus is one of the UK’s oldest fintechs. It previously operated under an e-money license, meaning it couldn’t lend its customers’ deposits and had to rely on expensive funding from other financial institutions, according to the FT.

The banking segment of small and medium-sized enterprises (SMEs) is a 850 billion dollars opportunity globally, but Cashplus faces fierce competition in a market that is home to some of the oldest and most mature SMEs


neobanks

.

  • Cashplus already has considerable deposits, lending capacity and existing market share, which gives it a head start over new entrants and even some established neobanks. The long life of fintech is a competitive advantage: “Our loan data is vast, 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, ”said CEO Rich Wagner, according to the FT. It also allows Cashplus to bypass the one-year restriction period typically required for banking startups, meaning it can start lending from its location. £ 500million ($ 641.2 million) in customer deposits immediately. With the full license, fintech will be able to offer a wider range of lending solutions to its existing customers, who represent 7% of all new UK businesses, and will put Cashplus on track to serve 10% of all new businesses by 2024..
  • But Cashplus still faces formidable enemies in the neo-banking space of British SMEs, and it will have to develop its offers to differentiate itself. The license will put Cashplus in direct competition with other neobanks that serve SMEs, a growing customer base, as businesses may be a more profitable segment than retail banking customers. Many of these neobanks take a market-based approach, in which they integrate relevant third-party services into their platforms, such as payroll or tax services. This allows them to meet more and more needs among their business customer bases, many of which exploded into growth last year amid the pandemic. Tide focused on SMEs over double its users to 300,000 between March and December 2020, reaching 5% of the UK SME market share. And it has new growth plans, targeting an 8% share by 2023. Meanwhile, Revolut has hit the ground running. 500,000 business customers in September, while Starling’s business accounts nearly quadrupled from 74,000 in 2019 to 285,000 today.

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