UK lender Cashplus enters the business banking big leagues

  • Fifteen-year-old UK fintech Cashplus snagged a full banking license.
  • This puts it in direct competition with big business banking neobanks, but it brings several key advantages to the fight. 
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The UK-based lender and provider of digital current accounts for small businesses and financially underserved consumers is becoming a fully licensed bank, the Financial Times reports.

Starling Total Business Accounts

Cashplus will face tough competition in the SMB 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 could not lend out its customer deposits and had to rely on expensive funding from other financial institutions, per the FT.

The small- and medium-sized business (SMB) banking segment is an $850 billion opportunity globally—but Cashplus faces tough competition in a market that’s home to some of the oldest and most mature SMB neobanks.

  • Cashplus already has considerable deposits, lending capabilities, and existing market share—giving it a leg up over new entrants and even some established neobanks. The fintech’s long tenure is a competitive advantage: “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,” said CEO Rich Wagner, per the FT. It’s also allowing Cashplus to bypass the year-long restricted period typically required of banking startups, meaning it can start lending from its £500 million ($641.2 million) in customer deposits immediately. With the full license, the fintech will be able to bring a wider range of lending solutions to its existing customers, which represent 7% of all new UK businesses—and put Cashplus well on its way to serving 10% of all new businesses by 2024.
  • But Cashplus still faces formidable foes in the UK SMB neobank space, and it will need to build out its offerings to differentiate itself. The license will put Cashplus in direct competition with other neobanks that serve SMBs—a growing crowd, as businesses can be a more profitable segment than retail banking customers. Many of these neobanks take a marketplace approach, in which they integrate relevant third-party services into their platforms, like payroll or tax services. That’s allowing them to address increasingly more needs among their business customer bases, many of which exploded in growth last year amid the pandemic. SMB-focused Tide more than doubled its users to 300,000 between March and December 2020, reaching 5% UK SMB market share. And it has further growth plans, targeting 8% share by 2023. Meanwhile, Revolut hit 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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