Striving to be a good bank at Tandem Bank: Fintech Interview 21

The biggest surprise for Tandem Bank when it moved customers it gained through acquisition, to its systems, was that not having the title Dame in its database could be an issue.

The digital bank was incorporated in 2013 took on its first employee, unsurprisingly a chief technology officer in 2015, and got its banking license in 2018. It has already amassed 500,000 customers for its services that include credit card, mortgages, savings, personal loans.

It plans to launch a current account soon.

Tandem is using artificial intelligence and open banking technologies to make banking easier and helping customers better manage their money.

It was founded by Ricky Knox, Matt Cooper and Michael Kent (Azimo CEO) in 2013.

I have already written about Tandem Bank a couple of times. Although it is a startup, much has happened. It has already acquired another bank and had a major cloud migration of its own.

In January last year, it acquired Harrods Bank, which at the time doubled its customer base to 21,000. The company’s growth has been steep with over half a million customers today. In fact so steep that the bank has already had a major migration of customer accounts when it moved from managed service provider systems to the Amazon Web  Services cloud. While its acquisition and customer migration might be in common with more established bank, the way it migrated, over one night was not.

I recently caught up with CEO and co-founder Knox to get a broader picture of the challenger. Knox told me he “is definitely not a banker.” After meeting him I unequivocally agree.

After studying economics he was involved in the first internet bubble in the early 2000s as a venture capitalist. “Most people thought it was a load of [rubbish] but we thought this internet thing was going to be big.”  Seems an understatement today, but although hard to believe there were many doubters.

“I went out to Silicon Valley to see what they were doing and came back to the UK and went to business school,” said Knox.  Since then he has set up six businesses, including one in telecoms and a software business.

Tandem was not Knox’s first fintech either. He was also co-founder of money transfer company Azimo, which I already featured in this interview series.

But Tandem is where he sits as CEO and where his time is mostly spent.

He said his and his co-founders’ vision was to build a good bank. “Money is difficult to deal with and most people mess it up and banks make it more difficult.”

“We make tools that actually allow people to make all these complex decisions and help them do what they want to do without any of the gobbledygook that the banks spout.”

He gave me an example of how banks are not designed for customers, which is a major failing when there is so much choice today. “Think about it, why do you have a current account and a savings account? Obviously this is because banks don’t want to pay interest on a current account. Why not? If they did you wouldn’t need a savings account.”

“People should get interest on everything they have got,” he said.

The bank uses Finserv as a system of record but it is the clever stuff at the front that does 90% of the work. Using the Tandem data platform, the bank offers customers information about their spending and helps them manage their money and get better deals.

“We analyses our customers’ various bank accounts and using AI spot opportunities for them to save money.” It is only when relevant the bank will offer customers advice on how to save money. This might include booking train tickets direct or switching utility supplier. It can then link to third party apps to help customers do this.

“But we do not push apps on people with a marketplace or anything like that,” said Knox.

“It is good to have pots and mechaniisms to help people save but the actual functionality of a bank should be to help people understand their finances,” he added.

For example, he said, in a world of contactless people don’t know where they are and can waste money. This is why, for example, real-time information about spending is useful.

To this end tech rather than bank was the place to start. “The first thing we built was the open banking piece and we did it initially using screen scraping to allow people to shadow control their accounts. We built all the tools to help people manage their cash over the top of accounts,” Knox explained.

“Our focus initially was gathering all the data and we didn’t need to do our own banking products to do this because of open banking.”

This is what Tandem offered its initial 10,000 co-founder customers as they are known. Knox explained: “We did a scheme that if you were an early customer you could help build the bank and the first 10,000 customers are known as co-owners.”

Tandem did not need a banking licence for this and was still in the process of getting one.

The clever stuff at the front end is the company’s differentiator. It has about 80 people working on thiis in product, design, tech and engineering. About 60 are in London with the other 20 in Krakow, Poland

And with half a million customers won over in about a year Tandem’s offering is certainly compelling.

The median age of a typical customer of Tandem, who uses a range of products, is 38 years, which according to Knox  “is a little but older than some of our competitors.” Knox said, like with most challenger banks Tandem is a second bank for many of its customers. “Spend card behavior is the main way challenger banks are being used.”

Some of its older clientele come from its first acquisition. At the beginning of 2018 it acquired Harrods Bank, which offered mortgages and savings. Although it was widely reported that this was done to give Tandem a banking licence, this was not the case. Knox said at that time the company already had a banking license and acquired Harrods Bank for the capital that had been invested into it. “This was in a way our first fund raise. We kind of did the deal for the capital and got the bank for free.”

Harrods brought about 7000 customers and £400m deposits £50m in mortgages.

Tandem experienced some obscure problems when migrating Harrods customers to its systems. “One of the problems is we did not have the title Dame in our database and 12 of our new customers had this title.” (My opening paragraph now makes sense).

About half of the savings customers from Harrods are still Tandem customers as well as a few hundred mortgage customers.

Following the Harrods Bank acquisition Tandem quickly launched its aggregation app, credit card and savings account. It later launched a personal loans business and revamped its mortgages business.

Read the previous fintech interviews

Part 20 Tink, Part 19 Goldex,  Part 18 AzimoPart 17 YoyoPart 16 BudPart 15 PrevisePart 14 FinastraPart 13 InstaReMPart 12 EucapsPart 11 AimBrainPart 10 MenigaPart 9 TrueLayerPart 8 InvestCloudPart 7 ClauseMatchPart 6 Rebuilding Society, Part 5 HonchoPart 4 AkoniPart 3 WriskPart 2 CreditLadderPart 1 Taina Technology

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