EXCLUSIVE: Cashplus, one of Britain’s longest-established digital challenger banks, plans to lend £400m to small businesses over five years.
Cashplus applied to become a full-blown bank last year and expects to be authorized in Q1 2020 with the aim of becoming the specialist bank for small business. It already has around 75,000 business accounts.
Unusually for a challenger bank, Cashplus has been in profit for the past eight years. In 2018-19 it generated £46.5m in turnover – a year-on-year increase of 19pc.
Rich Wagner, chief executive of Cashplus, said: “The day we become a bank we will be able to unlock £400m of money and be able to lend that out to overlooked SMEs, which will almost supercharge our growth.”
Since launch, Cashplus has expanded its range of services to include overdraft-style products to SMEs, which it calls iDraft.
- iDraft facilities of anything between £200 and £2,500. The average iDraft limit is about £620 and typically SMEs repay this within 10-15 days.
- Up to £10,000 through a corporate credit card
- Offering up to £25,000 in merchant cash advances, secured lending against credit card and debit card transactions, in much the same was as PayPal.
Cashplus began life in 2005 when it launched the UK’s first prepaid consumer debit card. At the time, there two million people in Britain who did not have access to even the most basic current account. The idea was to offer a prepaid card and provide people with a basic bank account for people at that time with a poor credit history. You topped up the debit card in much the same way as a basic current account operates, with no overdraft facility.
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Wagner said: ““We thought we could provide an electronic banking solution to them as good as a basic bank account.”
Cashplus raised £14m to launch, raised through US private equity house Trident Capital, which remains the challenger bank’s sole shareholder.
In 2013 Cashplus launched business accounts. The attraction of using Cashplus for startups is that there are no credit checks, its application process is quick and online, and you are issued with a sort code and current account number within minutes.
Wagner said: “Ease and speed is what we provide. It’s very similar to a current account with no overdraft facility. The key difference between us and applying for a high-street bank business account is that they have a 35-45pc decline rate because they do a soft credit search on you, wanting to futureproof you so they can offer you credit immediately on opening an account. Unsurprisingly, entrepreneurs fail this test.”
Wagner acknowledges that challenger banks are required to have the same capital retention requirements as a high street bank such as Lloyds, thought to be the safest bank in the UK. Some bankers have suggested that if the Government is serious about opening up SME lending to challenger banks, then capital requirement restrictions have to be loosened.
Wagner said: “There is some proportionality that they’re giving to smaller banks. The level of regulation required is robust. We still have to have the same percentage of capital and in some cases, slightly more.
“For me, being able to deploy £400m even with the capital requirements is significantly advantageous for my shareholders but also for my customers.”
Nearly 50pc of all transactions in the UK are cash transactions. Doesn’t this put a fintech such as Cashplus at a disadvantage at a time when other challenger banks, such as Co-operative Bank and Metro, are emphasising that they have relationship managers in branches?
Wagner points out that his business customers can use Post Office counters for day-to-day cash transactions.
“We’re hooked in to the 11,000 branches of the Post Office network, which in bigger in terms of number of branches is bigger than all the high-street banks combined,” he said.
Cashplus is based in London Bridge with around 150 staff in headquarters and another 50 staff at a satellite office in Birkenhead.