Bank North to wind down

Bank North has been trying to raise a GBP 50 million series B funding round from investors since May 2022, at a valuation of GBP 106 million.

While Bank North secured its banking license in 2021, when it also rebranded from B-North, it needed to continue to secure new funding to comply with its license.

In a letter to shareholders, chairman Ron Emerson said the bank had not been able to close critical capital in time to meet Bank of England requirements.

The letter notes that the bank is currently in talks with a third party to sell its GBP 17 million loan book as well as transfer its lending team, who make up a third of its 60 people staff.

The company was founded in 2018. It made its first loan in January of 2022 having secured a GBP 50 million debt facility in 2021 and a bank license around the same time.

This was proceeded by its GBP 17.1 million Series A round, at a GBP 25 million pre-money valuation, in August of 2021. It also raised GBP 30 million of equity capital from the likes of Growth Capital Ventures, LHV, Skipton Building Society, Insight Investment, Greater Manchester Combined Authority, and Channel4 Ventures.

More about Bank North

It launched via a variety of fintech partnerships; with Mambu, which provided its core banking system, ncino, TruNarrative, as well ClearBank, Wiserfundiung, and Validis.

Growth Capital Ventures owned the largest outside stake at 16.1%. LHV owned just under 15% of the bank while Skipton owned 13%. Its management had a combined stake worth approximately 20%. Greater Manchester Combined Authority and Channel 4 Ventures owned the smaller stakes at 3.7% and 2.6%, respectively.

Offering loans of up to GBP 5 million, it also had development finance, bridge funding, and short-term loan divisions. In terms of its customer segment, it was seeking to compete in a ‘missing middle’ segment of small and medium enterprises (SME) borrowers paying 3.5-6% above the base rate.

A differentiator was its decision speed on loans which it said would be scaled at 24 hours with cash arriving in 14 days. While its digital credentials were front and centre of its proposition, the bank also operated satellite offices in regional business centres starting with Manchester which launched in 2022.

The competitive threats multiply

As the digitisation of retail banking advances, the competitive threats to neobank entrants multiply.

Regionally, the profile of neobanks varies considerably. The UK, for example, has numerous full-service digital banks replicating the proposition of traditional players, whereas the US has very few. This is largely because UK entrants find it much easier to obtain a banking licence than those in the US, where only one – Varo – has done so.

In the UK, popular players such as Royal Bank of Scotland’s Bó and Monzo faced significant pressure moments, where Bó shut down just six months after launching owing to sunken profits, and Monzo withdrew its US banking licence application after regulatory discussions went downhill.

If 2021 was a prolific year for neobanks, several of them raising massive rounds of funding, becoming unicorns and decacorns, and expanding their global footprints, 2022 is proving to be a really challenging year for the sector. Intense scrutiny of regulators, a challenging economic environment, diminished funding and valuations, and growing fraud incidents have resulted in a sink or swim moment for neobanks.