UK challenger bank Tandem has come on hard times after House of Fraser, one of its backers made the decision to pull out from a planned funding of £29 million.
It was decided by the firm, (which was bought by Chinese firm Sanpower in a £480 million deal in 2014) because of limitations being placed on Chinese companies investing money abroad, amidst an atmosphere of stagnating domestic growth.
Even with the pullout, House of Fraser will continue as a minority shareholder in the FinTech company, owing to its £6 million investment last year.
According to a company-issued statement, the firm is putting a pause on its plans to offer savings accounts to customers in the short-term, but the withdrawal of investment will not delay its plans to launch. It continued:
This will not delay our launch to the market, with the app – which will allow customers to view all their money in one place and optimise their finances – still launching to the public in the coming months followed by credit cards later this year, subject to regulatory approval.
It also assured customers of saving accounts and current accounts being added back into the range of services provided as soon as it feels the time is right for its customers and its business, ending with:
Our determination to reduce the stress people feel in managing their money is as strong today as it has ever been.
However, City AM says that the startup will now end up missing a deadline to fulfill some of the requirements of its banking license, which is authorized by the Prudential Regulation Authority. It is expected that Tandem reapplies in due course.
The publication stated that its activities will still be regulated by the Financial Conduct Authority when Tandem launches.
Today’s announcement comes after reports that the firm made approximately 10 redundancies in an alleged attempt to lower its cash burn rate. Business Insider quotes House of Fraser (which did not comment) as wanting the challenger bank to reduce its overhead costs.