Popular consumer FinTech app Dozens is to close by the end of August.
The first product of London startup Project Imagine has 60,000 customers who have been told to move their funds to an alternative account before that date.
Dozens, a current account which offered spending, saving and investing in one place, launched in early 2019 and hit 25,000 users by the end of that year, allowing it to 鈥渢urn off marketing鈥�.
鈥淟ittle did we know, a once-in-a-century global pandemic was around the corner,鈥� read a blog post on the company鈥檚 website. 鈥淐OVID hit when we were still a very early stage company. Overnight we lost both investment and B2B deals worth millions of pounds.聽
鈥淥ur focus immediately switched to survival mode 鈥� simply looking after our employees and customers for as long as we could to provide some form of stability at a time when everything was so uncertain.
鈥淪omehow we made it through 2020, then 2021, and are relatively proud of what we were able to get done in the time and circumstances we had.鈥�
Project Imagine, which has fewer than 30 staff, has raised around 拢28 million, primarily from institutional sponsors in Hong Kong, with around 拢1m each from Seedrs and HMT鈥檚 Future Fund.
It blamed the 鈥渄omino effect of COVID鈥� on the decision to close and focus on a pivot to B2B.
鈥淸There is] less money in the system. COVID has led to supply chain disruption across the world and in the UK this has been compounded further by Brexit,鈥� it explained.聽
鈥淭he war in Ukraine has reduced supply further in an already constricted system. This lack of movement and supply of goods has caused prices to rise. As people and businesses across all sectors of society are adjusting how they use their money and where it sits, less and less money is being placed in illiquid investments like VC funds.聽
鈥淲ithin the FinTech sector specifically, less money is going into the consumer side of FinTech. There was a boom in consumer fintech funding in 2014-16, but most of Dozens鈥� larger, older competitors are yet to convert that into truly profitable businesses, so new funding has been focusing more on the B2B side.
鈥淏orrowing is going to go up. It鈥檚 a great time to be a bank. But while we鈥檙e still in the developmental stages of the business and running on an e-money licence, a model which doesn鈥檛 rely on lending has less chance of survival.
鈥淭here is money out there for startups like us to introduce 鈥榖uy-now-pay-later (BNPL)鈥� and flexible overdraft type products, and you will continue to see these popping up in many places. But for us as a business, and what we set out to do, it鈥檚 not a route we are willing to take.聽
鈥淲e are here to develop a successful new banking business model, not seek success at cost to our customer (the same reason why despite having the licences and the platform capabilities to do so, we never enabled crypto trading for our customers).鈥�
The post railed against the tendency for FinTechs 鈥渢o increase customers at all costs鈥� using VC funding and worry about building a sustainable business later.
鈥淥ur approach is noticeably different to the grow-first, cross-sell-later model that most have adopted so far. But it is our belief that visible top-line growth, funded by continuous dilution, without work on relatively more invisible cost and revenue controls is a risk to any business, and its mission.
鈥淯ltimately those losses have to be made up somehow 鈥� at the expense of the customer (usually through offering unsecured, high-margin personal lending products such as BNPL) or by resorting to new investors and delayed IPOs.
鈥淲e know that to have any chance of achieving our long term mission, we need to be self-sufficient via organic capital generation from our own revenue lines and profit centres.鈥�
Project Imagine, which intends to use money saved from servicing the existing app to drive tech innovation in the business, aims to launch a bank in future, although it did not seem too confident.
鈥淲e still aim to launch a bank, on a full banking licence that doesn鈥檛 rely on unsecured personal debt for profit and returns much higher interest rates to its customers鈥� that is not going to happen in the near future, and indeed given the tall order, may never happen.鈥�
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