The CEO of UK challenger bank Kroo Bank has suggested that it could begin offering investment products, amid a further fall in interest rates and customers becoming less risk-averse.
Andrea De Gottardo, Kroo CEO, said:
“If you look two years in the future with base rate going down, stabilising around 2 per cent, 2.5 per cent, some of the customers looking at better returns are willing to take some more risks. Potentially offering some sort of investment? Why not.”
The Bank of England cut interest rates from 5 per cent to 4.75 per cent in November, the second cut in 2024.
While offering stock and shares trading is not on Kroo’s immediate roadmap, De Gottardo pointed out that, should it offer investment products in the future, it might do so through a partnership, and not through its own licence.
Should it do so, Kroo would be entering a competitive market, going up against traditional players like Hargreaves Lansdown and new players like Freetrade.
Kroo, founded in 2016 and which has a UK banking licence, offers current accounts, personal loans, and overdrafts. It is set to offer cash ISAs next year.
It now has nearly 190,000 customers and has surpassed £1bn in deposits.
De Gottardo said last year that the goal was to get to a million customers, but says this is a long-term goal and not its north star.
He said:
“The number of customers is not our north star. A lot of other challenger banks have gone for growth at all costs. That has never been our mindset. It has always been quality over quantity.
“We could scale way faster if we want to. It’s fairly easy to acquire customers if you don’t really care about how the customer behaves.
“Do they like the product? Do they use the product? Do they engage with the product? Growth for the sake of growth feels very 2019/2020. I think the whole market has moved on.”
He said a growing number of Kroo’s customers, which are primarily between 30 and 45, use Kroo as their primary account, but did not disclose how many.
Kroo says it has paid out over £51m in interest directly back to customers’ current accounts, which the CEO says is at odds with traditional banks.
Kroo currently offers 3.85 per cent interest on its current account, while most banks do no pay interest on current accounts.
Industry figures show that £253bn sit in accounts that are non-interest-bearing, amid the UK’s major banks, such as Lloyds and HSBC, reporting big profits.
Kroo has raised around $74m and last year raised around $2.1m through a crowdfund raise on CrowdCube.
