Tandem Bank, a UK digital lender and provider of motor finance, has secured £20m in Tier 2 capital from Quilam Capital, a specialist funder for the finance sector. 

The investment by Quilam highlights its aim to build a profitable digital banking platform and was finalised with support from financial services advisor Alantra, according to GlobalData’s Financial Deals Database.

Alex Mollart (pictured), CEO of Tandem Bank, said: “This investment marks another significant milestone for Tandem as we enter yet another exciting stage in our journey.

“Following a transformational 2022, this capital will put extra momentum behind our green lending proposition and allows us to capitalise on a number of exciting opportunities to further grow our business.”

Matt Glew, director at Quilam Capital, said: “Tandem is perfectly positioned to continue to grow its market-leading green lending proposition, which our capital will help to unlock. We’re proud to join the Tandem journey and are looking forward to an exciting future together.”

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Stephen Walker, lead analyst for fintech research at GlobalData, said: “Of the first wave of successful UK challenger banks, Tandem is the only one to go after ‘green’ in a meaningful way, with its acquisition of Allium Lending Group, a leading green loans company, in 2020.

Allium Lending Group is a member of the Finance & Leasing Association.

“That acquisition provided critical experience and expertise around green savings accounts and green mortgages, at a time when many new entrants were struggling to get beyond platitudes and posturing.

“That said, the world has changed a lot in the last two years, with our most recent executive survey data suggesting ESG is far less important than it was, a finding reflected in our consumer survey data. As such, it’ll be interesting to see how this green lending proposition fairs overall in a more difficult economic environment,” Walker said.

The investment comes after Tandem’s acquisition of London-based social money-sharing app Loop in April 2023 for an undisclosed sum. Also, last year Tandem acquired consumer lender Oplo

According to Tandem’s most recent financial report, deposits increased by over 126% in 2022, from £771m to £1.75bn. The firm also increased its lending to £1.2bn and posted an operating profit of £4.5m.

Ciaran Yates, associate analyst at GlobalData, said: “On June 1st this year Tandem announced its first full year of profitability. This is big news. Neo-banks in the UK and elsewhere have generally struggled to find a way to profitably monetize their offering. Monzo, for example, is still making significant losses year-on-year despite being one of the biggest names in the UK neo-banking scene. This wasn’t a major issue for securing funding when interest rates were low – but recent rate rises have shortened investors’ horizons.

“The acquisition of funding in this environment is therefore a noteworthy occurrence for a neo-bank. An occurrence which is likely inextricably linked to Tandem’s explosive growth in both customer numbers and net interest income over the past year following its acquisition of the consumer loan provider Oplo.”

In the report, Tandem said the year saw the re-launch of its Motor Finance division totalling £11m (FY21: £0.3m) taking the book size to £18.3m (FY21: £9.3m)