The winning Kroo: the exciting new bank delivering sustainability with interest
Launching a challenger bank is, understandably, challenging - particularly if you opt to apply for a banking licence rather than leverage someone else’s, the more popular option among many startups. Indeed, so far in the UK only four neobanks have succeeded in acquiring a licence, one of which is Kroo.
A Marqeta partner, the business is attracting positive attention from across the innovation world, thanks to impressive milestones such as building a 130,000-strong customer base with deposits in the region of £780 million.
As part of Marqeta’s Founders’ Thoughts series, Marqeta's Deanna Fernandez spoke to Nazim Valimahomed, Kroo’s Chief Product and Design Officer, to learn more about what it’s like to launch “a bank with a conscience built to change banking”. During a wide ranging interview, Deanna and Nazim discussed Kroo's origins, how it's delighting its customer base with modern banking functionality and why a strong cultural alignment with tech partners is vital to success.
Tell us a little bit about yourself and your background and experiences before you decided to start Kroo.
I was born in Uganda in East Africa at the time of Idi Amin but I moved at a young age to Canada, which is where I grew up and went to school and university. I studied economics and actuarial science, which is mathematics, statistics and probabilities and you calculate risk for insurance companies.
I was pursuing an actuarial career and then shifted into advertising. And I spent a lot of time in advertising and built out an agency in Moscow of all places in the 1990s. I worked for a fantastic organisation based out of Paris, and I learned a lot about advertising at that time. I also learned a lot about the customer and how to really market to people by understanding what their needs and wants are and how to measure and value that.
So, what was it about that journey that made you decide to found Kroo?
It was all around something I call marginal utility, which is what you're willing to pay to get something. When I moved to the UK, everything was getting much more social and more dynamic. Silicon Valley was booming and yet banking was trapped in the old institutional way of doing things. I was really thinking about empowering people, really de-complexifying the juggernaut that is managing your finances, and really making the customer feel stronger, both financially and emotionally - that's really what drove me to found Kroo.
And what problems did you face along the way?
It has been a tough journey to become a bank. Kroo is only the fourth bank to be granted a banking licence by the Bank of England with a current account offering in the last 100 years. That was a very tough gate to overcome. The Bank of England really has very high standards, the gold standard around the world. They put us through our paces to ensure that we were ready to serve customers.
There were also a lot of things taking place in the macro environment. We went through Brexit, Covid, war in Ukraine - all of this while we were obtaining our banking licence and trying to launch the bank. So it was really tough, both from a meeting the regulatory standards and the requirements perspective, but also just from the whole macro environment perspective too.
What made you decide to go down the banking licence route rather than leverage someone else's?
If you want to empower the consumer to take control of their finances to become richer, you really have to do it at the central point of navigation where they control their money and that is in the current account that's in a bank. That's where everything happens around a person's finances. That's where the core is.
What we're doing at Kroo now is offering customers a higher earning interest current account that is tracked to the Bank of England rate, so there’s full transparency - they know what they're going to get. And they're earning 4.35% on their current account, so there's no need to move money between an instant access savings account. It's an excellent app in terms of its functionality - it is very easy to use. Our consumer customers love the whole onboarding journey. And we offer zero fees when you travel abroad, there are no hidden fees and we offer a market leading overdraft. We're doing all of this because we know that this is where their finances come together.
I would always want to say that Kroo is a technology company that has the powerful advantage of having a banking licence. And it's the technology part of it that has allowed us to deliver all of these wonderful features and offer a high-interest current account to customers and still be viable. It's really about the nimbleness of the technology, the automation, the very considered processes that you have to put together and we've shown you can do it.
Was there a particular moment or conversation that made you take the leap from the idea to the execution and actually founding Kroo?
The Bank of England had started a new bank startup unit, and they were really encouraging people to participate. At the same time, fintech was booming and we had put a really nice presentation together about what we wanted to be. It talked about how we wanted to really serve the customer, to have our customers’ backs, make them financially stronger, connect people financially, and take away all the anxiety that people were having.
It was only seven or eight years ago that it wasn't that easy to just use a telephone number to find out someone's details and just send money very quickly through your phone. Something that we really wanted to do is connect people financially so there was no anxiety, no stress, and no tedium around that.
We also wanted to champion the social good, because we believe that where you manage all of your finances reflects also who you are. You can see from each transaction where a person spends their money, how they give their money away, how they share their money, how they earn their money.
So we thought this is the place where we can be a conduit for social good, and champion the social causes that our customer community cares about. It was those three key pillars, having the customers’ back, connecting them financially and championing social good that really resonated with our investors.
When we put it together and shared it with a number of early stage investors the reaction was very positive. And I think it was the combination of the new bank startup unit and that positive reaction that led us to believe that we can actually do it, even though we weren't bankers.
You’re currently getting loads of great publicity, there's some fantastic UX there and offerings for your customers, but what have been the best bits of the journey so far?
The best bits are reading some of the customer reviews and seeing just how much customers are enjoying Kroo and how easy they find it, how rewarding they find the interest payments they receive every month. There’s also the complete transparency, the transformation of what a bank can be and getting the customer's reaction to that. So launching the bank and then seeing customers actually use the bank and enjoy the bank has been absolutely one of the best things ever for us.
And then to flip that on its head, what have been the hardest bits?
Going through that banking licence process and obtaining a banking licence has been extremely hard. Raising funds to build and launch a bank in the current environment has been difficult. Also, building and growing the culture, and getting the right executive team has been challenging. You go through ups and downs as you're building an organisation and you don't always get it right. Sometimes you don't hire the right person or you don't hire the right capability, and you're lacking things.
I'm keen to understand how you went about your partner selection process and in doing that what was it about Marqeta that made you decide to work with us?
As I mentioned, technology is extremely important to Kroo. We see it as a unique differentiator for us in the marketplace because of the way we built our platform - the nimbleness, and the progressive nature of that technology platform. And we see Marqeta as a unique partner in that exact same journey. We see you as technology progressive.
Security is also very important to us - ensuring that our customers feel safe and secure. Being able to avoid fraud and fraud detection are all crucial. So it really comes down to how we can enrich the customer service, and Marqeta was the right partner for us to enable us to do that in card processing.
If you could go back in time and launch Kroo again, what advice would you give yourself?
Number one, don't underestimate the effort it's going to take to get a banking licence. And number two, don't underestimate how important it is to build out your operations, your customer support and all of your backend that people don't often see. My advice whenever I talk to anyone who's starting up a new technology company, or even if it's not fully a tech company, is don't underestimate the importance of operations and make sure that you have what it takes to support customers.
What are you most looking forward to - what comes next for Kroo?
We’re currently preparing for a £70 million Series C funding round to support our next growth stage, further enhance transparency and build a loan book. That’s why, to complement our innovative current account with its high interest rate, we're about to innovate in lending. We want to deliver very high quality loans and a really good competitive rate, with an excellent customer journey throughout for customers. Savings pots are coming too.
I'm also excited about impacting the world. So far at Kroo we've committed to planting 410,000 trees through our customers. But we are taking that a step further as a bank. You see all the transactions that a customer has, and so why not see the entire carbon footprint and track all of the carbon emissions that a customer makes throughout the year - if they want to. A lot of our customer base cares about the world, they care about sustainability. So we want to offer ways for our customers to reduce their carbon footprint, as well as offset their carbon footprint.
For the last question - it’s something that we're all asked at Marqeta: what's your superpower?
My superpower is that I just love engaging with people and seeing them thrive, be happy and succeed. You know, I think I'm quite infectious. I really believe in what I'm trying to achieve. I really believe in the desire to do good and have an impact in consumers’ lives and in sustainability. What I've managed to do is carry everyone with me, everyone at Kroo believes in that and so I think I have an infectious ability to champion what I feel as positive in the world and relay that to others.
