Cashplus throws its hat into the challenger banking ring

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Cashplus currently offers prepaid cards (Source: Getty)

Pre-paid card firm Cashplus has applied to gain a banking licence as it seeks to make profits from the cash pile it holds from customers, the business announced today.

Cashplus, the trading name of Advanced Payment Solutions, offers current accounts to customers many of whom are unable to access bank accounts from high street lenders.

However, up to now the firm has been unable to lend out the cash loaded onto cards because it lacks the authorisation from the Bank of England and the Prudential Regulation Authority.

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The firm has already had introductory meetings with the Bank of England, and is confident it will be able to jump through the regulatory hoops necessary to become a fully fledged bank because of its track record so far and the fact it has been profitable for six years already.

Founder and chief executive Rich Wagner told City A.M.: “I border on a bit of cockiness” on gaining authorisation. “What we are showing them is actual customer behaviour, actual customer appetite.”

Cashplus has so far issued 1.8m cards in its 12-year history, and claims to have processed over £8bn in payments so far. Profits over the last five years have grown at a compound annual growth rate of 61 per cent.

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The firm’s balance sheet of £200m in safeguarded funds – to be turned into bank deposits – will make it a very small player in terms of UK banks, but it hopes to be able to expand its credit lending to small UK businesses via credit cards and overdrafts.

Its lending will be focused on companies with fewer than 10 employees, with loans backed by director guarantee, Wagner said.

Gaining a banking licence would insure all deposits up to £85,000 under the Financial Services Compensation Scheme, as well as boosting marketing efforts.

Wagner said: “Using known terminology will be a strong benefit for us so they know what they are getting.”

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