Kroo prepares to raise £70M for a path to profitability as banks fail to gain customer trust

As Kroo prepares for its next funding round, new research commissioned by the UK digital bank has revealed that 70% of participants don’t think their bank has their best interest at heart, and only 22% would describe their bank as transparent. Since launching its current account, Kroo has consistently raised its interest rate in line with each Bank of England hike. The bank’s latest product is the first of its kind in banking and commits to offering customers a ‘tracker’ rate set 0.9% lower than the Bank of England rate.

The latest product update, set to go live on 15 October, provides transparency on the interest rate offered to its customers, challenging the traditional profit extraction model that uses teaser deals to hook customers in without supporting them long-term. With 42% of participants unable to accurately calculate interest when asked, Kroo’s new ‘tracker’ rate takes away the guesswork, supporting Kroo’s commitment to passing on interest to customers in line with changing rates.

Kroo’s customers can now expect the expected by earning a rate 0.9% below the Bank of England base rate.

Kroo has already raised £75M to build and grow the bank. As it enters its Series C funding round, it is looking to raise £55M – £70M to enhance and develop its product offer, grow its customer base and build its quality loan book. As the scale of the investment grows, Kroo is targeting family offices, institutional investors, venture capitalists and private equity in the UK, US and Europe.

Kroo aims to reach profitability with the closure of series C funding. Having launched its current account in December 2022, it is well ahead of its competitors in the challenger bank market. This latest funding round is part of a trajectory of fast growth for the bank that was featured in Sifted’s top 10 fastest growing fintechs in Europe in August and OTTA’s fastest growing companies of 2022.

Since launching in December 2022, Kroo is approaching three quarters of a billion pounds in deposits and 130,000 current account customers, with a target to reach a million customers by 2025. It has a team of 250 employees across its Manchester and London offices.

Andrea De Gottardo, CEO of Kroo, says: “Our research shows people in the UK feel their banks lack transparency and don’t have their best interests at heart. This comes from the profit extraction model being unchallenged for too long. Despite rising interest rates, customers have become used to earning little or nothing on their cash, whilst banks have made record profits. Kroo is changing an outdated model by putting money in people’s pockets, not into bank profits.

“Our growth in the last nine months shows there is an appetite for better banking, and this latest investment round will enable us to support more customers and increase the products and services we offer. We want to challenge the traditional banking model for the better, shifting the relationship with customers by building their trust.

“We have ambitions to show it’s possible to create a successful bank that rewards loyalty and shares its success with customers. Whether rates go up or down, we’re committed to only earning 0.9% on the base rate. Our tracker rate is the first in the market and the latest in a range of products we’ve created to show customers we’ve got their backs.”