FinTech app Dozens to shut down

FinTech

The popular consumer FinTech app Dozens is to close by the end of August.

The first product of London startup Project Imagine has 60,000 customers told to move their money to an alternative account before that date.

Dozens, a checking account that offered spending, saving and investing in one place, launched in early 2019 and reached 25,000 users by the end of that year, allowing it to “turn off marketing”.

“Little did we know that a once-in-a-century global pandemic was around the corner,” read a blog post on the company’s website. “Covid hit when we were still a very early stage company. Overnight we lost both investment and B2B deals worth millions of pounds.

“Our focus immediately went into survival mode – simply taking care of our employees and customers as long as we could to provide some form of stability at a time when everything was so uncertain.

“Somehow we got through 2020, then 2021, and are relatively proud of what we were able to achieve in the time and circumstances we had.”

Project Imagine, which has fewer than 30 staff, has raised around £28m, mainly from institutional sponsors in Hong Kong, with around £1m each from Seedr’s and HMT’s Future Fund.

It blamed the “domino effect of COVID” for the decision to close and focus on a pivot to B2B.

“[There is] less money in the system. COVID has led to supply chain disruptions across the world, and in the UK this has been further exacerbated by Brexit,” it explained.

“The war in Ukraine has further reduced supply in an already constricted system. This lack of movement and supply of goods has caused prices to rise. As people and businesses across all sectors of society adjust how they spend their money and where it sits, less and less money is being placed in illiquid investments like VC funds.

“Specifically in the FinTech sector, less money is going into the consumer side of FinTech. There was a boom in consumer fintech funding in 2014-16, but most of Dozen’s larger, older competitors have yet to convert that into truly profitable businesses, so new funding has focused more on the B2B side.

“Loans are going to go up. It’s a great time to be a bank. But while we are still in the development stage of the business and run on an e-money license, a model that does not rely on lending has less chance of survival.

“There is money out there for startups like us to introduce ‘buy now pay later (BNPL)’ and flexible overdraft products, and you will continue to see these pop up in many places. But for us as a business, and what we have set out to do, it is not a path we are willing to take.

“We are here to develop a successful new banking business model, not seek success at the expense of our customer (for the same reason, despite having the licenses and platform capabilities to do so, we have never enabled crypto trading for our customers).”

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The post railed against the tendency of FinTechs “to grow customers at all costs” using VC funding and worry about building a sustainable business later.

“Our approach is noticeably different from the grow-first, cross-sell-later model that most have adopted so far. But it is our opinion that visible top-line growth, financed by continuous dilution, without work on relatively more invisible cost and revenue control is a risk for any business, and its mission.

“Ultimately, these losses have to be made up somehow – at the expense of the customer (usually by offering high-margin unsecured personal lending products like BNPL) or by resorting to new investors and delayed IPOs.

“We know that to have any chance of achieving our long-term mission, we must be self-sustaining via organic capital generation from our own revenue lines and results.”

Project Imagine, which intends to use money saved from operating the existing app to drive technical innovation in the business, aims to launch a bank in the future, although it didn’t seem too confident.

“We still aim to launch a bank, on a full banking license that does not rely on unsecured personal debt for profit and that returns much higher interest rates to customers … that is not going to happen in the near future, and indeed given high order, can never happen.”

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