As part of the £60m fundraising deal that was finalised at the end of August, Tandem has announced the acquisition of the Allium Lending Group, a point-of-sale lending platform provider that, for the past six years, has been providing finance to help customers make their homes more energy-efficient and environmentally friendly.
The acquisition will allow Tandem to integrate these niche offerings into its own platform and enhance its in-house lending suite, which currently only offers a credit card.
For Tandem, the expansion of its product range is a positive sign that lends itself toward diversifying its revenue streams at a time when consumer spending and sentiment are down, factors that have eroded revenues from interchange income. To combat this, Tandem announced plans in March 2020 to begin charging customers for its popular cashback credit card, with existing customers required to pay a £5.99/month membership fee for continued use.
Loan origination and income made from interest spreads will ease the pressure on the fees needed to be earned from credit card issuance and usage, while also allowing Tandem to better compete with the likes of Starling, Monzo, and Atom. Allium’s presence in the UK holiday ownership market will also provide Tandem with an additional and timely opportunity to lend to one of the few growing sectors in the current Covid-19 environment.
The strategy pursued by Tandem in targeting customers who rank ethical and environmental causes highly is one that could pay off in the long term. In GlobalData’s 2020 Banking & Payments Survey, 4% of UK respondents aged 18–34 years old stated that the most important attribute in a financial service provider was its reputation for supporting ethical or environmental causes, ranking higher than convenience and transparency.
Currently, Allium brings over five years of expertise to Tandem in an area that is relatively unexplored but growing, as well as state-of-the-art technology in offering bespoke products to customers and partnerships with over 100 retailers who supply home renewable products.
Complementing this, Tandem has the necessary operational ability and desire to amplify Allium’s offering to a wider user base to better scale its service. Crucially, Allium’s bespoke products complement the personalised mortgage service that Tandem plans to launch in 2020, allowing customers to design features of their mortgages that could include a ‘green’ element.
In the immediate term, the timing of this acquisition is somewhat undermined by the government’s announced plans for a new Green Homes Grant, which aims to stimulate and upgrade the economy post-Covid-19. However, the scope of products offered by Tandem is far greater than what the government is willing to include under the scheme, and as such, long-term interest in its offerings will likely increase.
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