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Why did Bank North Fail?

What Happened To Bank North & Why Did It Fail?

January 24, 2025

Bank North, founded in 2018, aimed to revolutionize the UK SME lending market with a fintech-enabled approach. Despite initial success, including a restricted banking license and significant funding, it failed to secure the additional capital needed for a full banking license, leading to its closure in 2022.

What Was Bank North?

Bank North

Bank North specialized in providing loans to UK SMEs, leveraging fintech to offer efficient, personalized lending solutions. Its unique value proposition lay in combining advanced technology with traditional banking trust. Notable achievements include securing a restricted UK banking license and raising £20.6 million in Series A funding.

What Happened to Bank North?

The story of Bank North is a compelling example of the challenges faced by fintech startups in the competitive banking sector:

  • Initial Ambitions and Funding: Bank North was founded in 2018 with the goal of revolutionizing the UK SME lending market. The bank secured a restricted banking license and raised £20.6 million in Series A funding, showcasing early promise and investor confidence.
  • Funding Shortfalls: Despite its initial success, Bank North struggled to secure an additional £30 million needed for a full banking license. This funding gap ultimately led to the bank's decision to wind down operations and sell its loan book.
  • Economic and Market Challenges: The broader economic instability and uncertainty in investment markets made it difficult for Bank North to attract the necessary capital. This reflects a larger trend of challenger banks facing similar funding issues, as seen with other recent closures like Dozens in the UK and Volt in Australia.
  • Regulatory Hurdles: Bank North received a restricted banking license from the UK Prudential Regulatory Authority but failed to meet the stringent requirements for a full banking license from the Bank of England. The regulatory environment demands significant funding and compliance, which the bank could not achieve.
  • Impact on Employees and Future Prospects: The closure of Bank North led to job losses and the sale of its £17 million loan book. The bank's leadership prioritized staff transfers and creditor payments during the wind-down process, highlighting the human and financial toll of its collapse.

When Did Bank North Shut Down?

Bank North announced its decision to wind down operations on October 3, 2022, following its failure to secure the additional funding required for a full banking license. The closure was immediate, with plans to sell its loan book and transfer some staff to mitigate job losses.

Why Did Bank North Shut Down?

  1. Funding Challenges: Bank North struggled to raise the additional £30 million required to obtain a full banking license. Despite securing £20.6 million in Series A funding, the bank's inability to close this critical capital raise within the necessary timeline led to its insolvency and eventual closure.
  2. Market Uncertainty: The broader economic instability and uncertainty in investment markets made it difficult for Bank North to attract the necessary capital. This reflects a larger trend of challenger banks facing similar funding issues, as seen with other recent closures like Dozens in the UK and Volt in Australia.
  3. Regulatory Hurdles: Bank North received a restricted banking license from the UK Prudential Regulatory Authority but failed to meet the stringent requirements for a full banking license from the Bank of England. The regulatory environment demands significant funding and compliance, which the bank could not achieve.
  4. Financial Losses: The bank reported a loss of $2.12 million from June 2020 to March 2021. These financial difficulties compounded the challenges of securing additional funding and maintaining operations, ultimately contributing to the decision to wind down.
  5. Impact on Employees: The closure of Bank North led to job losses and the sale of its £17 million loan book. The bank's leadership prioritized staff transfers and creditor payments during the wind-down process, highlighting the human and financial toll of its collapse.

Lessons Learned from Bank North's Failure

  • Secure Adequate Funding: Ensure sufficient capital reserves to meet regulatory requirements and sustain operations, especially in volatile economic climates.
  • Understand Regulatory Demands: Thoroughly comprehend and prepare for stringent regulatory requirements to avoid compliance issues that can hinder progress.
  • Adapt to Market Conditions: Stay agile and responsive to economic shifts to better navigate funding challenges and investor uncertainties.
  • Prioritize Financial Health: Maintain robust financial management to prevent losses that could jeopardize future funding and operational stability.
  • Support Your Team: Focus on employee well-being and clear communication during transitions to minimize the human impact of business challenges.

We Shut Down Startups

Bank North's failure underscores the complexities and challenges startups face, especially in highly regulated industries. If you're navigating a similar situation, book a demo with Sunset to see how we can help you manage the wind-down process smoothly.

Sunset takes care of all the legal, tax, and operational burdens, allowing you to avoid penalties and reduce liabilities. Let us handle the complexities so you can immediately move on to what's next.