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 who have been told to move their funds to an alternative account before that date.

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

“Little did we know, 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 switched to survival mode – simply looking after our employees and customers for as long as we could to provide some form of stability at a time when everything was so uncertain.

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

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

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

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

“The war in Ukraine has reduced supply further 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 are adjusting how they use their money and where it sits, less and less money is being placed in illiquid investments like VC funds. 

“Within the FinTech sector specifically, less money is going into the consumer side of FinTech. There was a boom in consumer fintech funding in 2014-16, but most of Dozens’ larger, older competitors are yet to convert that into truly profitable businesses, so new funding has been focusing more on the B2B side.

“Borrowing is going to go up. It’s a great time to be a bank. But while we’re still in the developmental stages of the business and running on an e-money licence, a model which doesn’t 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 type products, and you will continue to see these popping up in many places. But for us as a business, and what we set out to do, it’s not a route we are willing to take. 

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

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

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

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

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

Project Imagine, which intends to use money saved from servicing the existing app to drive tech innovation in the business, aims to launch a bank in future, although it did not seem too confident.

“We still aim to launch a bank, on a full banking licence that doesn’t rely on unsecured personal debt for profit and returns much higher interest rates to its customers… that is not going to happen in the near future, and indeed given the tall order, may never happen.”

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