Doorstep lender Morses Club has acquired digital current account provider U Holdings through its fully owned subsidiary Shelby Finance Limited.
Morses Club said the move was “an important step in building a digital offering” to allow its customers to “access credit flexibly”.
There is an initial cash consideration of £5.8m, financed from existing Morses Club cash and debt facilities, and a deferred £5m, payable in cash over the next four years to February 2023, conditional upon certain net profit criteria having been met.
As part of the transaction, Morses Club has acquired U Holdings’ technology and e-money banking platform, as well as its 20,000 current active customers. U Holdings trades as U Account.
Based in Sheffield, U Account provides an agency banking service. As well as providing card services with its current accounts through contactless Mastercard debit cards, U Account also offers in-app features and functionality to “help customers manage their finances more effectively”.
U Account focuses on customers who are “underserved by traditional banks”, offering a current account banking service that allows customers to receive wages or benefits directly, manage their outgoings, and avoid unnecessary bank charges. U Account customers can also deposit cash at one of PayPoint’s 28,000 terminals across the UK and earn rewards from recognised retailers.
U Account has historically been loss-making.
In the year ended February 28, 2019, U Account (then trading under the ownership of Ffrees Family Finance Ltd) generated unaudited revenue of £1.7m and an unaudited operating loss of £4m. However, management expect that post-integration and restructuring, the losses incurred in the remainder of the year will be in the range of £1.4m to £1.7m. They added they are confident that “the acquisition will be earnings accretive thereafter”.
Paul Smith, chief executive of Morses Club, said: "This acquisition represents a fantastic opportunity to enter the rapidly growing online banking market. U Account features the full suite of digital banking services and has grown its customer base to circa 20,000 active customers. U Account’s offering is highly complementary to that of Morses Club, and through this acquisition we expect to deliver significant synergies and cross-selling opportunities.
"This is another exciting step for Morses Club as, consistent with our stated strategy, we continue to diversify our product offering to serve a broader range of customers across the non-standard credit space. Our differentiated use of technology and innovation enables Morses Club’s customers to access a broader range of more flexible and suitable credit."