The WEALTHTECH Book

Launching MeDirect Bank as a Challenger Bank

By Xavier De Pauw

CEO, MeDirect Bank

After 10 years in the fixed income markets with Merrill Lynch in London, I joined three experienced fellow London-based bankers to start a new banking group in 2009. The aftermath of the banking crisis seemed to us the ideal time to launch a new bank with a focus on simplicity and transparency.

In contrast to a traditional (FinTech) start-up, a new bank requires substantial capital before it can be launched and thus we sought backing from a specialized private equity house, AnaCap Financial Partners, who provided the capital to start the venture.

Our initial focus was on simple balance sheet strategies to get the bank into profitability within months from start. As the bank grew, we shifted from wholesale funding to retail deposit funding and realized that our deposit clients were also interested in solutions to earn higher returns on their savings. We set out to build an online investment and wealth management platform within our challenger bank. The investments to build this platform came – and still come – from retained earnings.

Our strategy is based on partial rebundling. We built a WealthTech within a bank to offer a one-stop shop for savers and investors. From the WealthTech point of view, the rationale of this model is twofold: we achieve lower client acquisition cost and we self-fund the build-up of the business from retained earnings of the bank. In addition, from the savings and lending ...