The Royal Bank of Scotland’s new digital bank Bó has paid £5m for a 25% stake in student-focused fintech startup Loot.

Bó, a digital-only bank being developed by RBS’s NatWest division, has topped up a previously undisclosed £3m investment in Loot with another £2m.

Launched in 2014, with more than 175,000 sign-ups, Loot is a digital current account targeting students and young people. Customers get a prepaid debit card and personal insights into spending patterns, allowing them to set daily or weekly budgets.

The investment comes as Bó gears up for launch later this year, taking on digital challengers such as Monzo, Atom and Starling.

Led by former RBS chief operating officer Mark Bailie, the new bank is being built by a small team of developers and bankers and is expected to operate a marketplace model, meaning partnerships with several fintech firms.

“Loot is a really exciting brand and one that we’re proud to be associated with,” said Ballie. “Through its innovative use of technology and intention to change the status quo, it’s quickly built a following of loyal customers, with potential for rapid future growth.”