The Sheffield-based firm received support from a syndicate of investors including Finance Yorkshire, Nesta, and the Technology and Innovation Fund,
The Ffrees account helps customers build up savings in a separate account by rewarding them for using its network of more than 1,000 retail and financial services providers.
Customers receive Ffrees points as they spend at supermarkets, motor dealers and travel companies, for example. Once they have 10 points they can be converted into money: one point equates to one pound.
Ffrees also provides free services, including the Money Manager, which lets customers create separate “envelopes” to help control the family budget and put money aside for regular bills.
It currently has 35,000 UK customers, adding around 1,000 new ones each week. Ffrees aims to have 1 million UK customers in the next five years.
Founder Alex Letts said: “The real estate model of retail banking is rapidly collapsing. Customers require customisable data-driven services, rather than inflexible analogue products.
“They want to access their money at will from connected devices whenever and wherever. And they want to pay a fair price transparently to a trusted provider.
“That is the model that we at Ffrees are building and this new investment helps to accelerate the rapid progress already being made.”