UK Fintech News & Insights - FinTechUK.com

Second Anniversary of the Kalifa Review of UK Fintech

26/2/2023

Yes, believe it or not today (26th February 2023) marks the 2nd anniversary of the Kalifa Review of UK Fintech.

The Kalifa Review made fice (5) Recommendations in he following areas:

Policy and Regulation
Skills
Investment
International
National connectivity

Policy and Regulation -

The Review proposed the implementation of a ‘Scalebox,’ which would support firms focused on scaling innovative technology by enhancing the existing regulatory sandbox. Kalifa also discussed the founding of a Digital Economy Taskforce (DET) to collate various functions of regulators related to fintech into a policy roadmap for a single view.

Skills

The Review recommends upskilling and retraining by ensuring access to education from high-quality institutions at lowered costs. A new visa stream was suggested with the aim of opening up access to international talent which currently represents around 42% of UK fintech employees.

International

The Review proposed delivery of an international action plan for fintech, driving international collaboration through the Centre for Finance, Innovation and Technology (CFIT), and by launching an international ‘Fintech Credential Portfolio’ (FCP) - akin to a quality stamp - to bolster credibility perceptions in international markets.

Investment

The Review sought to establish a £1 billion ‘Fintech Growth Fund’ pulled from institutional capital to address a £2 billion fintech growth capital funding gap. The intention for this was that it would be a market-led fund, funded by holders of domestic institutional capital and would utilise existing regulatory concessions applicable only to the fund itself.

National connectivity

The Review proposed the delivery of a three-year strategy to nurture the nation’s top 10 fintech clusters, improved national coordination strategy led by the CFIT, and the growth of fintech clusters via accelerated development and investment in R&D.

Read the Kalifa Review

Read Fnextra Article here

Layoffs cloud UK fintech prospects

23/2/2023

Layoffs cloud UK fintech prospects

While London-based Revolut is set to hire at least 1700 staff over the next year, many of its peers have been less fortuitous, with the likes of Railsbank, Zilch, Zego and TrueLayer all shedding at least 10% of staff.
While London-based Revolut is set to hire at least 1700 staff over the next year, many of its peers have been less fortuitous, with the likes of Railsbank, Zilch Zego and TrueLayer all shedding at least 10% of staff.
The figures come amid further questions about the challenges facing London’s financial services post-Brexit.

Read more here

UK-based fintech firm Monzo approached by several investment banks about potential IPO

23/2/2023

UK-based fintech firm Monzo has been approached by several investment banks about a potential initial public offering (IPO), reported Business Insider.

People aware of the matter told the publication that the fintech has received offers from banks eager to handle a prospective IPO.

The neo-banking app is not likely to go public until late 2024 or early 2025 at the earliest, according to the sources, who stated that the pitches are still in the exploratory stage.
Typically, an IPO can take six months to a year, and given the weak market conditions, no formal talks between the parties have started yet.

Monzo declined to comment on the development.

Citing an investor update, the publication said Monzo claimed a 250% increase in annualised revenues to £440m in the twelve months up to December 2022.

In addition to smaller rival Atom Bank, other European challenger fintechs Starling Bank and Zopa Bank have hinted that they may consider going public.

Read more here

IKEA Store Owner Invests $9.6 Mln in UK Fintech Firm DirectID

22/2/2023

Ingka Group, the owner and operator of most IKEA stores, said Wednesday it has invested 9 million euros ($9.6 million) in DirectID, a U.K.-based fintech specializing in credit risk, risk analytics and predictive modeling based on bank transaction data.

The company said the deal forms part of its strategy to strengthen the core retail business by investing in companies in areas such as digitalization, customer fulfillment, fintech and sustainability, that support its ambition to become more affordable, accessible, and sustainable.

DirectID provides advanced data to optimize credit and risk decisions, allowing better assessment of risk regardless of age, location, and past credit performance, it said.

Ingka has made the acquisition through its Ingka Investments arm, with the funding expected to help accelerate the market launch of advanced predictive models, expand the credit risk offering into new markets and accelerate development of models, it added.

See James Varga's LinkedIN post for more

Implementing the UK Consumer Duty at Emoney and Payments Firms

21/2/2023

Copy of UK FCA letter on consumer duty to emoney and payments firms dated 21 February 2023 here

Implementing the UK Consumer Duty at #Emoney and #Payments firms.

UK Financial Conduct Authority issues letter to #fintech emoney and payments firms today (21 February 2023)

➡️ We expect the Consumer Duty to be a top priority for you personally. We want good outcomes for customers to be at the heart of firms’ strategies and business objectives, and leaders have a key role to play here. We expect firms’ Boards and senior management to embed interests of customers into the culture and purpose of the firm.

➡️ The Duty applies to products and services offered to retail customers, including to micro-enterprises and small charities with an annual turnover of less than £1 million, and to all firms who determine or have a material influence over consumer outcomes - not just those with a direct customer relationship. It is important that you consider how the Duty applies to your firm in light of its business model, customer characteristics and influence over consumer outcomes. We’ve set out a some more information and examples about how the Duty applies to payments firms in Annex 1 to this letter.

"Annex 1 - How the Duty applies to payments firms

The Duty will require firms to act to deliver good outcomes for customers (including those in vulnerable circumstances). This reflects the positive and proactive expectation we have of firm conduct, and our desire for firms to think more about consumer outcomes and place consumers’ interests at the heart of their activities.

The payments portfolio includes firms with a broad range of business models performing a number of activities that impact almost all consumers. Firms’ target markets range from large corporates to individuals, including diaspora communities and vulnerable consumers, some of which are otherwise unable to access financial services. We expect the focus on acting to deliver good outcomes to be at the centre of payments firms strategy and business objectives.

Where an authorised or registered firm, for example a money remitter or electronic money issuer, provides payment services through an agent or, in the case of an electronic money issuer, distributes or redeems electronic money through an agent or distributor, the authorised or registered firm is responsible for ensuring that the third party complies with the Duty."

Revolut: can the chancellor’s fintech favourite fix its image problem?

19/2/2023

"The chancellor had praised Revolut as a “shining” success, saying the government was willing to back innovative companies “to the hilt.

After a quick introduction, the pair posed for a photo – which was swiftly posted by #Storonsky’s team to one of Revolut’s Twitter accounts.

Revolut has yet to convince regulators – chiefly the Financial Conduct Authority (FCA) – it should be trusted to hold deposits and start lending to consumers. Rumours are that may be set to change, but there has been no official confirmation."

Hopefully that UK bank authorisation is not too far away. It is very difficult for SMEs (and in particular #fintech companies) to open bank accounts in the UK. To be clear I am talking about banks, not companies that provide 'banking like services', because what SMEs want and need are accounts that come with the £85,000 UK deposit protection guarantee scheme.

"The balancing act for watchdogs such as the FCA is to ensure standards and regulations are not eroded, while also encouraging growth. One former official at the regulator said: “The FCA will need to greenlight at least some form of licence if it wants to make the case for its continuing relevance. It can’t ignore the very company that’s being championed by the chancellor.”

https://www.linkedin.com/posts/peteroakes_revolut-can-the-chancellors-fintech-favourite-activity-7033467712337010688-68Av?utm_source=share&utm_medium=member_desktop

UK Fintech Investment Plummeted by Almost 60% in 2022

15/2/2023

The UK’s fintech sector saw investment drop $22 billion to $17 billion in 2022, as higher interest rates, inflation, and declines in valuations hit investor appetite.

A total of 593 UK fintech deals were completed in the UK in 2022, down from 724 in 2021, according to KPMG’s Pulse of Fintech report published Wednesday. The dataset includes mergers and acquisitions, private equity, and venture capital.

Funding for the sector in 2022 was a tale of two halves according to Karim Haji, a partner at accountancy firm KPMG. The first half of the year saw significantly more investment and deals than the second half.

“The variance highlights the shift in investor sentiment in the face of increasing geopolitical challenges leading to the lack of IPO exits, the downward pressure on valuations, and market turbulence,” he said.

Global investment in crypto and blockchain firms fell from $30 billion in 2021 to $23.1 billion in 2022. Scrutiny in the space picked up as the price of digital assets slumped and the bankruptcy of FTX upended the market.

While British fintechs attracted more funding than their counterparts in the rest of EMEA combined, other fintech hubs are starting to catch up. The value of French fintech deals rose 28% to $3.7 billion last year, according to the KPMG analysis. Deals in Sweden, the home of Klarna, hit $3.7 billion, up from $2.6 billion.

UK startups and investors are increasingly expressing concern over recent government policies that appear to run counter to the country’s ambition of remaining a global fintech leader. They point to examples including the recent pulling of crucial funding to the government-backed industry body Tech Nation, the lack of visas to attract startup talent, and the removal of tax relief for research and development.

Worldwide, the fintech market attracted $164.1 billion across 6,006 deals in 2022. This was down from $238.9 billion across 7,321 deals a year earlier.

Source - https://www.bloomberg.com/news/articles/2023-02-15/uk-fintech-investment-plummeted-by-almost-60-in-2022-kpmg-says

US fintech unicorn Alloy launches in UK

9/2/2023

Fintech unicorn Alloy is making its way across the pond to launch in the UK.

Founded in 2015 by Charles Hearn (CTO), Tommy Nicholas (CEO) and Laura Spiekerman (president), the firm supports more than 350 banks and fintech startups in North America, including Brex, Marqeta, Gemini and Ramp, to prevent fraud and financial crime.

Backed by leading investors from Lightspeed Venture Partners, Bessemer Venture Partners, and Canapi Ventures, Alloy's “Identity Decision Platform” helps reduce the friction between fintechs and their customers.
It connects companies to more than 170 data sources and enables them to automate customer approval and account opening, with real-time transaction monitoring.

“For financial institutions to remain competitive in today’s market, cross-border functionality is no longer a major advantage – it’s a must,” Alloy head of global Edwina Johnson.

“Fintech startups are now building with a global mindset from day one, and looking for technology partners who can scale with them, adapting to their changing business needs, appetite for risk, and compliance requirements.”

The company has so far raised more than $210m, reached a valuation of $1.55bn and last year said it would be expanding into 40 new countries, with its new London office now marking its first local site outside of the US.

Formerly the company’s chief operating officer, Johnson worked alongside the company’s founders to grow the business from Series C to unicorn status.

Relocating to the UK and shifting to a new role to head up global expansion, she is joined by former vice president at Onfido, James Baston-Pitt, who will spearhead commercial initiatives as the EMEA director of growth.

“The UK is one of the world’s most powerful fintech hubs, and we can’t wait to help innovative local firms unlock their potential abroad,” Johnson continues.

“For too long, international expansion has involved trade-offs with risk management, but that doesn’t have to be the case.

“Alloy provides dynamic support for companies operating across multiple regulatory environments, so they can focus on growing their business without worrying about the threat of fraud.”

Source: https://www.altfi.com/article/10391_alloy-alloy-alloy-fraud-fighting-us-unicorn-launches-in-the-uk

Why is the UK so successful in fintech? What are the opportunities for fintech in the UK?

30/1/2023

Why is the UK so successful in fintech?

If you are looking to establish your Fintech in the UK, Ireland or the US, get in contact with Peter Oakes at Armstrong Teasdale. Our fintech practice has significant cross-disciplinary, cross-border experience essential for established financial services and private equity firms, investors, retailers and other companies accepting digital currency, and startup companies developing the disruptive technologies at the heart of the field’s rapid evolution.

The UK continues to be ranked as one of the most fintech-friendly countries in the world.

The sector is home to many of the world’s largest fintech companies and is comprised of more than 1,600 firms – a number projected to double by 2030. It is well reported that the UK is a top financial technology hub, but why?

In terms of fintech investment per capita and as a percentage of GDP, the UK is second only to Singapore.

This comment by the author, Jonathan Warren in the FT Adviser, sums it up:

"It is no coincidence that Singapore and the UK, where fintech investment is highest as a percentage of GDP, have globally respected regulatory frameworks, good infrastructure, and political, economic, legal, and social stability."

Further, the UK is a global fintech hub, with extensive financial services experience, technological talent and progressive regulation.

The UK fintech sector is the top-ranking investment destination in Europe with £3 billion venture capital attracted in 2020. It accounts for more deals and capital invested than Germany, Sweden, France, Switzerland and the Netherlands combined and ranks second globally only behind the US. The UK also has access to world-class talent and a progressive approach to regulation to encourage fintech innovation. [Postscript 15 February 2023 - despite investment in UK fintech falling in 2022, British fintechs attracted more funding than their counterparts in the rest of EMEA combined.]

The UK’s finance and tech sectors and a world-class university system provide a large pool of talent for fintech. Around 76,500 people across the UK work in the industry with this set to grow to 105,500 by 2030. The Global Talent Visa in digital technology is set to attract and fast-track digital tech talent from around the world.

UK fintech sector benefits from a supportive regulatory system. The Financial Conduct Authority, the Prudential Regulation Authority and the Bank of England are heavily involved in build a competitive and innovation-friendly [and I hasten to add a resilient and robust] business environment. This helps companies grow and develop their fintech business in the UK.

The UK has entered 5 fintech bridge agreements with other fintech hubs including Singapore, South Korea, China, Hong Kong and Australia. These bespoke agreements create valuable opportunities for expansion and collaboration by reducing barriers to international markets.

Some of the opportunities in FintechUK are:

Payment technology (Paytech)
Wealthtech
Credit and lendingtech
Digital banking
Distributed Ledger Tech (DLT)
Digital Assets
Digital / Crypto Currencies
Proposed UK Digital Pound

Read more at:

Posted by Peter Oakes FintechUK.com

UK fintech firm Wise accused of stifling competition by rival startup

27/1/2023

One of the UK’s fintech darlings, Wise, could face a regulatory investigation after a rival startup accused the money transfer firm of stifling competition.

London-headquartered Atlantic Money has written to the Competition and Markets Authority (CMA) to raise concerns over potential conflicts of interest and anti-competitive behaviour after Wise blocked the firm from a swathe of its own price comparison sites.

An investigation could be a blow for Wise, formerly known as TransferWise, which became the largest tech listing in the UK when it was valued at nearly £9bn after its 2021 stock market debut.

Read more here