Home       Quarta-Feira, 14 de Novembro de 2018

Financial Times: UK fintech sector in buoyant mood as valuations soar

While British politicians squabble about Brexit, one group seems immune to the uncertainty hanging over the country: the new generation of financial technology companies that have sprung up in the past decade to challenge traditional banks.

The buoyant mood in the UK’s fintech industry was emphasised this week when Funding Circle, the country’s leading peer-to-peer lender, unveiled plans to raise £300m in an initial public offering that is expected to value it at more than £1.5bn.

The move highlighted how valuations for the new breed of fintech companies have soared over the past year as investors have bet that digital disruption will transform financial services, as it has across other sectors from retailing to media.

“It stands to reason that given how effectively these companies are taking on the biggest businesses in this sector they could quite easily get to similar valuations,” said Neil Rimer, co-founder of Index Ventures, an investor in many of the world’s leading fintechs including Funding Circle.

Britain can boast one of the biggest fintech deals of the past year with the £9.1bn takeover of Worldpay, Britain’s dominant processor of credit and debit card payments, which was bought by its US rival Vantiv.
Fintech chart

The closing of that deal helped the UK to outstrip the US and China when totting up the total investment in its fintech sector over the first six months of the year — including venture capital, private equity and acquisitions — according to a recent report from KPMG.

“Everyone is looking at the UK experiment,” said Anton Ruddenklau, global co-leader of fintech at KPMG International. “Investors are thinking which of these fintechs are scalable. Many of them are now multi-market and that’s a sign of a maturing of the UK market.”

He said the sector was being given an extra boost by the UK regulator’s early adoption of EU “open banking” rules that force lenders to open up access for fintechs to the data and accounts of any clients who authorise it.

Another stimulus is expected when a £775m pool of cash designed to boost competition in the UK’s small business banking sector is due to be awarded to rivals, including fintechs, by Royal Bank of Scotland next February under orders from European regulators.

The planned IPO at Funding Circle — which has expanded into the US, German and Dutch markets — follows eye-catching fundraising moves by other leading UK fintechs that have recently joined the “unicorn” club of start-ups with a $1bn-plus valuation.

In April, Revolut announced a $250m fundraising that valued the UK-based digital payments company at $1.7bn, more than five times the level of its last round of investment in 2017. Last November, TransferWise was valued at $1.6bn when the British cross-border foreign exchange company raised $280m from investors.
Fintech chart

British-based fintech Monese on Thursday said it had raised $60m in a fundraising led by Kinnevik, the Swedish family-controlled investment group that has become one of the biggest names in European technology.

On the same day, Acorn OakNorth became the latest British fintech to raise fresh capital when the specialist small business and property lender secured a $2.3bn price tag— a vastly higher valuation than only a few months ago — by raising $100m of fresh cash.

Rishi Khosla, the co-founder and chief executive of Acorn OakNorth, said he was encouraged by the recent efforts of UK chancellor Philip Hammond to support the fintech sector, such as by establishing regulatory “bridges” with other countries.

“The UK — led by the chancellor — is doing some really smart stuff to position itself at the centre of fintech innovation,” said Mr Khosla. “In terms of the UK as a place to base a fintech business it has a lot of the right ingredients.”

“You have got phenomenal fintech innovation in China and India — China is doing things the rest of the world hasn’t even realised yet and India is copying them quickly,” said Mr Khosla. “But if you take out those two markets then I would say the UK is far ahead of the rest of the developed world.”

The UK’s leading fintechs are still dwarfed by the biggest US groups, such as Stripe, Robinhood or SoFi. And even they are tiny compared with Ant Financial, the digital finance arm of China’s Alibaba, which was recently valued at $150bn.

Some European groups have also stolen a march on their British rivals. Adyen, the Dutch payments provider, went public in June and now has an €18bn market capitalisation that outstrips some of Europe’s best-known banks.

Even excluding the Worldpay deal, UK fintechs still increased investment by 40 per cent from the same period last year and raised almost 10 times the amount of their German rivals and more than 20 times their French counterparts in the period.
Fintech chart

British fintech executives find it surprising how much money continues to flow into their sector in spite of fears about the potential disruption that a hard Brexit could cause both by restricting access to EU clients and cutting off the supply of talented staff from the continent.

“Valuations are incredibly high and these are people betting with real dollars that Brexit isn’t going to be a large issue and smart firms like ours will work it out,” said Mike Laven, chief executive of Currencycloud, the UK payments company. “As you get closer and closer [to Brexit happening] without a deal, there will be more and more nervousness.”

Others in the sector are more sanguine about the risk of Brexit damaging the UK’s position as a global fintech hub. “As a start-up we have a list of things that could kill us, but Brexit is just one of the annoyances we can deal with later,” said Tom Blomfield, chief executive of Monzo, the digital bank that plans to raise about $150m with a valuation of some $1.5bn.

“Losing access to EU clients would be an irritation, but then we will need to get a banking licence in Ireland,” said Mr Blomfield.

London in a position to be exporter of fintech

In most countries the number of banks and payment companies has fallen sharply since the financial crisis a decade ago. In the UK, however, the trend has been reversed — underlining how many digital upstarts have emerged to challenge Britain’s financial establishment.

There are two-and-a-half times more companies in the UK banking and payments industry now than there were in 2005, while globally the total number has fallen by about a fifth, according to recent research by consultants Accenture.

“London remains well positioned, particularly because of its early start on fintech, the deep roots of finance in the City of London and the good environment here from a tax, regulatory, cultural and social point of view,” said Richard Lumb, head of financial services at Accenture.

The new generation of fintech companies in Britain has captured 14 per cent of total revenues in their target markets, much higher than the 6 per cent of revenues that have been taken by digital upstarts elsewhere in Europe.

“We are in an early part of the wave and it is great that London has developed expertise and is starting to expand globally,” said Mr Lumb. “I think London could position itself as an exporter of fintech in the way that Israel has positioned itself as an exporter of expertise on cyber security.”

With more than a dozen British fintechs having secured banking licences and several of them surpassing the 1m customer mark, Mr Lumb said the UK fintech industry “has got staying power” and predicts it will continue to attract capital and talent despite Brexit.

Fonte: Martin Arnold, do Financial Times