In a strategic move to fortify its reputation as a global fintech investment center, the U.K. has unveiled a £1 billion Fintech Growth Fund. This fund is aimed at nurturing growth-stage financial technology companies, supporting them until they are ready to go public.
Key Details
- The Fintech Growth Fund plans to invest between £10 million to £100 million into diverse fintech entities.
- Companies of interest range from consumer-centric challenger banks and payment technology groups to financial infrastructure providers and regulatory technology enterprises.
- The initiative is supported by heavyweights like Mastercard, Barclays, and the London Stock Exchange Group.
- U.K. investment bank Peel Hunt will be advising the fund, focusing especially on businesses at the growth stage of their funding journey, primarily those seeking Series C and beyond.
- The Fintech Growth Fund has also engaged Philip Hammond, former U.K. finance minister, as an advisor.
Origins of the Fund
A 2021 government-commissioned review, directed by former Worldpay Vice Chairman Ron Kalifa, was the catalyst for the fund’s creation. This examination delved into whether the U.K.’s listing environment was deterring tech companies.
The establishment of this fund signals a monumental commitment, especially as it emerges from a government-led strategy and has backing from significant industry players. Such a specialized focus on fintech from the U.K. government is a first of its kind.
Addressing Industry Concerns
Post its exit from the European Union, the U.K. faced mounting criticisms for perceived barriers placed in the path of fintech entrepreneurs. This sentiment forced many to contemplate overseas listings. The creation of the Fintech Growth Fund is a strategic response to these concerns. It aims to entice fintech entities to remain in the U.K., with the London Stock Exchange already initiating reforms to this effect.
Gautam Pillai, an equity analyst at Peel Hunt, conveyed optimism about this venture, emphasizing its potential to discover future fintech giants like Stripe, Worldpay, or Adyen.
State of U.K.’s Fintech Landscape
The U.K. proudly stands as a beacon of fintech innovation, only overshadowed by the U.S. in terms of industry scale. Independent research firm Statista, in collaboration with CNBC, notes that the U.K. houses 16 of the world’s leading 200 fintech establishments.
However, the industry hasn’t been without its challenges. Several notable fintech organizations have witnessed their valuations plummet dramatically. Companies like Checkout.com and Revolut experienced significant valuation cuts, and U.K. fintech investments also faced a staggering 57% reduction in the first half of 2023, as reported by KPMG.
Yet, the current market conditions might just be an opportune moment for the Fintech Growth Fund. With reduced entry levels for investors aiming at privately-held mature companies, Pillai believes that now is an ideal time to launch a fintech fund. He cites the burst of high valuations in 2020 and 2021 as a bubble, believing that while this correction has eliminated weaker business models, the robust ones will prevail and prosper.
Phil Vidler, managing director at Fintech Growth Fund, retains a positive outlook, asserting the U.K.’s stature as one of the premier financial hubs globally. He emphasizes the foundational strengths of the U.K., such as its strategic location, legal system, and the emergence of second-time founders and renowned global venture firms establishing their base in the country.
Conclusion
The Fintech Growth Fund stands as proof of the U.K.’s steadfast dedication to fostering fintech innovation. The journey forward is bound to be strewn with obstacles, but with the correct planning and backing, the U.K. can further strengthen its standing as a worldwide leader in fintech. The forthcoming years will be crucial in assessing the fund’s influence, not just on the U.K.’s fintech scene, but potentially on an international level too.
