Notice: Undefined index: banner_ad_width in /home/ayekooto/public_html/wp-content/plugins/quick-adsense-reloaded/includes/render-ad-functions.php on line 359
Notice: Undefined index: image_width in /home/ayekooto/public_html/wp-content/plugins/quick-adsense-reloaded/includes/render-ad-functions.php on line 359
Notice: Undefined index: banner_ad_height in /home/ayekooto/public_html/wp-content/plugins/quick-adsense-reloaded/includes/render-ad-functions.php on line 360
Notice: Undefined index: image_height in /home/ayekooto/public_html/wp-content/plugins/quick-adsense-reloaded/includes/render-ad-functions.php on line 360
UK establishes £1 billion fintech fund to take on Silicon Valley
In an effort to enhance Britain’s reputation as a centre for fintech investment, the U.K. has established an investment vehicle to support growth-stage financial technology businesses until they can go public.
The Fintech Growth Fund, backed by companies such as Mastercard, Barclays, and the London Stock Exchange Group, aims to invest between £10 million and £100 million into fintech businesses. These businesses include consumer-focused challenger banks, payments tech companies, financial infrastructure companies, and regulatory technology companies.
The fund, which is being advised by U.K. investment bank Peel Hunt, seeks to help businesses as they seek Series C and higher rounds of funding when they are in the growth stage of their fundraising cycle.The company was founded in response to a 2021 government-commissioned assessment, which explored whether the U.K.’s listings climate is unfavorable for internet businesses and was led by former Worldpay Vice Chairman Ron Kalifa.
“It’s definitely a start,” said Gautam Pillai, a Peel Hunt stock analyst who focuses on fintech, in an interview with CNBC on Wednesday. It is an unusual commitment to a targeted fintech fund supported by major industry heavyweights. There are fintech-specific funds like Augmentum Fintech and Anthemis Group, but none have emerged in the UK as a result of a government-led initiative.
After the country’s exit from the European Union, which has placed some doubt on the U.K.’s standing as a global financial hub, Britain has come under fire from the sector for its perceived impediments to fintech entrepreneurs and its need that they consider listing abroad. Following British chip design business Arm’s decision to forego a London listing in favor of a New York listing, the London Stock Exchange has committed to a series of improvements to encourage fintech firms to list in the UK as opposed to the U.S.
Finding the following Stripe, Worldpay, and Adyen is the goal, according to Pillai. Former UK finance minister Philip Hammond also serves as an advisor to the firm. Financial powerhouses may have a chance to obtain knowledge in the creation of new technologies as a result of the relocation. As they compete with younger tech upstarts, big banks and financial institutions are attempting to further their own digital objectives. By the end of the year, the Fintech Growth Fund hopes to have made its first investment, according to Pillai. Despite the fact that £1 billion is little compared to some of the enormous sums invested in fintech and technology more generally, Pillai said it’s “definitely a start.”
The U.K., which is just slightly behind the U.S. in terms of the size of its fintech business, is a hotspot of fintech innovation, he said. 16 of the top 200 fintech firms in the world are based in the United Kingdom according to an analysis from independent research firm Statista conducted for CNBC. Due to dismal macroeconomic conditions and rising prices, the fintech sector is now experiencing volatility. Companies like Checkout.com, Revolut, and Freetrade have all seen a dramatic decline in capitalization in recent months.
In a stock option transfer arrangement last year, Checkout.com’s internal valuation fell by 73% to $11 billion. According to a filing, stakeholder Schroders Capital reduced Revolut’s valuation by 46%, amounting to a $15 billion markdown. Revolut is a leading provider of foreign exchange services in the United Kingdom. A U.K. challenger bank named Atom Bank had its worth reduced by 31% by Schroders.
According to KPMG, U.K. fintech investment fell by 57% in the first half of 2023. According to Pillai, now is the ideal moment to launch a new fintech fund because it is now significantly easier for investors to buy shares of privately owned mature firms.
There has never been a better time in the history of fintech to launch a fintech fund, from the perspective of pure investing. In spite of the “bubble” of exorbitant valuations in the IT industry that occurred in 2020 and 2021, Pillai thinks that the correction “killed some very weak business models butt the stronger business models will survive and thrive.”
No matter what was anticipated to occur in the previous ten years or so, the United Kingdom still has one of the top financial hubs in the world, according to Phil Vidler, managing director at Fintech Growth Fund, who spoke to CNBC. “A center for business — time, location and law, etc. — those fundamentals are still here, and similarly we’re now getting to a point where second-time founders are starting companies, and large, global venture firms touted as the best in the world are setting up here in the U.K.”
Comment here