AltFi’s most-read stories from 2018

By Roger Baird on Monday 7 January 2019

Alternative LendingDigital BankingSavings and Investment

A selection of the most read exclusives and features from last year published on

From breakneck unicorn expansion, new banking tie-ups, to firms that failed to make the grade, 2018 was a huge year for disruptive finance.

Many may be glad it’s over, what with torrid financial markets and ever increasing political risks but for alternative finance and fintech focused firms it was an important 12 months. In this article we take a look back at the stories that were most popular with our readers over this period.

The rapid rise of OakNorth Bank
UK digital bank OakNorth is one of the runaway successes in the sector since its 2015 launch. The firm, aimed at entrepreneurs, has doubled in size, seeing its valuation top $2bn in September over the last two years.

Its heavyweight investors include Singapore’s sovereign wealth fund, GIC, the Clermont Group, Toscafund and Coltrane.

OakNorth makes its cash from lending to growing businesses and licensing its OakNorth Analytical Intelligence, a credit underwriting and portfolio monitoring technology, to rivals.

Last March the business posted £1.2bn of gross lending in the UK – up from just £300m a year ago – while profits hit £10.6m in 2017.

OakNorth chief financial officer Cristina Alba Ochoa said at the time: “The reason we grew so fast is because we were solving a problem”.

She explained that while good lending options exist for large businesses, and smaller fintech firms like Funding Circle plugged the gap for small firms, medium-sized were badly served.

Alba Ochoa said catering for the missing middle meant it was met with an “overwhelming response” from both investors and borrowers.  

The financial officer said the resilience of its loan book would be crucial in what could be a slowing UK economy troubled by Brexit uncertainty in 2019.

Every loan originated by the bank is secured on a senior basis, and additionally 92 per cent of the loan book is collateralised. The average loan-to-value ratio across the book is 52 per cent, while the maximum loan-to-value ratio is 75 per cent.  

Alba Ochoa added: “We fundamentally believe we’re in a position to be resilient in a downturn because of the low leverage ratio of the borrowers and the comfortable loan-to-value ratio that we have.”

Digital banks firms continued to extend their services last year, to compete with each other as well as high street lenders.

Starling strikes first banking-as-a-service partnership

British digital bank Starling last August struck its first banking-as-a-service partnership with deposit marketplace Raisin UK, an arm of a German fintech that plugs users into a wide range of savings products across Europe.

Starling’s new operation allows third parties to offer customised services such as retail banking payments and card issuing – without having to seek permission from UK regulator, the Financial Services Authority (FSA). This is because these firms can piggy-back off the banking licence Starling already has with the regulator.

Raisin, which launched in 2013, has processed over €7bn of savings deposits and boasts more than 130,000 customers across Europe.

The new partnership means Raisin will be able to use Starling’s application planning interface (API) to open Starling accounts for its customers, collecting deposits and distributing them via its multiple savings product partners.

Previously, the firm could only collect deposits in the name of its partner banks, meaning customers did not have individual accounts with Raisin.

Starling founder and chief executive Anne Boden previously told AltFi that to justify the expense and regulatory burden of having a banking licence, “you have to do a lot of banking.”

She added that the deal “with Raisin is a compelling example of the new Open Banking reforms in action and will allow it to build out its business in the UK.

Boden said: “By opening its APIs to Raisin, Starling is part of a new movement where different businesses can tailor their propositions to each customer base and put their customers at the centre of a wider financial ecosystem.”

TransferWise takes on Revolut by launching 'borderless banking’

International money transfer service TransferWise launched its consumer borderless account and Mastercard debit card in January.

The service allows users to hold local bank accounts in sterling, euros, US and Australian dollars, and receive payments from around the world in local currency without fees.

TransferWise adds that the service also allows customers to hold money in up to 28 currencies and convert them between each in seconds with “real” exchange rates and low fees.

Taavet Hinrikus, chairman and co-founder, TransferWise says the launch is  a ‘major milestone’“ on the firm’s mission to help money flow across borders without friction.

“The borderless account is a game changer for anyone living or working between countries. Opening a bank account abroad is incredibly difficult without a local proof of address, but the borderless account can be opened in minutes. For expats, second home owners, freelancers, sole traders and more the borderless account is invaluable.”

TransferWise employs 900 people globally in nine offices and holds a 15 per cent share of the UK market, its biggest region. It adds over two million people use its money transfer platform to send over £1.5bn every month.

Invoice financing platform put into liquidation

However, at least one firm was forced to close under usual circumstances, highlighting the fact that young firms can be hit for six by turbulence that more established firms can weather.

UK-based invoice financing platform Urica was forced into liquidation last July, after an invoicing fraud was uncovered at one of the French firms it dealt with.  

One of its major investors, Artemis Fund Managers, wrote down the value of its holding in Urica to zero, in an email seen by AltFi, adding the move was “unexpected and disappointing”.

The asset manager, which has £29bn of assets under management, said the move resulted in a 2.2 per cent reduction in the fund’s net asset value, translating to a £3.8m hit.

Urica founder Lindsay Whitelaw, who was also a partner Artemis at the time of its launch in 2014, said “it is with deep regret that I announce we have had to appoint an interim liquidator from 20th July 2018.”

Whitelaw added: "The fund we manage suffered a large fraud in France at the beginning of the year and as a young business we have been desperately trying to recover from that event.

 “Other financial institutions were also defrauded by the same client, but because we are relatively small and at a formative stage in development this has had a much greater impact on us.

 “We have been trying to secure the necessary funding we required to keep trading but that unfortunately has not been successful.”

Tales of failed peer-to-peer lenders

Manchester-based property-backed peer-to-peer lending platform Collateral collapsed into administration last March, leaving investors unable to access their money or even view their accounts.

The platform, which let its Financial Conduct Authority (FCA) licence lapse the previous month, got into trouble after it taking on an £8.5m loan that significantly outweighed demand from its investors. This left £21m of investors’ cash is at risk, and led to the FCA being called in to oversee the recovery of any remaining  funds.

This prompted AltFi to look over the grim history of other peer-to-peer lenders that failed over the last few years.

The list includes tiny UK-based peer-to-peer platform Be The Lender, which folded in August 2014 after its holding company People 2 People, dragged its 100-strong staff into administration, unable to pay its debts.

Stockholm-listed TrustBuddy, a peer-to-peer firm specialising in short-term loans for consumers, was the first big platform to go belly-up in late 2015, after the discovery of a £3.5m black hole.

An investigation by the firm’s new management team uncovered  £3.5m discrepancy between the amount owed to investors and the available balance of the client bank accounts.

Loans disguised to hide poor performance were also discovered, leading the the world’s first peer-to-peer lending business to collapse, leaving administrators to sort out its £24m loanbook.

Ezubao was one of China’s highest profile peer-to-peer lenders, which collapsed in spectacular fashion in early 2016.   

A police probe found that the platform had fleeced its investors of Rmb50bn ($7.6bn), in what turned out to be a giant ponzi scheme.

Two earth diggers were hired by police to uncover 1,200 account books that had been hidden underground. The platform’s 34-year old founder Ding Ning was accused of splashing investor cash on lavish gifts, including a Rmb130m villa in Singapore and a pink diamond worth Rmb12m. His younger brother was paid Rmb1m a month as an executive. In total 95 per cent of the projects backed by the platform turned out to be fake, and 20 arrests were made.

AltFi expects more vibrant stories from this pulsating sector in 2019.

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