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A year in fintech & alternative finance: part 2

Regulator reviews, expansion into new markets and high street banks playing catch up, were key fintech themes in 2018.

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In a year plagued by Brexit uncertainty, slowing investment and faltering consumer confidence, fintech businesses attracted investors and opened up new markets.  

In this article, following on from our look at the first half of 2018, we take a look back at stories that set the pace over the final six months of the year.


UK regulator, the Financial Conduct Authority (FCA), proposed that peer-to-peer lenders and crowdfunding platforms should be more transparent, so investors have a clearer sense of the higher risk lending they are taking on.  

The long-awaited review added that peer-to-peer lending platforms should offer more information about the creditworthiness of the borrowers on their platforms, and take extra steps to protect investors in the event of a collapse.

Rhydian Lewis, co-founder and chief executive of RateSetter said: “I welcome this consultation paper because the clearer the regulation, the better chance peer-to-peer lending has of becoming meaningful competition to the banks.”

Money app Revolut continued its rapid expansion signing up its one millionth UK customers, adding to its global customer 2.25 million customer base. The fintech firm said it had so far saved its British customers over $330m in fees.

However, digital challenger bank Monzo saw its annual pre-tax loss leap fourfold to £33.1m, and more than tripled its customer base to 750,000, as the business, founded in 2015, continued to target growth over profits.


Goldman Sachs launched the UK arm of its online bank, Marcus, as the US financial institution rolls out the business it launched in America in 2016. The lending and deposit platform has already lent over $3bn to US consumers, and plans to hold $28bn of online loans on its balance sheet by 2020.

The FCA joined forces with 11 financial regulators from around the world to oversee cross-border fintech firms. The Global Financial Innovation Network - which includes regulators from the US, Canada, Dubai and Singapore - said one of its main functions will be to share knowledge on innovation across the various sector.

British digital bank Starling 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 the FSA. This is because these firms can piggy-back off the banking licence Starling already has with the UK regulator.


LendInvest proved its attractiveness to investors by clinching £150m from global investment bank Nomura and investment manager Magnetar, to fund residential development finance. Two weeks later it secured an additional £30.5m in a series C funding round bringing in new investors from technology-focused investment bank GP Bullhound and Tiger Management, a hedge fund and family office founded by prominent US investor Julian Robertson. LendInvest specialises in development finance, bridging loans and buy-to-let. It has funded more than £1.5bn in loans to date, helping support the building or renovation of some 5,000 homes across the UK.

The Treasury select committee labelled bitcoin and other cryptocurrencies as “wild west” assets that exposed consumers to a host of risks.  In particular the committee pointed to the lack of enforceable regulations around initial coin offerings and money laundering.

Barclays took advantage of the Open Banking framework to allow its six million app customers to view the personal and business accounts they hold with rival UK banks. Barclays promised to add to the Lloyds, Halifax, Santander, Nationwide,RBS, Bank of Scotland and NatWest accounts on its app as the service developed.   


Funding Circle fell by as much as a quarter on its first day of trading in London following its long-awaited initial public offering, raising questions about the valuation of the peer-to-peer lender founded in 2010. The business, which collects a pool of funds from individuals and firms that it lends out to small businesses, saw its flotation value drop from £1.5bn to £1.25bn over the day.

Berlin-based smartphone bank N26 launched in the UK, and followed that up with openings in Denmark, Norway, Poland and Sweden a month later. By the end of the year it traded in 17 countries across the eurozone.

The business, which gained a banking licence from German financial regulator Bafin in 2017, offers online accounts for cash withdrawals, savings and insurance services.

Specialist lender Just Cashflow said it had been producing a monthly profit since July. The firm, which provides credit to small businesses, funds its loans using bonds listed on the Irish Stock Exchange, institutional cash and its own balance sheet. Just Cashflow said at the time it had  lent just over £80m since it had been founded in 2013, and was currently lending at a rate of £1m a week.


Zopa, the world’s first peer-to-peer lender, said it had raised £60m to fund its digital bank. The UK business, founded in 2005, received a licence from the FCA the following month. It plans to launch a series of banking services in 2019, including a fixed term savings product and a credit card.

Chief executive Jaidev Janardana said: “This new funding takes us a step closer to realising our vision of being the best place for money in the UK.”

Zopa is one of the UK’s so-called Big Three peer-to-peer lenders, alongside Funding Circle and Ratesetter.

Fintech app Starling Bank gained a high street presence by striking a deal with the Post Office, allowing its customers to withdraw and deposit cash at any one of its 11,500 branches nationwide. The Post Office boasts more branches across the country than all of the UK’s banks and building societies combined.

Among a number of notable fundraisings, UK digital bank Tandem raised £15m in November after striking a deal with Hong Kong financial services business Convoy to launch a ‘virtual bank’ in the region. Tandem will provide the technology, while Convoy plans to take advantage of its distribution network and local expertise.


Leading digital banking challenger Revolut was granted a European banking licence, after an application process that lasted more than a year.

The licence will give the firm the power to roll out banking operations across the European Union, including full current accounts, loans and a commission-free stock trading tool.

The rapidly expanding firm is also in the middle of an ambitious international expansion, with launches in the US, Canada, Singapore, Japan, Australia and New Zealand all expected early 2019.

Funding Circle secured a new £1bn funding facility from US investment firm Waterfall Asset Management. The peer-to-peer business lender said Waterfall will invest the cash over a two-year period, supporting around 14,000 small businesses. Over recent months the British Business Bank, the European Investment Bank and other pension funds and insurance companies agreed to make loans on the peer-to-peer lender’s platform.

Leading app-only bank Monzo hit its £20m crowdfunding target in less than three hours after giving its one million current account holders the chance to buy shares.

The firm, valued at over £1bn, said it would use the cash to boost its product range and showed the public investor appetite for fintech firms remains as we entered 2019.

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