2019 In Fintech And Alternative Finance: Part 1

A flurry of funding rounds, explosive expansion into new markets, and high street banks clamouring to catch up were key fintech and alternative finance themes in H1 2019.

In yet another year mostly plagued by Brexit uncertainty, ever-rising fintech investment and growing consumer confidence, fintech businesses attracted investors and opened up to new markets.  

In this article, we take a look back at the stories which set the pace over the first six months of 2019.

January

The year kicked off with Berlin-based app-only bank N26 hitting a $2.7bn valuation as part of a funding round which would propel it to become the first European digital bank to fully launch in the US by July.

Curve, the all-in-one bank card, launched its long-awaited integration with American Express… only for the US credit giant to pull the plug two days later, despite repeated threats of legal action by Curve.

Starling’s Anne Boden predicted her digital bank would reach 1m customers later in the year, a figure it eventually hit in November after the launch of its first high-profile TV marketing campaign.

Goldman Sachs revealed that its digital savings bank had reached £5bn of assets under management in the UK and, in its first set of results since IPO, Funding Circle boasted of beating its targets by growing revenues in 2018 by 55%.

February

In February a handful of lending milestones were met, including Landbay surpassing a cumulative £250m in lending, Zopa hitting £4bn in lending, Sancus business lending topping £1bn, and Assetz Capital reaching a £700m lending milestone.

OakNorth’s $440m SoftBank funding round propelled it to become among Europe’s most valuable startups.

Most importantly, the first tranche of cash from the £775m RBS Competition Fund was doled out to Starling Bank, Metro Bank, and ClearBank (with Tide), triggering a wave of progress for SME digital banking. Eventually cash would also be given to Funding Options, Codat, Fluidly, Form3, Ebury Partners, Swoop Finance, Nationwide Building Society, Investec Bank and The Co-operative Bank. 

Finally, Experian’s £275m takeover of credit scoring app ClearScore was shut down by the regulator, at the same time as Credit Karma’s Nichole Mustard arrived in the UK to take control of the company’s recently-acquired Noddle operation.

March

Revolut found itself at the centre of a series of scandals over its workplace culture, money laundering, multiple senior departures and app outages.

A “blockchain-powered freelancer firm” called Nodal Labs reported having signed a £250m contract with a recruiter, however an AltFi investigation would later cast doubt over the company’s technology, revealing a string of missed payrolls for employees and contractors. Nodel entered administration in October. 

Just four days after winning its £100m grant from the RBC Competition Fund, Metro Bank was forced to tap investors for a £350m bailout after discovering an accounting error which led it to underestimate how much shock-absorbing capital it was holding. As the market turned against Metro facing tumbling profits chairman Vernon Hill was forced to step down in July, and CEO Craig Donaldson left in December once the full scope of Metro’s now £900m accounting error became clear.

April

In April AltFi’s exclusive Streetbees Digital Banking Benchmark 2019 revealed how women were being left behind by the digital banking revolution, Apple Pay is soaring in the UK, and fintech mortgages might be a hard sell.

Mini-bonds began the year already mired in controversy, after the £236m collapse of London Capital & Finance in January. The tale continued after Mexican restaurant chain Chilango closed its second £3.7m “Burrito Bond” backed by retail investors, who poised to be subsequently wiped out by December as the company now looks set to tumble into administration.

Finally Funding Circle’s first annual report as a public company shone a light on the soaring headcount (and salaries) at the lender, while its Q1 results continued to see lending and revenues tick upwards.

May

Funding fury returned in May with Checkout.com’s bumper $230m raise from Insight Partners and DST Global, and fintech lender Greensill which raised $800m from SoftBank.

Crowdfunding saw its own resurgence, with Freetrade managing to take down Crowdcube with its oversubscribed funding round. Eventually Freetrade came back for a second try in July and managed to close its $15m round with Draper Esprit on board.

A tumultuous year for the robo-advisor/investor sector as Investec pulled the plug on its high profile Click & Invest platform after just two years in the market, joining the 2018 departure of UBS SmartWealth and October decision of Tiller to shutter its direct-to-consumer business.

It’s not all bad news for digital wealth in May however, as Wealthsimple secured a bumper $75m investment from Allianz.

June

In the wake of Lendy’s collapse in May, the FCA confirmed its new rules for P2P investments including a 10% cap on retail investor portfolios and more stringent tests on investors’ knowledge before investments are made.

Open Banking startups took the limelight with TrueLayer landing $35m from Tencent and Temasek, and Tink revealing PayPal’s involvement in its February €56m Series D.

The high street banking push back against digital players like Monzo and Starling was stepped up a gear as NatWest poached Circle’s Marieke Flament to lead its SME bank Mettle, and by November would officially launch its consumer digital bank Bó.

That’s the first 6 months of 2019 done, come back tomorrow when we’ll delve into July-December.