Roughly a decade after start-ups began upending financial services, a new period of innovation seems to be occurring with many early movers now in the hands of new leaders, investors and customers. Then along came the coronavirus.
Originally published in The AltFi Weekly Newsletter, for more like this sign-up now.
A fun perk of reporting on the fintech sector in recent years was visiting interesting start-ups and scale-ups’ bright and breezy offices. You got to see the stellar growth in real time.
A half-yearly catch up at firms such as Monzo, Starling, Revolut, Funding Circle et al give the clearest view of staff headcounts doubling in a matter of months, increasingly critical fundraising dynamics and how strategic corporate grand plans were really playing out. Not so much of that right now of course, and perhaps never again in the same manner. The future of office life is not the only reason.
An incredible $48bn was pumped into UK fintech firms in 2019 but towards the end of the year, and in the start of 2020, a period of change started to occur among many firms that make up UK fintech. A plethora of stories covered on AltFi suggested a new era was fast approaching before coronavirus became a household name.
This included, mostly within the four weeks around the festive season, the stepping aside of a number of long term fintech CEOs, also often founders. These included LendInvest's Christian Faes, Nutmeg's Martin Stead, Metro Bank's Craig Donaldson and GrowthStreet's Greg Carter.
And of course not forgetting fintech’s most famous pivot
Other rumblings too suggested something a bit more tectonic was underway. This included the exit of N26 from the UK, apparent to all but the firm this was because the field was becoming increasingly crowded and dominated by the three largest players. The period also saw the eventual closure of RBS’ digital bank brand Bó not long after.
Take Monzo as a pertinent example, perhaps even a bellwether for the industry. Monzo had an annus mirabilis in 2019, for the avoidance of doubt. It became the most switched to bank in the last three months of the year. A huge achievement.
The picture shown above from Monzo’s 2019 annual report indicates, however, how there has been a huge change for the digital bank in terms of its senior exec team in the past twelve months.
Paul Rippon, Meri Williams, Tim Trailor, Libby Townsend, Dean Nash and Tom Foster-Carter have all exited. It’s CEO Tom Blomfield, most significantly, moved into a newly-created role of President. Co-founder Jonas Templestein, who took over some of the CTO responsibilities from Williams.
Monzo as a darling of fintech scene here in the UK and around the world is clearly entering into a new era of its growth and development. It now has a new (non-founder) CEO in TS Anil who joined from VISA, who is based in the US and not even six months into the job.
The UK regulator the FCA’s ‘crackdown’ on alternative lenders - “a watershed moment” according to RateSetter’s CEO Rhydian Lewis - at the end of last year also showed how a large area of fintech was changing with a number of leading firms shifting strategies.
The alternative lending sector is now dominated by a totally new model, of course. Rather than being an alternative source of capital to the banks, it is a powerful conduit of government stimulus to SMEs via CBILS, Bounce Back Loans etc.
In total lenders (including incumbents) have arranged nearly £30bn of loans from government coffers since the lockdown.
Digital wealth disruptors too have found themselves an unlikely beneficiary of coronavirus from a new group of retail investors taking advantage of depressed asset prices to kick start personal portfolios or give their existing finances a spring clean.
So what's going on? Clearly some form of accelerated evolution has already set in. This is hardly surprising given fintech's core message of 'change'. What is interesting is how will firms that have reached a critical size, have millions of customers but an increasing need to grow revenues such as Monzo look in another 12 months time.
It is clear too that COVID-19 is ushering in an acceleration of change for one of the global economy’s raciest sectors. This could bring some huge benefits. Disruptors are better at remote working, better able to pivot to new opportunities and naturally digital-first. But, also dependant on venture capital for now. It's too early to say how this will play out and it would be absurd to reduce to a bull/bear case yet.
I'll leave you with a statistic, though. In three years there has been a 50 per cent increase in demand for tech roles within UK banking and now one in three of all roles in the gigantic sector is tech-focused, according to recruiter Robert Walters.
You can't put the toothpaste back in tube. Financial services have irrevocably changed over the past decade and my money says it will continue to see a massive digital shift with disruptors still uniquely placed to take market share from creaking incumbents. But, for certain, it is a new era.