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2020 in Fintech and Alternative Finance: Part 1
Coping with market chaos caused by Covid-19 was the pivotal fintech and alternative finance theme in H1 2020.
In a year supposed to be all about Brexit uncertainty, instead, fintechs and alternative lenders found themselves dealing with a somewhat more unexpected challenge as the Covid-19 pandemic struck.
In this article, we take a look back at the stories which set the pace over the first six months of 2020.
The year kicked off with optimism as Visa woke everyone up from the Christmas slump with its $5.3bn takeover of open banking provider Plaid, while open banking in the UK reached a milestone of 1m customers.
On the funding side of things, Receipt Bank, Tink, Volt, WealthKernel and Nucleus Commercial Finance were among the startups that secured cash in the first month of the year.
RBS (now known as NatWest) admitted that the launch of its Bó ‘flanker bank’ hadn’t gone according to plan as it bounced boss Mark Bailie, then had to replace 30,000 customer cards, and would eventually shutter the ill-fated project in May, less than six months after launch.
Ex-chancellor Philip Hammond also joined OakNorth’s advisory board in January, Christian Faes handed over the reins at LendInvest, deposits provider Raisin entered the US, and the Peer-to-Peer Finance Association was wound down to be replaced by Innovate Finance’s 36H Group.
Oh, and Holvi launched its SME banking app in the UK… only to leave seven months later.
In February growing Brexit concerns led Revolut to start shifting more of its regulatory base to Ireland and Lithuania, and pushed N26 to quit the UK entirely.
After securing funding to complete its banking licence application in late 2019, Zopa finally removed arrested Indian tycoon Kapil Wadhawan from its board.
Zopa’sclose call nearly saw it losing its banking licence, but the successful funding would see its full licence approved in June and the launch of fixed-term savings accounts in August and its first credit card in October.
Neyber also ran into funding woes after also being caught up with the Wadhawan collapse, and would be acquired by rival Salary Finance the following month.
Two deals closed the month as Revolut raised $500m from backers including TCV, and Credit Karma was acquired for $7.1bn by QuickBooks owner Intuit.
Finally, Metro Bank returned £50m that it had been awarded by the BCR, a return that would be matched by the £50m returned by Nationwide in April, funds which would eventually be won by rivals Virgin Money, ClearBank and Tide.
In early March here at AltFi we wrote our first article to mentioned Coronavirus, a theme which by the end of March would come to dominate much of our fintech coverage.
Before then, however, Thought Machine would raise $83m from Draper Esprit,Starling Bank announced its sponsorship of Team GB for an Olympic games that would never happen, and Brismo was acquired by LoanClear.
Chancellor Rishi Sunak announced a few initiatives that might benefit fintech in his Budget 2020… however by mid-March the world had entered full Covid-19 pandemic.
Alternative lenders, especially those in the peer-to-peer lending space, saw withdrawals spike and many including Assetz Capital and Growth Street stopped or delayed withdrawals—in Growth Street’s case this would eventually lead to its demise.
By the end of March, the phrase CBILS (Coronavirus Business Interruption Loan Scheme) had officially entered AltFi’s vocabulary as the British Business Bank-led lending initiative launched and eventually opened accreditation to alternative lenders.
Furloughing staff began at the end of March and into April as fintechs found themselves evicted from offices and forced to adapt to working from home. Kabbage in the US was among the first AltFi covered, but soon Monzo would join suit, Curve and 11:FS among others would tell staff to stop working.
Pay cuts also came in, with the founders of Funding Circle, N26, 11:FS, Crowdcube, Seedrs, SyndicateRoom, Revolut and Monzo leading the way.
Speaking of Monzo, the digital bank was already experiencing a wave of senior departures even before Covid struck, but that pace continued throughout 2020 with its deputy CEO, CTO, CCO, and CEO among those who stepped down this year.
AltFi exclusively revealed that Robinhood’s UK launch was on ice, RateSetter said its “options are under review” before selling itself to Metro Bank in August, Facebook scaled back its crypto plans, and share trading apps Freetrade,Stake and Revolut Trading all boomed as punters took to the markets—with Freetrade even completing a crowdfunding round!
At the end of April Starling Bank geared up to launch Bounce Back Loans, a move that would super-charge its business banking efforts and catapult the fintech to becoming one of the leading SME lenders of the Covid crisis.
By May many of us were wondering “can 2020 get any worse?” The answer, of course, was yes as Monese and 11:FS both started the month by laying off more staff, and Monzo slashed its valuation by 40 per cent in order to raise £60m in capital.
AltFi had its own news in May, both with our acquisition by ETF Stream, and by hosting the AltFi Digital Summit, our first virtual event with the CEOs of ComplyAdvantage, Revolut, Nutmeg, Freetrade, PensionBee, Starling Bank, Plaid, Bunq, Just Cashflow and Innovate Finance.
It was clear by the end of the month that Tide’s Bounce Back Loans had hit trouble, with the SME banking service having been unable to raise capital to continue lending, eventually pulling the plug on its offering much to the anger of many customers.
Reaching the halfway point of 2020 saw Wealthify fully acquired by Aviva after the insurance giant gradually increased its stake over the years, while insurtech Lemonade filed for its $100m IPO.
Goldman Sachs had been gradually ramping up for a big push into the UK market this year, but tumbling interest rates and a fast-changing economy made it clear that 2020 might not have been the best timing.
June also saw Wirecard’s ongoing accounting scandal pick up pace after finally admitting something had gone pretty majorly wrong as at least €1.9bn was missing from its books.
Within days the German payment provider had filed for insolvency, had its UK assets frozen by the FCA, sent dozens of fintechs into a spin as they raced to keep their services working, and would eventually be split up and sold for parts to other payment groups.
The whole affair would lead Financial Times reporter Dan McCrum to be recognised for his Special Industry Contribution at the AltFi Awards, but that would come later in the year...
That’s the first 6 months of 2020 done. Want to know what happened in the second half of the year? Find out here.