A year in lockdown: What the world of fintech looks like a year on

By Aisling Finn on Tuesday 23 March 2021

FeaturesAlternative LendingDigital BankingSavings and Investment

A dig back through the AltFi archives to take a look at the past year in lockdown.

A year in lockdown: What the world of fintech looks like a year on
Image source: Matt Seymour/Unsplash

Today marks exactly a year since the UK went into its *first* lockdown prompting a huge wave of change, not least for fintech companies. Many of whom have benefited from the following wave of digitalisation.

One of the most immediate and long-term changes we all experienced was working from home. Offices shut up shop across the country as the pandemic began to ramp up and most of us shifted to remote working for the first time in our careers. 

Since then, we’ve seen the likes of digital banking challenger Revolut announce a permanent shift to flexible working, while international payments group TransferWise plans to create 750 roles globally across its 14 offices.

In this article, we took a look back through the archives to see what fintech has achieved in one of the most unprecedented years in recent history.

Hey Big Spender

Despite the Covid-19-related pinch on the purse strings, fintech funding has had a strong 12 months.

Some estimate that VC funding dropped by just nine per cent, while others have calculated that fintech funding dropped by nearly a quarter in 2020.

In 2021 already so far, we’ve seen some of the biggest fintech funding rounds ever. 

This time last year, Revolut had just raised a $500m Series D funding round, which it then went onto extend by another $80m in July.

After Revolut got the ball rolling, other fintechs followed suit.

Checkout.com raised $150m in June 2020, tripling its valuation in the process. Earlier this year, the payment processor tripled its valuation for the second time to $15bn after a $450m Series C funding round.

Klarna, not happy about having to share the title of Europe’s most valuable fintech with both Revolut and Checkout.com, raised $650m at a $10.65bn valuation in September, only for the Swedish fintech to follow in Checkout’s footsteps and triple its valuation in March 2021.

The buy-now-pay-later fintech raised $1bn at a massive $31bn post-money valuation, making it Europe’s most valuable fintech once more. 

So, in the past year, it’s safe to say fintech funding has not dropped off a cliff like many thought it might do at the start of the Covid-19 pandemic. 

Regulation

Just before we headed into lockdown in 2020, fresh-faced Chancellor of the Exchequer Rishi Sunak made his first budget, a year on and Sunak looks to be one of the most fintech-friendly Chancellors to have picked up the red briefcase.

To help support businesses throughout the lockdown, Sunak introduced the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme and Bounce Back Loans.

After calls that fintechs were being left out in the cold, the Chancellor introduced the Future Fund, a government-backed convertible loan for anywhere between £125,000 and £5m.

The fund has since helped fund some of the UK’s most prominent fintechs, such as rental deposit lender Fronted, AI-powered savings app Plum, peer-to-peer lender Assetz Capital and money management app Snoop.

In his first budget, Sunak also called for a review into the UK’s fintech sector, culminating in the Kalifa review that was published a month ago. 

Kalifa suggested implementing changes to how companies list on the London Stock Exchange, a £1bn Fintech Growth Fund, new visa routes, fintech task forces and how to move towards open finance.

Movers and Shakers

Over the past year, there have been several trends that have emerged thanks to the lockdown.

Firstly, after an initial dip, people turned to trading and investing under lockdown, with a specific focus on cryptocurrency.

For instance, Revolut’s customers turned to trading cryptocurrencies under lockdown with the number of users buying cryptocurrencies rising 68 per cent from 20 April to 4 May 2020.

Now, it’s estimated that Revolut could have roughly £1bn worth of crypto under its belt thanks to the spike in cryptocurrency trading. 

In more recent history, we’ve seen a number of Reddit traders take on Wall Street, forcing hedge funds to lose billions of dollars in the process. 

The massive trading volumes caused many interactive brokers to freeze buy orders on the ‘Reddit Stocks’, which included video game store GameStop ($GME), mobile phone manufacture BlackBerry ($BB), Finnish technology company Nokia ($NOK) and cinema giant AMC Entertainment ($AMC), claiming the market was too volatile.

We’ve seen the likes of Freetrade tentatively take its first steps aborad, setting out plans to launch in France, the Netherlands, Sweden and Australia, while trading giant Robinhood officially cancelled its plans to launch in the UK.

Buy-now-pay-later

BNPL found its way into the mainstream in 2020 as more people turned to the fee-free credit option to help fight the Covid-19-related tightening of the purse strings, however, it wasn’t without its bumps.

At the beginning of December, Capital One became the first major bank to block BNPL credit card transactions, with the US bank describing such transactions as “risky for customers and the banks that serve them.”

Just three weeks after Capital One applied the brakes to BNPL, the Advertising Standards Agency (ASA) branded four Klarna ads as ‘irresponsible’ after several influencers posted ads for the fintech linking spending (and borrowing) money with happiness.

In February 2021, the Financial Conduct Authority published the long-awaited review from Christopher Woolard, the former interim CEO of the FCA, this morning, calling for tighter regulation of buy-now-pay-later (BNPL) firms.

At the time, HM Treasury released a statement about the concerns raised over the sudden rise in popularity of BNPL during the pandemic. 

It read: “Buy-now-pay-later products are rapidly increasing in popularity, with the volume of transactions tripling in 2020 as the pandemic drove online shopping, and there is now a significant risk that these agreements could cause harm to consumers.”

“By announcing plans to legislate to bring interest-free buy-now-pay-later into regulation, the government is acting swiftly to ensure people can continue to benefit from these products with the right protections.”

Despite the calls for regulation, there still remains a fairly sizeable question mark over exactly what form that regulation will take. 

So, all in all, a pretty quiet and uneventful 12 months, wonder what the next 12 will hold…?

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