In the UK, a mechanism has been created to provide support to firms that are at the stage of growth and are engaged in financial technologies.
The plan of the United Kingdom provides for the support of companies until they become public. This decision is aimed at strengthening the UK’s global status as a center of investment in fintech.
The Fintech Growth Fund plans to invest between 10 million and 100 million pounds in companies, including consumer-oriented challenger banks and payment technology groups. Support will also be provided within the framework of initiatives aimed at developing financial infrastructure and regulatory technologies.
The fund is supported by Mastercard, Barclays, and the London Stock Exchange Group. Consulting services are provided by the British investment bank Peel Hunt. The fund focuses on interacting with those companies that are striving for Series C and higher rounds.
In 2021, the former vice chairman of Worldpay, Ron Kalifa, commissioned by the British government, conducted a review to study what the listing environment is for technology firms. The Foundation is a kind of response to the results of this study.
Currently, well-known funds supporting fintech are Augmentum Fintech and Anthemis Group. Against the background of their strong position, the United Kingdom has to do work to create a competing structure, the emergence of which is the result of the implementation of the relevant government strategy.
The UK has received a portion of negative criticism from the fintech industry. Industry representatives accused the government of creating barriers to business development, which also force many to explore the possibility of placing shares abroad. According to critics, the problem worsened after the UK left the EU, which, in their opinion, to some extent shook the country’s status as a global financial center.
The London Stock Exchange has committed itself to carrying out reforms in order to create favorable conditions for the activities of fintech companies in the United Kingdom. This is a strategically important decision, the need for which underlines a very significant event, which is that the British chip development firm Arm will be listing in New York, abandoning these actions on the stock exchange in the UK.
The fund’s advisor is Philip Hammond, former Minister of Finance of the United Kingdom.
According to experts, the implementation of the project to provide assistance to fintech companies also allows financial giants to gain access to expertise in the development of new technologies. Large banks and smaller organizations of the same profile are currently looking for ways to realize their digital ambitions. Traditional players in this market cannot ignore the development of technology, as startups offering advanced solutions are gradually forming something like a competing sector. In a more global context, it is fair to think that indifference to progress and denial of its gradual penetration into the space of human life always stops development and starts a movement in the direction of gradual degradation. In the technological aspect, this statement is particularly relevant.
The Fintech Growth Fund plans to start investment activities by the end of this year. Against the background of the huge sums present in the fintech industry, $ 1 billion seems like a small initiative, but this is only the beginning of a financial project that has prospects for scaling.
In terms of activity in the field of fintech innovation, the UK is second only to the USA. Currently, 16 of the 200 largest fintech companies are based in the United Kingdom.
In recent months, the cost of such firms as Checkout.com, Revolut, and Freetrade, declined. This indicates that the fintech industry is going through a difficult period, which is caused by a decrease in consumer spending against the background of the lack of macroeconomic stability and the dynamic of inflation showing steady growth.
Internal evaluation Checkout.com last year fell to $11 billion, which is 73% lower than the previous value of this indicator. Shareholder Schroders Capital has lowered the valuation of Revolut, the British currency services giant, by 46%. The firm is currently valued at $15 billion.
KPMG reports that following the results of the first half of this year in the United Kingdom, the volume of investment in the fintech industry decreased by 57%.
The current historical moment is the most suitable for creating a fund to support fintech firms. The initially large number of investors seeking positions in private mature companies has significantly decreased.
In 2020 and 2021, there was a period in the technology sector that can be described as a kind of era of sky-high valuations. The change in external economic circumstances led to the bubble bursting, although it should have happened anyway and was a matter of time, not a coincidence of factors and trends. The changes in the external space have ruined weak business models, stronger strategies have survived and have very good prospects.
Phil Vidler, managing director of the Fintech Growth Fund, said that there is still a high level of activity in the UK investment market.
As we have reported earlier, Singapore Becomes Command Center for ASEAN Fintech.