Over the next month we will be looking back at fintech in 2017 from every angle, in order to determine the most significant developments in the industry during that time.
This article looks back on an article we did in February which predicted the top UK fintechs to watch for 2017. Were we right? How have those fintechs performed and what has 2017 done for them?
What we thought then: The fintech industry has seen tremendous growth in last decade. The sector now supports over 61,000 jobs and turns over billions in revenue for the British economy. The UK has grown in stature to be a global hub on the fintech stage, in terms of investment, employment and the number of fintechs in the market. A report by the UK government estimates that the UK fintech sector represented £6.6bn in revenue in 2015 and attracted £524m in investment. Therefore, consumer adoption of fintech is becoming increasingly mainstream.
What we think now: 2017 was always going to be a big year for fintechs as the incumbent banks looked to hedge a section of the market post PSD2 and GDPR. That’s certainly what we’ve seen, with many prominent collaborations. For that reason, the fintech sector is set to break investment records this year, some £825m according to Reuters, double the investment of 2016. Whilst the terms of Brexit are no clearer, the fact that London attracted 90% of investment suggests 2017 was not the year that London was replaced as capital of European fintech.
Here are the first five UK startups:
Total equity funding: $89.8m (flat) --%*
Where they were then: Nutmeg is an investment portfolio company that help clients create intelligent investments and see their portfolio funds grow over time. The fintech company requires no paperwork to sign up, and users can choose a portfolio based on their financial needs. Nutmeg changes the way people manage their money; it specialises in ISA’s pensions and offer straightforward service for online investment management.
Martin Stead, Nutmeg CEO, said: “Nutmeg manages over £600m for more than 25,000 customers, and has four-year performance track record, benchmarked against its competitors, open for all to see on our website. Over £71m of equity has been raised from investors including Schroders, Balderton Capital, Fubon and Convoy. It offers a real alternative to expensive IFAs, doing it yourself, or leaving cash in a lower-risk but low-interest savings account.
"Our mission is to democratise wealth management. The way we do that is simple: We take the best elements of a high-end investing service, strip out the complexity and cost, and provide it to our customers online”
Where they are now: Nutmeg now manages £1bn for more than 49,000 customers. Despite a torrent year in the market with geopolitical instability and the (expected) Bank of England interest rate rise, Nutmeg’s conservative, long term approach to asset allocation has seen them outperform the average returns of high net worth clients between 3.3% and 10.3% over 5 years.
Martin Stead, CEO, wrote: “These aims are personal to each customer and we take the responsibility of this very seriously. Our experienced investment team is entirely focused on delivering against our customers’ aims. They are fiercely focused on identifying the most appropriate investment options for our customers’ portfolios and are not tied into exclusive deals with providers. This is as it should be”
In July, Nutmeg partnered with challenger bank Fidor to launch a fintech service in the UK.
Total equity funding: $35m (now $61m) +74.29%*
Where they were then: Launched in 2012, Currency Cloud has more than 500,000 end users in over 150 countries. The company was started as means to re-imagine the way money flows through the global digital economy.
Currency Cloud operates as a foreign exchange broker and international payments company. It provides customers with an API which gives access to foreign exchange. The company has processed $15bn worth of transfers per year.
Where they are now: In March 2017, Currencycloud closed a £20m Series D funding round from GV and other investors, with total investment at £44m. In June, the fintech announced an exclusive partnership with Hyundai Card to break into the Asian payments market. Currencycloud won the 2017 API Awards in September which certainly puts Currencycloud in good stead to take advantages of the opportunities that PSD2 will bring.
Total equity funding: $17.7m (now $141m) +696.61%*
Where they were then: The millennial-focused way of banking has achieved great success over the past two years. Users of Monzo can manage their finances from their mobiles. The ‘new’ form of banking allows users to get instant spending notifications, add receipts to purchases and manage budgets. A great advantage of the app is that users don’t have any international charges when using the card abroad.
“We’ve been delighted to see the growth of Monzo. We rolled out the prepaid cards about 14 months ago, and we only anticipated 5000 or 6000 being handed out and we just hit 100,000 last month so we really exceeded our expectations, which has been brilliant. Fundamentally, we’ve been really open and transparent about what we’re building, what’s our mission and why”, says Tom Blomfield, CEO and co-founder of Monzo.
Where they are now: Monzo has quickly come to prominence as the forerunning challenger bank along with Atom and Starling. The app-based bank passed their Beta stage to roll out their new current account. As well as improvements to app functionality (Pots, Top-Ups) whilst they also provided new utilities in overdrafts and full debit current account. Now, the two year-old startup are looking to open an office in Cardiff and advertising new roles in customer relations in the Welsh capital.
Tom Blomfield, CEO of Monzo, said in a blog post: “We have had a fantastic year - our prepaid programme has just hit 240,000 funded accounts, with more than £250m spent in total.
The first five months of 2017 in particular have been very strong. Since January, we’ve seen an average of 5% weekly growth in customer numbers and 7% weekly growth in transaction volumes. This growth is almost entirely organic from word-of-mouth referrals as people tell their friends and family.
In February and March, we agreed £22.5m of investment from Passion Capital, Thrive, Orange Digital Ventures, and more than 6,500 Crowdcube investors. We have also now directly connected to both Faster Payments and Mastercard as members and in April of this year we received our full UK banking licence”
Total equity funding: $147.6m (now $192.7m) +30.56%*
Where they were then: WorldRemit is a digital money transfer service that allows users to send money internationally with low cost fees and rates.
The reason why WorldRemit is a company to look out for in 2017 is because instant payments, especially internationally, have quickly become a necessity in the fintech sector. According to The Guardian, in the past seven years the company has grown to allowing users to send money to 130 countries. In December 2016, 588,000 transactions were completed on the platform, and the company now employs 328 people worldwide.
Where they are now: WorldRemit has spent much of 2017 expanding upon their burgeoning list of 130 countries, with entries into the Maldives, Seychelles and Zimbabwe as well as South Korea to add to their list of WorldRemit ready countries. As both a much needed service within international payments, as well as pioneering financial inclusion, WorldRemit is in a good place to knuckle down and cement their place as an established fintech company in their own right.
Total equity funding: $116.3m (now $397m) +241.36%*
Where they were then: Founded by former Skype employees Kristo Kaarmaan and Taavet Hinrikus, Transferwise allows users to swap currencies to find a counterparty making a similar deal on the other end of an exchange transaction, which means there are no fees attached. The concept of sending money internationally at real exchange rates is the thinking behind Transferwise.
The fintech start-up has recently been valued at $1.1bn, with backers such as Sir Richard Branson and Silicon Valley VC Andreessen Horowitz. Transferwise now employs over 600 members of staff.
Where are they now: Valued at $1.5 billion in August, 2017 has seen Transferwise become operationally profitable with healthy investment to the tune of a total of $397m. In response to the continued uncertainty surrounding the Brexit deal, the former East London startup chose to move its European headquarters to the continent in April. Also in April, they launched their APAC hub in Singapore. In May they launched their Borderless account designed for businesses and freelancers.
Keep an eye out for our '5 more UK startups' article coming soon. Will these companies make our list for our 2018 fintech companies to watch? Find out in the New Year.
*Statistics provided by Crunchbase.