Draper Esprit are one of London’s longer-established VCs and with investments in the likes of Revolut, Transferwise, Thought Machine, Seedrs, Crowdcube and Freetrade might know a thing or two about Fintech. Draper Esprit, like Augmentum who we had on the show last year are also a listed AIM and thus also can offer finance not tied to the cycle of underlying funds – the so-called patient capital model.
Vinoth not only leads Fintech investments at Draper Esprit but has had a long running interest in the sector being at a Zopa Party in around 2007/2008 long before almost every firm now on the scene existed.
In this episode he picks out the key developments in Fintech over the past decade and a half, some of the takeaway lessons that all businesses can implement, some of the challenges and ends with his prospects for the upcoming decade.
In this show we review a decade in Fintech. Although the earliest Fintechs were formed around 2004/5 (WorldFirst, Zopa) many big names formed around 2010 (Funding Circle, Ratesetter, MarketInvoice). The LFP formed started covering the scene in mid-2014, the year of the first London Fintech week and the year that the Fintech word first hit the broadsheets. Using the shownotes at the time as a diary I trace the evolution of the promises, the hopes, the disappointments, the old innovations and the new innovations. Where did it all go?
No long show notes this week – it is a podcast podcast and in listening you can draw your own conclusions – indeed that’s the point of using dozens of real world examples as seen at the time not as seen through the dark glass of memory.
Congratulations to everyone involved in the London Fintech scene and wider UK Fintech scene and to all listeners. Want to know what the next decade might hold? Check out the previous decade and join the dots…!
So far Fintech has lionised technologies – APIs, Open Banking, AI/ML and so forth. But from a different perspective these are just glues to connect things that haven’t been connected before to make new propositions not previously possible. Although this has been touched on so far – marketplaces aren’t the best example – after all marketplaces are tens of thousands of years old.
In this episode we are joined by serial entrepreneur Sam O’Connor, CEO of Coconut to discuss convergence – the gluing together of components which were previously seen as different things.
Our smartphones glue together things we would have historically done in different places using different devices – camera, mp3 player, and emails for example, In the same way Coconut are focusing on micro-businesses into which all of us indies seem to need to fold ourselves these days and combining banking, accounting and tax in one place – items which historically would have been seen as different propositions.
Michael conducts the most in-depth analysis of Companies House data on UK Fintechs that I am aware of. That earlier this year he partnered with KPMG and Google on his Fintech Funding and Financing study says a lot. So what can we learn from a decades’s data on UK Fintechs?
Well first that only five are making a profit!
Michael recently updated his study which includes nearly one hundred Fintechs.
In this episode we focus on trends in profitability – which are not all as you might expect – although the report covers many more parameters especially around fund-raisings.
After a decade for the longest running Fintechs we should be able to start to draw conclusions. What are they?
App Banks are all the rage and you can go round the world on their cards. However move to another place and you soon find you need a bank account. Norris Koppel founder of Monese is on a mission to build a Global App Bank that will enable you to have local bank accounts at the touch of the button. How is he doing this? Probably easier having recently raised a $60m round 🙂 Listen and learn…
It is important to understand what has been said on the show in the past about the nature of existing “Global Banks” (q.v. Railsbank, GoCardless).
Global banks are just brands, just umbrella companies sitting over a whole bunch of national banks all of which have different procedures around account sign-up, KYC, AML etc procedures. Despite the marketing BS there are no global banks just businesses that own and co-ordinate a plethora of local banks. This will be very familiar to any of you who have changed country and need a new bank account.
Norris moved back in the day from Estonia to what is now the Disunited Kingdom and had just this problem and one day set about it solving it.
Michael is the author of “The Fintech Financing and Performance Report” and expert on strategy and innovation in financial services. In this show we dive into the third edition of his report and dive into the critical and fascinating topics of how UK Fintechs have funded themselves, what their valuations have done over time and attempting to measure their performance.
We are all used to seeing big picture, top-down reports saying a gazillion dollars has flowed into Fintech since a week ago Tuesday and hence taking it all with a pinch of salt.
However Michael’s “Fintech Financing and Performance” report [available via Clarus Investments] is hardcore stuff being based on data held at UK Companies House (where in passing its essentially illegal to knowingly file incorrect data).
Once upon a time P2P was a simple thing. Now it’s more accurate to see it as online lending and borrowing. Models vary, regulation varies, the most successful platform was started by a bank, direct lenders have wholesale flows in funding retail or corporate outflows, others have just retail funds and others mixed.
Quite a complex state of affairs and in this episode Christian Faes joins us for a wide-ranging conversation about where this all came from, where it is and where it is going.
Lendinvest itself is no longer a P2P in the current definition but an online investment platform which is itself only one of their many channels.
App Banks are following many courses with many motivations. Who better to guide us through this ever more complicated maze of motivations and destinations than Ricky Knox, Founder and CEO of Tandem Money/Bank and serial entrepreneur sans pareil.
inter alia (alia being things like Insead) Ricky founded GSM Systems in 2003 (where he remains non-exec chairman) which now has partnerships with >170 mobile operators in >70 countries.
In 2005 he founded Small World Services taking it from inception to a Top10 global money transfer businesses with nigh on $5bn annual turnover.
Not content with these laurel leaves he founded the well-known Fintech Azimo in 2012 which does remittances to 198 countries globally, has half a million customers and more than 270,000 cash pick-up locations worldwide.
In 2015 he founded Tandem Bank, which (another inter alia) bought Harrods Bank – which certainly makes it a standout in Fintech as a whole, let alone in the App-Banks sub-sector.
All of which background (and more not included!) makes him ideal to discuss whether the current crop of App Banks are going to turn into real businesses – you know those businesses that are self-supporting and whose revenues are higher than their costs 🙂
One of the founding ethos of Fintech was “unbundling” – the slicing of FS into single-issue firms. This is now looking old-hat. Revolut acquired 500,000 customers in less than two years by offering interbank rates on FX transfers and so was one of the most successful of Fintech 1.0.
Now they are leading the way with Fintech 2.0 offering a whole range of products. Managing this transition with respect to both “the brand” and “the app” is not trivial and I am delighted to be joined today by co-founder and CEO Nikolay Storonsky.
Unlike Monzo who have gone down the banking route but Revolut have remained with the simpler/cheaper/faster but narrower e-money issuer licence.