The City of London has been at the center of financial markets for centuries:
Before London became the heartbeat of the UK’s financial services industry, early records show that the Romans established ‘Londinium’ on the site now known as the ‘City of London’ in 43 AD. Londinium served as a major commercial center in Roman Britain until its abandonment in the 5th century.
By the late 16th century, under the British Empire, London increasingly became a major center for banking, international trade and commerce. Today London’s position as a global financial superpower’s supported by its convenient time zone between financial hubs in the United States and Asia. Indeed London processes over half of the world’s $5.3 trillion (USD) currency market. The City also benefits from open-minded regulators, access to technical talent and a receptive consumer market.
However, London’s ability to maintain financial influence in the future increasingly depends on London’s status as a global FinTech hub. During 2017, £800 million was invested in London-based FinTech startups. That’s double 2016’s figure. So who’s snapping-up the cash and which ones should we all be watching? Let’s take a closer look at five of London’s fast rising FinTech superstars on their way to your town.
Flashback to 10 years ago when one of the most important FinTech innovations, blockchain, was developed as the infrastructure powering Bitcoin cryptocurrency. It was quickly touted as one of the most important technological inventions since the internet.
A couple of years later during 2011, a London FinTech startup also called ‘Blockchain’ developed a Bitcoin wallet and it has become the most widely used Bitcoin API. The company’s on a mission to create an open financial future that supports the broadest global community possible. It describes itself as being ‘the world’s leading software platform for digital assets’.
Today London-based Blockchain’s technology powers over $200 billion (USD) in transactions and serves a customer base across more than 140 countries. The company’s behind more than 26 million wallets worldwide. It also has an enterprise solution to help businesses accept Bitcoin payments.
With those figures its no surprise Blockchain is backed by some of Silicon Valley’s biggest VCs as well as investors including Richard Branson. The company’s raised over $70 million (USD). It’s enormous success has been supported by the UK’s flexible approach to blockchain regulations.
Earlier this year Revolut became the UK’s newest unicorn when it closed Series C at $250m (USD) and received a valuation of $1.7 billion. It’s an impressive achievement especially given just a year before the FinTech was valued at $300 million.
The company began three years ago in London as a digital banking alternative on a mission to challenge the status quo in UK banking. It currently supports spending and ATM withdrawals in 150 currencies and sending in 26 currencies directly from its mobile app.
Revolut has recently added cryptocurrency capabilities, as well as safety features such as disposable virtual cards to prevent online fraud. The company has also started offering a global business account for freelancers and businesses.
At the time of its Series C funding, the Revolut’s figures showed it had nearly two million customers and it was signing up between 6,000 and 8,000 new customers a day. The company says its latest cash injection will be used for global expansion including to the Unites States, Canada, Australia, Singapore and Hong Kong.
Big banks will be watching because Revolut has done all of this without even holding a banking license. It’s applied for one in Europe and has plans to apply for one in the United States. Once it has licenses, the startup is positioned to rocket around the world.
Another FinTech unicorn on the London scene is Transferwise, valued at $1.6 billion (USD) in 2017. It was founded in 2011 by two Estonian entrepreneurs. Its probably the best known brand among London’s FinTech pioneers.
If you haven’t heard — Transferwise is a peer-to-peer foreign currency exchange and transfer service. The company has over two million customers, offers 750 currency routes and moves over $1 billion (USD) a month.
Transferwise’s business model works by matching inverse transfers between international customers. This allows it to offer users the middle market exchange rate and avoid the typical expense of international bank transfers. Exchange values are charged a modest flat commission and this amount is the revenue generated.
Within the last year Transferwise raised another $280 million (USD) Series E funding, its moved into profitability and it also introduced new borderless accounts supporting 27 currencies aimed at international freelancers and businesses. It also announced in April 2017 that because of Brexit and London’s loss of financial passporting rights, the company would move its European headquarters to the Continent by March 2019, while keeping its global headquarters in London. Transferwise says its latest Series E investment will support further international expansion.
This innovative FinTech achieved a landmark for London earlier this year when it became the first Islamic digital finance firm to gain full authorization from the UK regulator the Financial Conduct Authority (FCA). Islamic Finance follows guidelines based on profit-sharing, instead of interest being charged on loans.
Founded in 2015, Yielders’ three young British founders are shaking up the property investment market in the UK. They’ve designed a business model for followers of the Muslim faith, however, that is not a requirement to invest. The company says at least one third of its investors are non-Muslims.
The company is a Shariah-compliant crowdfunding platform for property investment. It complies with additional Islamic Finance requirements that include avoiding both uncertainty and gambling by pre-funding property investments — altogether this means no mortgage (debt and interest) is required. Users then take a share in a crowdfunded investment property, either commercial or residential, from as little as £100 ($130 USD).
Founder Ifran Khan, says he created the company to meet the needs of Britain’s three million Muslims, while debunking any myths that traditional Islamic Finance is uncompetitive. He believes the Islamic market is underserved and he wants to change that. In fact, the platform is able to take some international investment but this is dependent upon UK FCA regulations — so international investors need to consult with the company to see if they are eligible.
And finally, Yielders has also helped London solidify its position at the center of Islamic FinTech when it won the Money and Finance category of the Islamic Economy Award, a competition that is overseen by Thomson Reuters and the Dubai Islamic Economic Development Centre, in November 2017. Indeed, Yielders’ office is at Canada Square alongside many of the City’s traditional banks who also call Canary Wharf home.
This business bank account’s motto is ‘do less banking’ and they are putting their money where their mouth is. Tide is a modern mobile first account that gives time back to busy business owners by simplifying and expediting processes from opening an account to customer invoicing.
Tide is an alternative to traditional high street banks that allows most UK business owners to open an account via the mobile app in less than five minutes (according to Tide) and start banking straight away. Compare Tide’s process to a traditional high street bank where it can take several weeks to many months to get an account up and running. With Tide, most customers will get a sort code and account number a few minutes after an application is submitted which they can immediately use. A debt Mastercard then arrives in the post at the business’s address about three days later.
Some customers have experienced a slightly longer opening time while Tide verifies a Director’s home address if this can’t be done instantly via the app. The app does this in seconds by checking the UK electoral roll and other sources but if someone has recently moved house or isn’t on the roll — perhaps an international resident who is not an EU or Commonwealth citizen — it might take a bit longer to open an account while they verify the account holder’s home address.
Even in a delayed circumstance, Tide is usually still faster than high street banks. In banking this verification process is called “Know Your Customer” or KYC and its an important part of confirming a person’s identity. High street banks will also require home address verification for business account holder applicants as a normal part of the account opening process.
Tide’s business model is that its authorized as an electronic money institution by the UK regulator the Financial Conduct Authority (FCA). At the moment it doesn’t have a full banking license so it provides a stable digital business banking platform on top of a Barclay’s account. What this all means is that money up to the UK/EU required amounts are fully protected/insured in the same way as if a business owner used a high street option instead.
An account costs nothing to open. There are no standard monthly fees. Instead the Tide account costs 20p per transfer/payment (in or out) — that equals about 26 U.S. cents. Although if a payment is received via BACS rather than Faster Payments, there’s no fee at all. There’s also a £1 ATM fee ($1.30 USD).
Tide’s founder George Bevis, an alumnus of the University of Cambridge, has managed to revolutionize UK small business banking with Tide. In just three years he’s grown the banking platform to more than 30,000 customers and he’s attracted serious investment from A-list VC’s including Eileen Burbidge at Passion Capital.
With a total of $16 million (USD) funding to date, Tide is now getting ready to hit high growth mode. Bevis announced earlier this year he would step down as CEO, but remain on the board, in order to bring in someone with international scale-up experience. And just this week, Tide released a statement naming German FinTech specialist and Oxford PhD, Oliver Prill as Tide’s next CEO ready to champion small businesses in Britain and beyond.