A fork in the road: The future of UK fintech
Duncan Childs is head of financial services (commercial banking) at Metro Bank, which was the first new high street lender in 150 years when it launched in 2010: “The collapse of Silicon Valley Bank (SVB) was an important moment for the sector but I would argue that the £100 million+ fine handed to Santander by the FCA in 2022 has had the most significant impact on lenders. “The cost of non-regulation tends to fall on those with the biggest balance sheet within the supply chain, so compliance is an important consideration when banks work with fintech suppliers and customers. Fintechs are classed as high risk, so they are likely to find that clearance banks are asking questions about their compliance with the same rigour as investors. “My advice – for suppliers and customers – would be to start the conversation as early as possible and with as much transparency as you can to aid that due diligence process.”
Those firms that can reassure investors about their commercial strategy will find that investment is still very much available. “
The UK should be proud of its flourishing fintech sector, which is internationally recognised as being among the most innovative and important in the world. A positive reset
While the trajectory of valuations seen in recent years may now be flattening out, it represents a return to normality after the unprecedented impact of the pandemic, with the sector’s fundamentals remaining strong. Of course, fintechs are experiencing new uncertainty, the causes of which are far from unique to the sector. It’s a new environment for many newer entrants who only emerged in the sector’s purple patch during the pandemic. The amount of businesses pursuing M&A strategies suggests that many remain in rude health and are likely to lead a market reset in pursuit of both new customers and innovative IP.
For those considering consolidatory support, the next 12 months will be crucial in optimising their commercial operations and profitability to develop the best proposition for would-be suitors or new investment. As advisers, our focus continues to be supporting the profitability and value of firms as they look to attract investment and realise their valuations. There may be some pain along the way, but we can have faith in the long-term future of UK fintech. Phil Reynolds Partner Restructuring Advisory
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