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London fintech
istock_Daniel Tomlinson

Fintechs fight collapse with fairy dust and unicorns

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A lot of big news has come out of the UK fintech sector this month, from record valuations and new unicorns to 50% devaluations, investigations and closures. Maddy Christopher has this month’s fintech rundown.

17th Mar 2021
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NatWest pulls the plug on Esme Loans

As the coronavirus continues to ravage small businesses, NatWest decided to wind up standalone digital SME lending platform Esme Loans.

First piloted in 2017 and fully rolled out in 2018, Esme Loans offered bespoke loans for small businesses looking for fast, unsecured loans from £5,000 to £250,000. Esme also offered a full range of conventional loans in tandem with its bespoke service.

“Esme Loans is being closed and is not accepting any new loan applications,” NatWest said in an official statement. “Businesses that currently have a loan with us are not affected by this decision and are still able to log into their dashboard as usual. The team will continue to service current clients and is always happy to speak to customers, brokers and partners to answer any questions they may have.”

Following Esme’s partnership with digital lending-as-a-service platform ezbob in 2019, it was showing 300% growth. The partnership brought ezbob’s Open Banking data and advanced analytics to Esme, simplifying loan applications while reducing costs.

Stripe hits $95bn after latest fundraising

Following its latest $600m round of funding, payments processing fintech Stripe has been valued at $95bn, making it the highest-valued private company to come out of Silicon Valley.

The company said it will use the capital to invest in its European operations, support surging demand from enterprise heavyweights across Europe and expand its global payments and treasury network.

“We’re investing a ton more in Europe this year, particularly in Ireland,” said Stripe president and co-founder John Collison. “Whether in fintech, mobility, retail or SaaS, the growth opportunity for the European digital economy is immense.”

Stripe estimated three out of four UK adults made a payment using Stripe in 2020. The valuation reflects how some fintech organisations have benefited from a surge in digital payments and ecommerce.

“We’re investing in the infrastructure that will power internet commerce in 2030 and beyond,” commented Stripe CFO Dhivya Suryadevara. “The pandemic taught us many things about society, including how much can be achieved, and paid for, online, but the internet still isn’t the engine for global economic progress that it could be.”

However, the sustainability of surging tech valuations has been called into question by investors, inflating market expectations and affecting bond and stock markets alike.

Atom Bank cut in half as valuation halves after £40m fundraising round

The app-only neobank Atom’s bid to raise £40m from existing investors lead to an adjusted value of just under half its 2019 valuation – just 60p per share. The devaluation highlights how digital anking startups are struggling to attract new investors. Atom Bank insisted the 60p price has not been confirmed by shareholders.

Although the funding was advertised by Atom, the new valuation was not mentioned. Unlike Stripe, Atom is not the first fintech to be affected by the changes in the funding community. Monzo suffered a 40% devaluation on its £175m funding round as CEO and founder Tom Blomfield during the first lockdown.

However, Atom is streamlining its loan application process and plans to commit another £1bn in lending to small and medium businesses over the next couple of years. It has partnered with financial API providers Codat, Plaid, and Credit Kudos which aggregate data across ecommerce, banking transactions, and accounting. 

Atom’s new and improved access to customer information accelerates the customer and SMB application process and created authentic insights into prospective borrower's financial health, boosting Atom's underwriting ability.

Starling Bank achieves unicorn status after £272m funding

Last week, Starling Bank announced it had raised £272m in a Series D round of funding, led by Fidelity Management and Research. Starling had previously been largely funded by mysterious billionaire, Harald Pike

The investment surpassed its £200m target and leaves the company with a pre-money valuation of £1.1bn, making it an official unicorn, and on its fourth consecutive month of profit. One of the only digital-only fintechs to do so.

The funding is said to support UK growth, upcoming mergers and acquisitions and a European launch.

“Digital banking has reached a tipping point,” commented Starling Bank CEO and founder Anne Boden. “Customers now expect a fairer, smarter and more human alternative to the banks of the past and that is what we are giving them at Starling as we continue to grow and add new products and services.”

Starling launches first recycled plastic card

Starling has also become the first UK bank to distribute recycled plastic Mastercard debit cards. Currently, there are 97 million in circulation, mostly made from first-use PVC which Starling says will reduce demand for new plastic production.

25% of the card is made from non-recycled elements, such as the card’s chip and magstripe. Existing customers will receive the recycled cards when they are issued a new card upon expiry, loss etc.

Starling Bank recently joined the ‘Tech Zero taskforce’ to tackle the climate crisis and last year started planting thousands of trees to help improve forest protection.

“The environment is important to our customers, so launching a recycled plastic debit card was the right thing to do,” said Boden. “This new card comes with no deterioration in technical quality or capability, it simply supports people in their journey to become more green. We’re proud to be a branchless, paperless bank that runs on renewable energy. And now we’re delighted that we’re building on this with our new recycled cards.”

Greensill downfall warns UK fintechs

£3.5bn Softbank-backed fintech Greensill Capital had previously been celebrated in UK fintech for its apparent AI and machine learning prowess. But now Greebnsill’s reputation has spiralled into turmoil following its recent collapse. The FT has triggered an investigation as the company enters administration that questions Greensill’s existence as a fintech.

Creditors investigating the fintech have found no first-class tech platform and “fully integrated technology and funding solutions” making up its a ‘proprietary’ invoicing platform that had been boasted about. Instead, it appears Greensill had leveraged external software – which is now throwing the legitimacy of other fintechs into question.

Greensill had also borrowed €100m from its sister bank months before its collapse, raising more questions about its governance and regulatory oversight. It had also lost insurance crucial to its business model and struggled to find an auditor as regulators were investigating its suspect relationship with metals tycoon Sanjeev Gupta

According to the FT, UK taxpayers now have £1bn debt from Gupta and Greensill Capital via three government guarantees. HM Treasury is now under scrutiny for its role in assessing appeals to access Covid loans.

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