London’s calling for yet another immigrant Fintech
* The article was initially published on our blog.
Description: At the advert of our trip to London, Armada Labs found out how many local Fintechs are founded by expats, what was their story and how they impact the UK economy as a whole.
London is the center of an old Europe full of old money and capital. It historically has been acting as an engine for innovation and progress in both technology, art, and fashion. With this entrepreneurial and rebellious flair, London for centuries has been accumulating talents, encouraging them to live out their most crazy dreams.
How else would you describe a perfect starting point for any business, let alone one with such a wide scope like Fintech? The industry embraces the full spectrum of economic activities including payments processing, loan and wealth management, underwriting and insurance. To deliver something so innovative and unique, you definitely have to be someplace at the verge of technology advancement. `
No wonder the world’s hottest Curve, Everledger, Monese, Revolut, and TransferWise were born and bred in London. All of them are officially recognized as the Fintech most wanted unicorns whose market value reaches billions of dollars. But they share another very specific characteristic, which laid the foundation of this article. The idea for each and every one of them has sparkled in the mind of foreigners traveled to the UK for a better life. The main goal of this reading is to understand why the FinTech founders choose London as an ultimate location to kick off their business and how their presence impacts the UK economy.
½ Cup Immigrant Fintech, Shaken Not Stirred
My research started with looking through the bio of Fintech founders, whose initiative is now molding the industry ecosystem in London. I was trying to identify the series of lightbulb moments that eventually led to the creation of a company. I’ve done about 10 Fintechs when suddenly realized that out of them exactly 5 companies were founded by people who were born and lived someplace outside the UK. With this number in mind, I’ve finished the list of top 50 London-based Fintech companies to find out that 38% of them came up as the result of frustration at managing various banking services by people who have recently moved to the UK.
Surprised? Don’t be. Not only you have been suffering from various charges and hidden fees. Almost every one of Fintech founders cited expensive and poor banking services as the main reason why they decided to create a challenger bank of their own. It’s worked and today traditional banks face a wave of disruption happening in consumer finance where new specialist companies are revolutionizing how consumers get their service and win.
But let’s get back to our founders and take a closer look at their profiles. As can be seen from the table below, the absolute majority of them focus on international money transfers and banking services, which were the source of most troubles for newly expats. Just like any living organism they grow and wrap their offerings around the industry hottest trends including cryptocurrency and blockchain, artificial intelligence, data mining, and open APIs.
London became their ultimate destination because it is a great place to keep up with everything new. The same way, several years ago Leanne Kemp came to London from Australia to study innovative blockchain technology. Today she is top woman in Fintech, the founder of Everledger, a startup that utilizes blockchain to track diamonds supply chain and ensure the provenance of the gems and other high-value products. Last March, it completed a $10.4 million funding round.
Taavet Hinrikus has a very similar story. Back in 2006, he moved to London from Estonia as a part of an early Skype team. Pretty soon he started feeling the pain of international money transfers when it took about 5% extra-fee for sending money between Estonia and the UK. Together with his friend Kristo Käärmann they came up with a peer-to-peer payments network that further grew into TransferWise.
Shachar Bialick and Norris Koppel both have been disconnected from traditional banking services once they moved to the UK as with no credit history or utility bills to prove their creditworthiness, they were unable to open an account, get a paycheck or rent an apartment consequently. Monese and Curve were built to help people who have recently moved to a new place get affordable and quality banking support.
Revolut became a sort of remedy for travelers who need instant access to their money from anywhere in the world. The company has been revolving around the emerging crypto-technology and one of the first offered the clients cryptocurrency wallets and transaction support. Once again because Revolut CEO Nikolay Storonsky had unpleasant experience dealing with astronomical fees applied to foreign exchange transactions.
It can easily be inferred that among other things, London was heralded as the world’s biggest FinTech hub primary thanks to rigid and rather conservative banking regulation in the UK.
Where’s the Money, Lebowski?
Everyone who has ever launched their own business would know that an aspiring idea is only half the way to success. Money is what seals the deal. At this point, London is the perfect place to start as the city is home to the leading venture capital firms that are scouting tech accelerators for the startups worth funding.
A vast majority of the Fintech companies we are examining received seed funding from London-based venture capital firms including a well-known Seedcamp and Balderton Capital. TransferWise and Monese whose founders come from Estonia have secured additional financing from Scandinavian investors like Spring Capital. It does not come as a complete surprise since the country has been acting as a launchpad for many startups like Erply, GrabCAD, and Pipedrive.
Revolut and Everledger, on the other hands, were brought up by London tech accelerators, Level39 and Techstars that have been helping them scaling up, find investors and fit into the regulatory sandbox. Back in 2015 only a few rich counties like the UK have such an infrastructure completely devoted to the development of Fintech startups.
A decade ago, the UK pumped these companies with money and resources but today they pay it back. Last year Curve, Everledger, Monese, Revolut, and TransferWise raised over $550 million from the global investment community. They put it directly into the UK economy, paying taxes, creating new job openings, driving innovation and improving the countries investment climate. Smart bargain, isn’t it?
Plenty of countries like the UAE, China, and Ireland now follow London lead, equating a plainfield for Fintech companies through favorable initiatives and government support.
Will London remain global Fintech capital for long now remains unclear. But it sure has the world’s most wanted unicorns that will keep London in the top of charts for another decade.
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