Fintech is booming in the UK, with venture capitalists and the big banks circling companies that can transform financial services and make everyone rich.
In 2017, the country's fintech sectorattracted £1.34 billion of venture capital funding, according to research by funding database PitchBook. The figure is almost half of £2.99 billion that was invested across UK tech companies, an all-time high that almost doubled the £1.63 billion outlay of 2016.
Here are some of the hottest fintech startups in the UK right now, from young upstarts to more established names that are eyeing an IPO.
Note: fintech can be a nebulous term in the world of startups but for the sake of this list we are defining a fintech startup as a company that is using technology to help people and businesses manage their finances.
Additional reporting by Thomas Macaulay
1. TransferWise
Money sending firm
TransferWise kicked off 2018 with a bang with the launch of a "borderless" account and debit card. The service will initially be rolled out to 1,000 customers, who can use it to hold and convert 28 currencies at the real exchange rate.
TransferWise was founded in 2011 by two Estonians living in London. One of them was Taavet Hinrikus, Skype's first employee, who had grown tired of paying fees when transferring money back to Estonia to pay his mortgage.
He and cofounder Kristo Käärman launched TransferWise as a solution to his problem. The peer-to-peer money transfer platform promises to cut hidden bank fees and inflated exchange rates when transferring money into different currencies.
The platform lets users convert currencies with a calculator tool. This shows transparent pricing on the exchange rate and the TransferWise charge - typically 0.5 percent for GBP transfers - as well as how much they think this is saving you.
The fintech
unicorn is fully regulated by the Financial Conduct Authority and became profitable for the first time in 2017. In November that year, a $280 million (£207 million) funding round led by asset manager Old Mutual Global Investors and Silicon Valley venture capital firm IVP brought the total investment in the company to $396 million (£290 million).
2. Atom Bank
Anthony Thomson, Atom Bank Chairman © Atom Bank
With barriers to entry coming down fast,
digital-only banks are starting to get their licences. Atom was one of the first, receiving its licence in June 2015 and launching services through its mobile app in April 2016.
Based in Durham, Atom Bank markets itself to young, internet-savvy users tired of traditional banks. The website, branding and marketing are both cuddly and slick.
Atom Bank started providing two-year fixed rate residential mortgages through selected independent advisers in December 2016, joining its two Fixed Saver accounts and SME business lending product. Customers can track any changes to their mortgage progress after receiving a decision in principle (DIP) through the Atom app. Current accounts are due to be added later this year.
The bank was founded in 2014 by Anthony Thomson who co-founded Metro Bank and the CEO is
Mark Mullen, formerly of First Direct, so there is banking pedigree at the top level of Atom Bank.
Atom Bank has raised an eye-popping £234 million in capital so far, including a
reported £100m venture round in February 2017. Existing investors include hedge fund Toscafund, Neil Woodford, and Spanish bank BBVA.
3. Monzo
Digital challenger bank
Monzo is building its banking software from the ground up to give customers a current account that lives on your smartphone. This will include transparent, real-time information about your money, geolocated transactions, peer-to-peer transactions and historic data on your spending with specific retailers.
Monzo gained its full, unrestricted banking licence from UK regulators in February 2017. This means the now-official bank can hold customer money and offer products like current accounts.
CEO and former GoCardless cofounder Tom Blomfield wrote in a
blog post last year: "We're tired of hidden fees and charges, endless paper forms, and nothing quite working in the way we'd expect. So we're trying to build a bank that we’d want for ourselves, our friends, and our families."
The company's user numbers soared by 300 percent to 450,000 in 2017, but its generous services left it losing £50 per customer. It recently introduced overseas ATM fees to help cut its losses.
Monzo raised £71 million in October 2017 from Goodwater Capital, American payments software company Stripe and Michael Moritz, through his charitable investment vehicles.
The startup had previously raised £19.5 million in February 2017, led by Thrive Capital. Other investors included Orange Digital Ventures and Passion Capital, who already invested £13 million.
You can keep up to date with what Monzo is up to through its product roadmap, which is a
publicly available Trello board.
4. Nutmeg
Former CEO
Nick Hungerford founded Nutmeg to make investments accessible as an online platform. Nutmeg acts as an online wealth manager from as little starting capital as £100.
It charges a 0.75 percent fee for investments up to £100,000 and 0.35 percent beyond for fully managed portfolios. For fixed allocation portfolios it charges 0.45 percent up to £100,000 and 0.25 percent beyond that.
When you register you tell the platform what you are saving for and how much risk you want to take before being presented with a portfolio that you can check in on 24/7. The investment decisions are made by the Nutmeg team on your behalf without the use of algorithms. You can withdraw your money whenever you want with no exit fees.
All the hallmarks of a good fintech company are there: a user-friendly online interface, transparent pricing and a mission to bring down barriers. In November 2017, Nutmeg reached more than £1 billion in assets under management, after doubling its number of clients to 48,700.
Nutmeg has raised £71 million to date, including a £12 million round in January led by Asian bank Taipei Fubon. Other investors include Schroders, Balderton Capital, Pentech, Armada Investment Group and Nigel Wray.
5. Revolut
© Revolut CEO Nikolay Storonsky
Revolut started life as a mobile wallet app to help customers avoid fees when sending and receiving money in foreign currencies.
Once signed up users get a physical MasterCard. You top the card up from your debit account and when you make purchases abroad the card exchanges the money into the local currency so that you don't get hit with any fees. Customers can also easily send money to friends through popular channels like WhatsApp.
Even though it doesn't yet have a banking licence, the startup launched its own version of a current account in February 2017, so UK customers can get a personal international bank account number (IBAN) through the app. This means customers can transfer money from an existing bank account and route their salary directly into Revolut, but not direct debits.
The app also added spending categorisation, bill-splitting, remote card freeze and a chatbot to handle support requests.
It followed this up with the launch of a premium service in March 2017, allowing customers to spend, transfer and exchange unlimited amounts of money in 23 currencies without any fees for £6.99 a month.
Revolut raised a $66 million (£51.5 million) Series B round led by Index Ventures in July 2017, with participation from existing investors Balderton Capital and Ribbit Capital. The company has raised $83 million (£65 million) in total.
6. GoCardless
Founded by Oxford graduates Matt Robinson and Hiroki Takeuchi,
GoCardless uses technology to process business-to-business payments and direct debits quicker than traditional providers.
The technology brings down barriers for small businesses to process direct debits by aggregating payments, and fees are kept low at one percent per transaction which is capped at £2.
Customers can process payments using one of three tools: an online dashboard, account software partnerships or as an integration via an API. Customers can't accept credit card or instant payments via the platform though and the system is limited to the UK and Europe as the company continues to grow.
GoCardless has raised $47 million (£35 million) in funding so far, including a $22.5 million (£16.6 million) funding round in September 2017 led by Accel Partners.
