UK FinTech Investment at All-Time High as Startups Raise Millions

Two UK financial technology businesses, iwoca and GoCardless, announced on Monday that they had raised over £200m between them. This investment adds to the hundreds of millions already invested in the sector for this year so far.

Online small business lender iwoca said on Monday that they have raised £150m in debt and equity funding. Separately, direct debit tech business GoCardless raised a whopping $75m (£58m). The fundraisings are the latest in a series of significant investments into UK fintech in 2019.

iwoca as Emerging Lending Platform

The small business lending platform iwoca has raised in its equity and debt capital. This investment brings its total funding to £350 million. The £150 million capital was raised during the funding round of Series D led by Augmentum Fintech, the fintech venture capital investor. Other existing investors such as NIBC Bank and Prime Ventures also participated in the series. This round’s collection brings the total funds raised to £350 million to iwoca. This investment comes as major venture capital firms continue to pour money into the thriving FinTech scene in UK. The raised fund will be used by iwoca to support small businesses across its markets in Germany, Poland and even in the UK.

Last year, three of the UK’s banks, Barclays, HSBC and Lloyds have connected to the platform of iwoca. This was done through Open Banking, allowing businesses to provide information about their accounts in seconds to support lending applications.

Founded in 2011, iwoca provides loans of up to £250,000 to small and micro businesses via its website and through its lending API and Open Banking. The company uses digital solutions to slash the time and paperwork required to approve funds making it easier to lend investments for microbusinesses. Since its launch, iwoca has lent more than £600 million, with 70% of its lending decisions automated.

The co-founder and CEO of iwoca, Christoph Rieche, said that iwoca still continues to grow rapidly while bank lending to small companies has dwindled. This fundraise enables the company to empower many (more) small businesses. He excitingly added that the company is excited to score a win in Augmentum Fintech to join in the next phase of growth of iwoca.

He further said during the press interview that the company is aiming to fund around 100,000 small businesses in the next five years.

Meanwhile, CEO of Augmentum Fintech, Tim Levene said, “As an SME (Small and Medium-sized Enterprises) lender, iwoca is unique for its scale in both the UK and Germany. He then added that Augmentum FinTech is confident that iwoca will push through and emerge as one of the few successful winners in the SME non-bank lending world. He further said that despite Brexit, iwoca has clearly established itself as the fintech hub of Europe” and will “remain the global centre of fintech”.

The CEO continued that The ongoing uncertainty is clearly not helpful as it inevitably creates investment inertia which could see a short term impact on the level of funding entering the sector. “However the medium and long-term prognosis for UK fintech remains strong and will be able to overcome any short term pain that Brexit brings.”, he said.

GoCardless in Going Global

GoCardless, a startup FinTech company which lets online businesses accept direct debits, raised $75m (£58m) from several investors. The round was led by new investors including Adams Street Partners, GV (formerly Google Ventures) and Salesforce Ventures, alongside existing investors, including Accel Partners and Balderton Capital. 

The London-based FinTech, GoCardless, said it would use investment gathered during Series E to boost access to its unified global bank debit network program. This program provides the infrastructure for recurring payments, subscriptions installment and invoice payments.

In an interview, GoCardless provided a statement about its plans to use the funding they collected to expand their network into Asia and North America. CEO Hiroki Takeuchi said in a statement, “A global network for bank debit is an absolute necessity in allowing businesses to easily collect recurring payments anywhere, in any currency.” Moreover, Hiroki added, “Thanks to the support of our investors we can now open up our global network and payments platform to more businesses across the world and deliver on our mission to take the pain out of getting paid, so that businesses can focus on what they do best.”

GoCardless said it would use the money to accelerate global expansion as it builds new offices across Europe, Asia, the Middle East and North America, in order to tap the $41 trillion-dollar market in recurring payments. 

Rise and Importance of FinTech

Fintech or financial technology is a term commonly used to call the technology startup scene that is deviant of the traditional sectors such as banking, mobile payments, money transfers and asset management. It includes a wide array of companies that uses software to provide financial services. 

Global investments in FinTech has exploded in recent years. Fintech now makes up a multi-billion-dollar industry, and is still dominated by startups offering technological solutions to financial services and products. However, while it continues to grow in the western side of the globe, Fintech has also changed the financial game for emerging developing nations. Now, anyone in anywhere in the world who owns a smartphone can open a bank account from it, transfer money and even apply for loans. 

As a matter of fact, the market for loans and lending is one of the biggest areas where Fintech shines. This leads to crowdsourcing which takes center stage for many budding startups. Crowdsourcing, generally allows an individual with a big idea to get funding quickly from investors anywhere in the world. 

The most noticeable importance of Fintech is that it has enabled individuals to use products and services at lower costs. For example, the transferring of international money used to be very expensive as the big banks controlled the market. However, with startup FinTech companies nowadays it has changed drastically. Fintech companies allow you to transfer money to anywhere in the world, straight from your mobile phone at much lower cost. 

Fintech firms tend to be quite small in size, when they startup. This gives them leverage as they can innovate quicker and have much lower costs basis. They are able to deliver huge savings to the consumer.

Fintech has clearly changed the business world of finance.  It has also shown great change of habits from the consumers because the core of Fintech is to marry together technology and finance. This makes loans, bank transactions, and remittance right at your fingertips

Today, Fintech is on the rise and it's far from over as it has now opened up a world of endless possibilities.

Final Words

The amount of investments received by iwoca and GoCardless is a testament that investors fully believed in FinTech startup companies. Further, the market for this startup companies is widely distributued all over the globe. With the harness of technology, this Fintech companies have a positive future if managed well.

As a matter of fact, earlier this month, a record of $3.3 billion (£2.5 billion) was invested into UK fintech in 2018, according to Innovate Finance the UK’s trading body for fintech. This investment is higher by 18% on the prior year. A separate study from Accenture put the figure at $3.9 billion and said the UK accounted for 56% of all fintech investments in Europe last year.

The deals closed by iwoca and GoCardless amount to $812m (£629m) invested into UK fintech in under two months in 2019. If funding would continue at the same rate, UK fintech would be on track to smash and earn higher than the 2018 total and raise $4.8 billion (£3.7 billion). Seasonal slowdowns suggest that this is highly going to happen, but it is still a positive indicator.

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