A rising tide lifts all boats, they say.
If so, Britain’s growth-stage fintech companies could be in store for a swelling of demand among investors.
Readers will not need to be reminded of the problems plaguing London’s capital markets in recent years.
Fluctuating valuations, a dearth of new flotations and a general lack of investor appetite – which is unlikely to improve following Chancellor Rachel Reeves’ tax-heavy Budget – have put the capital in a state of distress.
Yet fintech remains something of a beacon of hope in the dreary fog hanging over the City, which is unsurprising given London’s international reputation as a financial services hub.
Three London-headquartered fintech heavyweights, Revolut and Monzo and Starling, are some of the capital’s hottest unicorns and are IPO contenders in the coming years.
Their valuations have seen substantial increases recently, with the latter reportedly fetching a £4.5 billion valuation via a staff share sale.
Revolut enjoyed a similar uplift after fetching a US$45 billion (£35 billion) valuation following its own staff share sale in August.
Unless the allure of a US listing proves too strong, these companies have the power to attract a significant shot of optimism into London’s capital markets.
As the adage suggests, Britain’s small-cap fintech could see themselves lifted too. There are some to keep your eye on.
Finseta (formerly Cornerstone FS)
Foreign exchange and payments company Finseta plc (AIM:FIN) hailed its first annual profit earlier this year after group revenues doubled and margins saw a marked improvement.
Finseta carried the momentum into the new financial year with a 40% year-on-year revenue increase and 4.7 percentage point margin improvement in a September interim report.
Active customer numbers have consistently gone up.
Finseta has been carving a niche in the crowded world of foreign exchange through elevated customer experiences and a desire to serve the underserved.
Operating in “the more esoteric currency pairings”, as chief executive James Hickman described it, attracts a higher margin than the intensely competitive main markets, while also helping Finseta to hedge its own risk against the cyclical nature of foreign exchange.
Alpha Group
Another FX play, Alpha Group International PLC (AIM:ALPH)’s financial results posted in March impressed City analysts.
One broker contended that “the market continues to underestimate the strength of Alpha Group’s business model and the cash generation that results”.
Alpha Group, which bills itself as “a high-tech, high-touch provider of financial solutions to corporates and institutions”, is perfectly set up to "exploit the unbundling of the banking value chain", said the broker.
The company uplisted from AIM to London’s main market in May, stating at the time: “As a business that is growing in size, becoming more global, and gaining interest from increasingly larger clients, this Main Market Premium listing will serve to further enhance our reputation and support our expansion.”
GSTechnologies
GSTechnologies Ltd (LSE:GST) recently told investors that it is making significant progress on developing a borderless neobanking platform, under its GS Money banner.
The fintech firm said is advancing both organically and through acquisitions to enhance its digital money solutions.
In August, GSTech hailed its first full year as a pure-play fintech outfit following the disposal of EMS Wiring Systems.
During the year, GSTechnologies acquired PAYPT Finance, a Canadian company with a Money Services Business licence.
This acquisition led to the formation of Angra Global, which launched a multi-currency e-wallet service.
Ebury
At the pre-IPO level, Santander-backed payments firm Ebury has commenced discussions with potential investors for London flotation, Bloomberg reported in October.
An Ebury IPO has been rumoured since March of this year, at a potential valuation of around £2 billion.
Ebury arranges foreign exchange conversions, forex trades and payment requests.
According to financial statements published with Companies House in November 2023, Ebury booked £25.5 billion worth of volumes in the financial year ending 30 April 2023 with revenues totalling £204 million.
Santander acquired its majority stake in Ebury for £350 million in 2020 and increased its holding in 2022.