Goldman Sachs’ Consumer Banking Division Marcus to Offer Stocks and ISA Access, Supported By Nutmeg

New York-based investment bank Goldman Sachs’ consumer banking division, Marcus, is reportedly expanding its operations to include investment-related services in the UK. Marcus is introducing a new stock trading and ISA vehicle, which will be supported by digital wealth manager Nutmeg.

The ISA will be available in 2020, however, neither Marcus nor Nutmeg have disclosed the rates or terms and conditions of the new initiative.

Nutmeg funds offers users an app and website that allows people to select from the company’s various investment portfolios. The investment choices may vary depending on the level of risk that investors might want to take. The wealth management firm also provides its own stocks and shares Isa.

Marcus’ latest product will invest in its own Isas and also the same Nutmeg funds, however, it will be marketed in a different manner. It’s worth noting that the Marcus account might not be as competitively priced as using Nutmeg’s services directly.

Marcus was introduced in the UK in September 2018. The company provides an easy-access savings account.

In October 2019, Marcus began marketing a rebadged version of its easy-access deal. The company also began offering a one-year bond via Saga, a specialized financial services provider for people over 50.

Saga’s easy-access account pays 1.4pc, 0.05 percentage points lower than what investors are able to get by simply going directly to Marcus.

Martin Stead, CEO at Nutmeg, stated:

“Now that Nutmeg’s service is proven at scale, we are working on a number of strategic partnerships with established brands to rapidly bring financial advice backed with a quality investment strategy to many more people.”

Marcus has been named after Marcus Goldman, the founder of Goldman Sachs. In January 2019, the giant Wall Street bank invested £45 million in Nutmeg.

Marcus has reportedly experienced major losses of around $1.3 billion since 2016. The losses may be attributed to increased spending on acquiring startups, greater investments in cloud-based storage systems, and hiring new tech-savvy workers.

The bank has also had to deal with loans going bad at significantly higher rates than its competitors have.

Update: Nutmeg Surpasses £4 Million Days After Crowdcube Debut

Less than a week after launching its equity crowdfunding campaign on Crowdcube, UK fintech Nutmeg has successfully secured more than £4 million from nearly 2,000 investors. The funding round originally sought to raise £1 million, with Nutmeg offering 1.59% equity at a £251 million pre-money valuation.

As previously reported, Nutmeg claims to be the UK’s first online “discretionary investment management company.” The fintech already manages more than £1.7 billion for over 70,000 customers. It also offers three investment styles (including socially responsible) through an ISA, a Lifetime ISA, a pension and a general investment account.

“Our risk-adjusted, multi-asset, globally diversified portfolios are managed by experts. We keep our day-to-day costs low with proprietary technology and smart trading of exchange-traded funds (ETFs), with a low fee to boost compound returns. Our strategy has regularly delivered investment performance above industry averages.”

Nutmeg also crowdfunding effort plans earlier this spring, with Martin Stead, CEO of Nutmeg, stating at the time that he and his team are looking to invest in new features for the Nutmeg customers, while also taking the company to new markets around the globe. 

“This is an incredibly exciting time for Nutmeg, we continue to welcome new customers: both seasoned investors seeking a high-quality wealth management service at a much lower cost; and first-timers, attracted by intuitive technology and a team of investment experts that will manage their portfolios for them.”

Luke Lang, Co-Founder of Crowdcube, shared at the same time:

 “Nutmeg is a business with a deep sense of purpose – they’re tackling everyday problems and challenges that will resonate with many of our investors. It remains our mission to help nurture the growth of innovative businesses and we’ve no doubt the campaign will be a real success.”

The funding round is currently set to close mid-July

UK Fintech Nutmeg Launches Crowdcube Round & Quickly Secures More Than £2.5 Million in Funding

UK-based fintech firm Nutmeg has launched an equity crowdfunding campaign on Crowdcube. The funding round quickly secured its £1 million funding target and has now nearing £2.6 million from over 1000 investors.

Nutmeg claims to be the UK’s first online “discretionary investment management company.” The company reported that it already manages more than £1.7 billion for over 70,000 customers. It also offers three investment styles (including socially responsible) through an ISA, a Lifetime ISA, a pension and a general investment account.

“Our risk-adjusted, multi-asset, globally diversified portfolios are managed by experts. We keep our day-to-day costs low with proprietary technology and smart trading of exchange-traded funds (ETFs), with a low fee to boost compound returns. Our strategy has regularly delivered investment performance above industry averages.”

The company revealed crowdfunding effort plans earlier this spring, and Martin Stead, CEO of Nutmeg, stated at the time:

“This is an incredibly exciting time for Nutmeg, we continue to welcome new customers: both seasoned investors seeking a high-quality wealth management service at a much lower cost; and first-timers, attracted by intuitive technology and a team of investment experts that will manage their portfolios for them. We’re investing in new features for our UK customers, while also taking Nutmeg to new markets around the world, with our first international launch imminent.”

Luke Lang, Co-Founder of Crowdcube, also commented:

 “Nutmeg is a business with a deep sense of purpose – they’re tackling everyday problems and challenges that will resonate with many of our investors. It remains our mission to help nurture the growth of innovative businesses and we’ve no doubt the campaign will be a real success.”

Funds raised through the Crowdcube round will be used to continue the growth and development of the Nutmeg platform. It is set to close mid-July.

Nutmeg Announces Summer 2019 Crowdfunding Round Plans

UK-based fintech firm Nutmeg announced on Wednesday it is planning to launch a crowdfunding round this upcoming summer through equity crowdfunding platform, Crowdcube. This news comes just a couple of months after the company secured £45 million through its latest funding round, which was led by Goldman Sachs and Convoy.

As previously reported, Nutmeg is described as the UK’s first online “discretionary investment management company.”

“Nutmeg is changing the way people manage their money. Specializing in investments, ISAs and pensions, our online investment management service is intelligent, straightforward and fair.”

While sharing more details about the upcoming crowdfunding efforts, Martin Stead, CEO of Nutmeg, stated:

“Nutmeg was the first digital wealth manager to launch in Europe and now we’re opening up ownership of our business to give eligible customers the opportunity to invest alongside institutional investors, venture capitalists and leading entrepreneurs. This is an incredibly exciting time for Nutmeg, we continue to welcome new customers: both seasoned investors seeking a high-quality wealth management service at a much lower cost; and first-timers, attracted by intuitive technology and a team of investment experts that will manage their portfolios for them. We’re investing in new features for our UK customers, while also taking Nutmeg to new markets around the world, with our first international launch imminent.”

Luke Lang, Co-Founder of Crowdcube, also commented:

 “Nutmeg is a business with a deep sense of purpose – they’re tackling everyday problems and challenges that will resonate with many of our investors. It remains our mission to help nurture the growth of innovative businesses and we’ve no doubt the campaign will be a real success.”

Stead went on to add:

“We’ve come a long way since we launched in 2012. We’ve grown from a trailblazing start-up to a full-scale digital wealth manager. Now, we want to give eligible Nutmeg customers the chance to share in our success – it’s the least we could do, since they’re the reason we’ve got this far.”

Nutmeg Secures £45 Million Through Latest Investment Round Led By Goldman Sachs & Convoy

UK-based fintech firm Nutmeg announced on Tuesday it secured £45 million through its latest funding round, which was led by Goldman Sachs and Convoy, which is an existing investor of the company. As previously reported, Nutmeg is described as the UK’s first online “discretionary investment management company.”

“Nutmeg is changing the way people manage their money. Specializing in investments, ISAs and pensions, our online investment management service is intelligent, straightforward and fair.”

CEO of Nutmeg, Martin Stead, claimed the company has delivered strong investment returns over the past six years and has more than 60,000 investors. It was reported that 40% of its customers have never invested before, 35% are female (compared to a market average of 26%), and the average investor age is 40 (around 10 years younger that the industry average. Stead also revealed:

In six short years, as well as being the largest digital wealth manager in Europe, we’ve grown to be the eighth largest wealth manager in the UK. It’s an honour – and, moreover, a huge responsibility – to be entrusted with our customers’ investments. We manage these investments as though they were our own. I think it goes without saying that challenging the wrongs of the industry and doing the right thing for our customers runs through our DNA, and this is our first priority.”

Speaking about the investment, Stead reported that the funding will enable the company to deliver on its objective to be the most trusted and fastest growing digital wealth manager by delivering new products and features. The funding will also enable Nutmeg to expand, with an international B2B plug-and-play partnership model which leverages its proprietary technology and operational expertise. Stead then added:

“This is the largest ever investment into a digital wealth manager in Europe. The round was led by the Goldman Sachs Principal Strategic Investments Group, which makes long-term investments in fast-growing technology companies. Their investment firmly positions Nutmeg to be the global WealthTech winner, and is an endorsement of our investment proposition, our track record, and the brilliant team of committed professionals I am humbled to lead.”

Seedrs is an Iceberg Business. The Behind the Scenes Operation is Hugely Important

Seedrs is one of the largest equity crowdfunding platforms in the UK and thus the world. It is the first regulated crowdfunding platform in the UK but trailed Crowdcube by a few months in its official launch. While starting as a small, early stage funding platform, over the years Seedrs has grown into a robust and dynamic funding portal providing access to capital for early to mid stage companies alongside unique and compelling investment opportunities. Earlier this month, Seedrs celebrated its 5 year anniversary. On this annivesary, Jeff Lynn, Seedrs co-founder and CEO, stated;

“I believe that non-public companies – and in particular startups – are much better growth investments in the coming years, and that they have the chance to do for the mass affluent wealth what public shares did fifty years ago … How far we’ve come in five years!”

To date, Seedrs has raised more than £230 million, funding over 500 deals on the platform. They do not suffer the outdated differentiation between accredited and non-accredited investors as they do in the US. Anyone can invest.

Seedrs was recently recognized as the most active investor in private companies in the UK, according to an outside report, and Seedrs is actively expanding across Europe.

Seedrs has logged an enviable list of features and partnerships over the years. Just in the past few months, Seedrs has;

Seedrs announced this spring it is preparing for a major strategic push this year as it seeks to hit “aggressive growth targets” in a post Brexit Europe (and perhaps beyond).

[clickToTweet tweet=”This #crowdfunding platform is a true cross border operation with global aspirations @Seedrs” quote=”This #crowdfunding platform is a true cross border operation with global aspirations @Seedrs”]

The crowdfunding platform is a true cross border operation with global aspirations. It has the US in its queue, but not quite yet.  Back in 2014, Seedrs “acquired” Junction Investments, an early investment crowdfunding site, in a sign of its intent to cross the Atlantic but then pushed pause.

While all signs point to an impending USA launch, the hesitancy is most likely due to the Reg CF rules that Lynn described as being “not workable in its current form.” Expectations are for Seedrs to launch a Reg D 506c platform (accredited crowdfunding) at some point unless Congress, or the SEC, acts to improve the Reg CF rules.

Recently Crowdfund Insider had the opportunity to stop by the Seedrs office in London and, after the grand tour, we sat down with Seedrs Chief Investment Officer Thomas Davies for an update on Seedrs progress.

“Seedrs is an Iceberg business,” Davies explained. “The behind the scenes the platform is very important. Dell was better at building and shipping [computers] than anyone else. The Seedrs process behind the scenes is to operate as quickly and as efficiently as possible.”

Davies said that today date, Seedrs core market is a raise from between £400,000 to £2 million with about half of their offerings in that range. But Seedrs is not averse to raising sub £150,000 rounds because once they have listed on the platform these companies typically return for their future funding rounds.

“They are our future clients if we can do that successfully. They tend to come back again and again,” added Davies.

LandBay is an excellent example. Their very first raise was a tiny funding round. In fact, the very first time LandBay came knocking, Seedrs rejected the company. But then LandBay came back.

LandBay has now done 9 crowdfunding rounds on Seedrs. Some of these have been preemption rounds that are private rounds but you get the picture of an emerging, full stack funding ecosystem.

Every offer on Seedrs has a Nominee structure (SPV) meaning there is a single shareholder on the issuers books. This can simplify management for the issuer but, if structured correctly, can provide strong investor protection qualities. Deal terms are always the same as larger investors. This is important as a growing number of institutional types are participating in funding rounds on the Seedrs site. Davies did add that a big VC may get a liquidation preference off-platform, but it is always disclosed and always at the same valuation. The crowd investor always knows what is going on.

While the majority of issuers hover within the aforementioned crowdfunding range, there are indications that rounds are going higher as the industry matures.

Today, there is a speed bump in the UK at €5 million as an issuer is required to file a prospectus at this point (not a small task) under EU rules. “When we launched, the thought of raising €5 Million was ridiculous,” shared Davies. But this cap is expected to be bumped up to €10 million in the not so distant future. It is interesting to note that while US policymakers quibble about raising Reg CF to $5 million, the Brits are speeding onward much higher.

Asked about the impact of Brexit, a vexing issue for all of Europe, Davies stated;

“Brexit will affect us but there are some easy solutions. Our Tech team is based in Portugal. We can be authorized in a member state.”

Other than a general economic downturn, Davies is not overly concerned about the European referendum. He did say that a platform like theirs revolves around standardization. If the rest of Europe changes, it can obviously be harder.

Seedrs most recent project is its Secondary market, an initiative that Davies has been championing on the platform. Understandably, Davies said it has been a challenge but they have taken a “slow beta approach”, in providing liquidity for crowdfunded securities.

“You build it not really knowing who is going to use it. Hence the minimal viable product (MVP). The feedback from the first window has been really good. We had 130 share lots and 63 of them sold. We only invited people to sell on a pop up platform basis. Few people knew. Only fellow investors. It really limited who could buy. Now anyone can sell. We have had 550 requests to sell this month.”

There are currently two key restrictions on the Secondary market. First, a participant must be a shareholder in the company already. This has to do with the Asymetric information issue. Existing shareholders start with the same level of information and there is no advantage to either buyer or seller. But allowing non-existing shareholders to participate is described as a solvable problem.

“I am working on that,” said Davies. But so far there has been sufficient interest from internal shareholders.

[clickToTweet tweet=”.@Seedrs directs a good amount of energy towards due diligence & transparency. Reputation is key #EquityCrowdfunding” quote=”.@Seedrs directs a good amount of energy towards due diligence & transparency. Reputation is key #EquityCrowdfunding”]

The second issue is price. Without a bidding mechanism it is Seedrs that must determine a fair price for both buyers and sellers. This alleviates the issue of a supply/demand imbalance where a price can be either ridiculously high (due to hype, perhaps) or too low. It is the lack of volume and lack of information that can drive a market not to work.

“Starting at a Fair Market price is hard,” said Davies. “I want to solve this one first. I want to create an auction. This is in the pipeline. I would like to see this before the end of the year.”

Seedrs continues to grow in number of users, over 300,000 today, and total crowdfunded. Early concerns of fraud have been squashed as none has appeared to date. Seedrs directs a good amount of energy at due diligence and transparency. Reputation is key.

More people in Britain alive today have made an investment through Seedrs than had ever made an angel investment through any means before

While it is difficult to predict where Seedrs will be 5 years from now, past may be prologue, and Seedrs is on a solid trajectory upward. Seedrs is striving to accomplish what Lynn shared in his recent posting, drawing a parallel to what Charlie Merrill accomplished in the last century.

Seedrs & Nutmeg Partner with Fidor Bank on Fintech Marketplace

Seedrs has announced that it will be the sole equity finance provider in a new partnership with Fidor Bank, a challenger bank that launched in the UK back in 2015. Nutmeg, an online wealth manager, will also be joining Seedrs on Fidor’s new marketplace. The two platforms are the inaugural partners with additional partners expected to be announced in the coming months. The marketplace is expected to include a number of debt based peer-to-peer lending platforms as well.

This Fintech marketplace is designed to give Fidor’s UK banking customers access to investment opportunities in some of the UK’s hottest alternative finance brands, including equity crowdfunding. The partnership is described as creating a one stop platform that provides every digital finance service a customer may need.

Katharina Rausch, Head of FinanceBay, Fidor’s Fintech marketplace, welcomed both Seedrs and Nutmeg to their platform;

“We are pleased to welcome Seedrs and Nutmeg into our Fintech marketplace as our investment providers. Fidor has long welcomed affluent and financially curious customers to our digital bank and based on their investment appetites we have built an exciting suite of investment products made accessible to customers via a handful of carefully curated Fintech partners. Our fintech marketplace will be instrumental in offering exciting investment opportunities to many of Fidor’s UK based customers.”

Seedrs is one of the most active equity investment platform in the UK having funded over 500 investment rounds for fast-growth SMEs, with more than £220 million invested into campaigns on the platform to date.

Jeff Lynn, CEO and co-founder of Seedrs, said the new partnership would provide a great opportunity to tech savvy investors to early stage investment opportunities across Europe;

“We are huge admirers of Fidor and all that has achieved as one of the original challenger banks, and we look forward to welcoming many of their customers as Seedrs investors.”

Nutmeg is a multifaceted wealth manager that builds and manages portfolios, ISAs and pensions, with no hidden charges. For Nutmeg customers with fully managed portfolios, we regularly review the investments to make sure that their money is still invested in the assets that best fit their personal investment goals and risk profile. Nutmeg invests in exchange-traded funds, which are designed to track the movement of various market indices.

Martin Stead, CEO of Nutmeg, said the way people are saving and managing their money is clearly changing.

“Innovative technology is transforming financial services with a clear focus on improving access and opportunity for new and existing investors,” said Stead. “We are passionate about making quality wealth management available to everyone and initiatives like Fidor’s Fintech marketplace, make great strides toward this goal.”

Fidor Bank may be described Europe’s original digital challenger bank. Founded by CEO Matthias Kroener in 2009 in Germany, Fidor has been a recognized pioneer in the digital banking business. Acquired by Group BPCE in France last year, the digital bank clearly has large aspirations. The company launched its retail banking offer in the UK in September 2015, and plans to expand its services into Europe in the coming months. It currently has over 350,000 online community members in Germany and the UK, with a customer base of over 100,000.


The Inescapable Fintech Revolution

Big consultancies, such as PwC, Cap Gemini, KPMG, Deloitte and Accenture, research and analyze fintech developments to support the digital transformation of their banking customers. They promote this work through well-crafted free reports and white papers. The latest of such reports was published by Julian Skan, Senior Managing Director and Eve Ryan, Banking Research Lead in the UK & Ireland Financial Services division of Accenture UK under the provocative title: “Did someone cancel the Fintech revolution?

This report argues that fintech ventures have so far failed because of a lack of investment and that banks can, and should, take the lead in the fintech revolution by investing more and differently.

Far from being as polemic as its title might suggest, the report reflects the consensus among banking consultants. A consensus also often shared among fintech professionals, for example at recent conferences in Paris and Berlin. The narrative of the consensus goes as follows: Banks are here to stay because they have deep pockets and entrenched relationships. Fintech startups don’t. Their customer acquisition costs are too high and VC money doesn’t go the distance. Hence, fintech ventures can’t make it alone. Rather than attempting to be a challenger bank, a financial portal or any sort of financial destination site, fintech ventures should slip into the role of bank enablers. Fintechs and banks’ collaboration is best for both.

Like often in finance, it’s important to question the consensus. In what follows we question three claims of this report.

Claim No. 1: The Fintech revolution has stalled

Accenture UK’s report paints a pretty grim picture of what the Fintech revolution has achieved so far. It claims that both Fintech startups and bank-incubated ventures have failed to deliver. As the authors put it:

“There are indications the Fintech revolution has stalled. It promised to change market structure, to radically improve products and services, and to save the incumbent banking sector from a slow slide to invisible utility status. But these promises are yet to come to pass.”

According to the authors, the Fintech revolution failed to create enough value and to create it fast enough.

The claim is supported by a few examples rather than statistics. UK retail banking Fintechs such as Revolut seem to be “perpetually stuck in beta”. Wealth management Nutmeg (40,000 users) and challenger bank N26 (300,000 users in 2 years) “failed to capture the market.“ Their customer acquisition costs largely outweigh the cost advantage of not having physical branches. Building a full-service bank and a balance sheet should take challenger banks 15 to 20 years.

Internal banking teams have not fared better.

“Internal incubators and innovation streams have universally failed to produce killer apps. Death after proof of concept has become the norm.”

The authors see a confirmation of their claim that Fintech is wavering in the significant slowdown of UK fintech investments by VCs. It went down by 36%, from $1.1 billion in 2015 to $0.7 billion in 2016.

Counterargument/Food for thought

Fintech ventures are precisely that: ventures. Many will fail before one can tell that the survivors succeeded. As investments come in cycles, the first wave of inflated expectations is followed by failures and a trough of disillusionment, as depicted in the Gartner Group’s Hype Cycle.

Sweeping judgments about Fintech ventures at large can be very misleading. In online “winners-take-all” markets, a few successful firms can disrupt an entire sector. Think Amazon, Airbnb,, Netflix etc.

Bankers often argue that finance is different as it does not tolerate monopolies. In practice, however, finance lives under the yokes of the GAAFA (Google, Apple, Amazon, Facebook, Alibaba), like any other industry does. Finance and insurance companies are the top ad spenders on Google Search (86% of UK market). Banks should not think that they are immune to the arrival of a predator à la Uber, able to raise billions of dollars ($8.8 in equity plus $3 billion+undisclosed in debt) to gain market share. Even if Uber ultimately fails, it will have ruined many incumbent transporters in the process.

Lastly, contrary to what the report states, UK Fintechs like Transferwise and lending startups like Funding Circle are unicorns who meet several of the stated metrics of Fintech success:

  • Radically more efficient business models showing 20% to 30% cost improvement.
  • Increased competition, price decreases, greater price transparency and more switching.
  • New ‘surprise and delight’ customer experiences.
  • Net new revenue and valuations that reflect this – > 20 Price/Earnings ratio.

Claim No. 2: Fintech is too “tech-light”

According to the authors, next to the cost of customer acquisition and compliance, a major reason why Fintech is stalling is that investment in the new technologies – the technology of the past 10 years that define the Fintech revolution – has been too low.

“Fintech’s failure thus far to contribute meaningfully to productivity has been driven by a slow start to investment.”

Many Fintech ventures have no competitive technology advantage over incumbents:

“The household names in the Fintech business today make only light or early-stage use of the latest technologies. And some use none at all, and are deploying legacy technology to deliver new products or reach new customer segments.”

This holds of alternative lending:

“These [alternative lending] models have already been embraced by incumbents, they only make light use of new technology. They can hardly therefore be said to represent a revolution in the marketplace.”

This is also true of China’s Fintech hub which, in spite of the success Chinese Fintech giants like Alipay and JD Capital (445 million and 226 million, customers respectively) is not, according to the authors, a model of sustainable value creation because its success is not built on efficient systems and advanced technology.

Counterargument/Food for thought

It is indeed startling for outside observers how low-tech some tech startup can be in their early stage.

Yet, Amazon did not start with a $2 billion automated warehousing facility. It did build one as soon as it could. Likewise, starting from scratch, Fintech startups generally focus their early technology advantage on a few front-end technologies. They often operate their back office in the existing ecosystem, which contributes to their high operating costs. As they gain traction, however, they entice other startups to build an alternative ecosystem of more efficient and less costly solutions. Payment startups such as Transferwise, Kantox, or Adyen, for example, enable banking and lending startups.

Lastly, if Fintech ventures are technology light, banks are indeed “technology heavy”, plagued by their legacy systems. Fintech startups are free of such a burdens and can go a long way using nimble technologies such as agile Web development and open API technologies.    

Claim No. 3: Banks can and should drive the Fintech revolution forward

The report goes on to claim that banks must be the ones who drive forward the Fintech revolution that has stalled for lack of VC funding.

“Getting banks to realize the potential upside of the innovative, game-changing technologies already available would be the first step in breaking this [down] cycle.”

Banks must act in any case, irrespective of the Fintech competition. Changes in economics, customer needs and regulation drive profound changes in the structure of the financial services market. Vertically integrated banks are threatened by a proliferation  of new businesses providing customer access to financial services – separating customer experiences and access from manufacturing, infrastracture and connectivity. A process often called “unbundling the bank.”

To unlock the potential of value creation trapped in Fintech, banks must up their investments. The authors qualify as “relatively low” the cumulative investment of $500 million by Barclays’, HSBC’s, and Santander’s technology funds since 2014.

UK banks should not only invest more, they should invest better, which means investing in:

  • Innovative enabling technologies such as Blockchain.
  • Late-stage Fintech startups that would bring to banks the benefits of VC’s investment.
  • Exportable category killers such as payment Fintechs VocaLink (now a Mastercard company) and Worldpay. Fintech killer software, for example, would enable banks to conquer new geographies such as Mexico, Russia and China and new segments such as the 2 billion unbanked people worldwide. These investments would be more profitable than trying to make the domestic UK banking market more efficient and competitive, which is a zero-sum game.

In addition, the UK banking sector should continue to seek the support of the UK regulator and to build Fintech bridges with countries like China, Singapore and Australia in order to mitigate the impact of the Brexit. 

Counterarguments/Food for thought

As it tries to show how the UK banking sector, one of the largest in the world relative to GDP, should reassert its leadership and “punch above its weight,” the authors reveal how low a potential they see for value creation in the domestic UK banking market:

“This [strategy of investing in Fintech exports] will offer a far greater return than simply making a domestic market a better version of its current self.”

Yet, customers want better customer experiences and banks have no choice but to defend their turf. Considering the previously disrupted markets like the media and eCommerce, one can anticipate that the so-called zero-sum game between Fintech and banks in the UK soon experiences a drastic acceleration of the destruction of value for incumbent banks.

[clickToTweet tweet=”Domestic banking could soon experience a drastic acceleration of destruction of value #Fintech” quote=”Domestic banking could soon experience a drastic acceleration of destruction of value #Fintech”]

As timing is everything in tech, a strategy of investing in late-stage innovative startups could prove difficult as these will be highly visible and expensive. Mastercard paid more than £700 million to acquire 9-year old VocaLink. BNP Paribas in France was wise enough to acquire neo-bank Compte Nickel for an undisclosed amount as it was hardly 3 years old.

Whether Fintech ventures are internal or external, early-stage or late-stage, bound for export or domestic market, will matter little in the end. The decisive factor will be the cultural and organizational ability of banks to let these ventures thrive. And that is their major weakness. Banks will find it very hard to become the Amazon Web Services of finance. It is doubtful that their shareholders will allow them to invest the billions of dollars that it would take.


In conclusion, like others of its kind, this short but dense report by Accenture UK offers much food for thought. It tries to defend a bank-centric view of Fintech. In doing so, it shows that the Fintech game is a hard one to play and that it is also an inescapable one.

Therese Torris, PhD, is a Senior Contributing Editor to Crowdfund Insider. She is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.

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Half of UK’s Financial Service Staff is Now Under the Women in Finance Charter

An additional 33 companies have registered for the UK’s Women in Finance Charter, the ground-breaking piece of legislature aimed to conquer gender inequality.

This announcement arrives on the very first anniversary of the charter, which now includes 122 firms, over half a million people in the United Kingdom, and encompasses nearly 50% of the financial service industry.

The Women in Finance Charter requests that companies dedicate themselves to four industry actions, with the goal of building the path for female employees to leadership positions. This innovative approach has been extremely successful, with some of Britain’s largest financial companies signing up.

The most recent companies that have committed to this charter include retail bank CYBG, payment firm VocaLink, global bank Royal Bank of Canada, insurer Ageas UK, and others including Bank of American Merrill Lynch, the latest US-based firm to join.

Since its release a year ago, 77 companies in the financial service industry have pledged to have at least 30% women in senior roles by 2021, and 23 other firms have set the goal to 50%. The most recent firms will announce their goals in June.

Baroness Neville-Rolfe, The Commercial Secretary, said:

“I know how difficult it can be for a woman to get the recognition she deserves and achieve her potential. And in financial services particularly, women progress too slowly or they leave the sector completely. We have made a strong start – the first anniversary of the Women in Finance Charter sees 122 firms seizing the competitive advantage by tackling sex inequality head on. But this is just the beginning. The financial industry is famed for its ability to identify opportunities to improve productivity. The Women in Finance Charter is one of those opportunities. It offers the chance to increase diversity of thought and for the financial services sector to better reflect the society it serves. This is why I encourage firms across the UK to step up and sign the Charter.”

The CEO of Virgin Money and the government’s Women in Finance Champion, Jayne-Anne Gadhia, said:

“I am delighted with the strong and ongoing momentum of the Women in Finance Charter. A truly diverse financial services sector will drive productivity and underpin the UK’s position as a strong and competitive economy. There is still further to go and I urge more businesses to commit to the charter so that they can play their part in building an economy that works for everyone.”

As the latest US-Headquartered company, Bank of America Merrill Lynch joins Morgan Stanley, BNY Mellon, BlackRock, Circle, and Thomson Reuters. This wide reach exemplifies that there is nothing stopping companies outside of the UK to portray their dedication to gender equality by signing the Charter.

EMEA at Bank of America Merrill Lynch, Alex Wilmot-Sitwell, said:

“Bank of America Merrill Lynch has a long history of supporting women’s leadership and economic empowerment, but there is clearly more to be done. Increasing the number of senior women and addressing gender balance is crucial for our long-term success. This means supporting and engaging women at all levels, to ensure a strong pipeline of talent. We are wholly supportive of the Women in Finance Charter and the positive impact it will have on our industry.”

Even though they are industry disruptors, Fintechs have also answered the government, with nine signing the Charter, including Azimo, FINTECH Circle, Monzo, Nutmeg, RateSetter, Starling, and Zerdo.

In a recent inquiry, the Gadhia Review found that UK financial services female representation was around 23%, but only 14% on executive committees. It is estimated that bringing the role of men and women to 50% in the labor market could increase GDP by 10% by the year 2030.

On June 29th, the inaugural Women in Finance Awards will be hosted by the HM Treasury in partnership with, What Investment magazine, and Virgin Money at The Savoy in London. This award ceremony will celebration both the organizations and individuals who are driving gender diversity in financial services.

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Nutmeg Raises More Money. Closes on Additional £12 Million after Last Months £30 Million Raise

nutmeg-spice-nutsFintech firm Nutmeg is raising money fast. Last month (November), Nutmeg announced it had closed on £30 million Series C led by Convoy Global Holdings in Hong Kong. This week Nutmeg has revealed an additional cash injection of £12 million – this time Taipei Fubon Bank (TFB), part of Fubon Financial Holdings which is Taiwan’s second largest financial service firm.

So why all of the excitement? Rapid growth. Nutmeg is zooming along in growing assets under management. Today the total is estimated at £600 million. One estimate indicates it has grown 50% since last August. That’s really fast.

Nutmeg is described as the UK’s first online “discretionary investment management company”. Their rapid popularity from users is driven by the fact they don’t charge a premium for the “illusion” of a personal relationship. In brief, quality service minus the excessive fees. Nutmeg has clearly captured the interest of venture money and, simultaneously, many competitors. If you are interested in learning more about the Nutmeg investment philosophy, you can read about it here.

martin-steadMartin Stead, CEO of Nutmeg, released a statement regarding its funding push;

‘There is a very significant market opportunity before us, in the UK and beyond, and we are going to capture it. With these new funds, we will continue to invest in product innovations which disrupt the industry and deliver a better deal – and a better experience – for customers. And, we are going to expand into new categories and new territories.”


UK Fintech Firm Nutmeg Secures £30M During Series C Funding Round Led By Hong Kong’s Convoy Global Holdings

On Monday, UK-based fintech firm Nutmeg announced it secured 30 million during a Series C funding, which was led by Hong Kong independent finance advisers firm, Convoy Global Holdings. Other participants included existing investors such as Schroders, Balderton Capital, Pentech Ventures, Armada Investment Group, and Nigel Wray.

Money UK Europe Euros PoundsLaunched in 2012, Nutmeg is regulated by the FCA and specializes in investments, ISAs, and pensions. The company reportedly manages half a billion pounds for more than 20,000 customers and has grown four times the size it was two years during its last fundraise.  Martin Stead, CEO of Nutmeg, reportedly stated:

“We are delighted to welcome our friends at Convoy to our board. Convoy shares our huge ambition for the Nutmeg business and, with these new funds, we will be able to further scale and expand our business, bringing smart online investing and advice to more people. Disrupting an exclusive industry was always going to be a tough challenge, but it is one that we relish. Nutmeg is successfully enabling people from all walks of life to get their money working harder.”

Nutmeg claimed that the 30 million raise is considered the largest raise since the Brexit vote. Chancellor of Exchequer, Phillip Hammond, explained:

“Britain is leading the way forward in global FinTech. It’s an industry that is going from strength to strength and today’s announcement confirms the UK’s position as the global FinTech capital. This is another international investment into a home-grown UK company, demonstrating the UK is open for business‎.”

The company added it is planning to use the funds help accelerate its growth.

Fintech Startups and The Future of Banking

whirlpool vortex change disruption

Will fintech startups cause the demise of banks or come to their rescue? This was one of the topics debated at The “Future of Banking” event held by The Economist in Paris on March 10th 2016.

The Future of Banking was aptly subtitled “Survival of the nimblest” reflecting the current existential questioning about the future of banks, including the notorious too-big-to-fail banks of Europe. Although many of these banks are still is reporting healthy profits (€23 billion in profits for the top 6 French banks in 2015), bank stocks were severely hit during the stock market downturn at the beginning of this year.

Future of Banking by The Economist in Paris March 10th 2016 2

Unbundling the Banking Business

Part of the worry revolves around the role that fintech startups will play in the future of the banking sector: threat or opportunity?


Edward McBrideEdward McBride of The Economist phrased the question as:

“Can banks successfully integrate fintech startups by buying, copying or working with them, or will fintech startups, coming each from a different angle such as payments, wealth management, equity or credit, progressively nibble at the banking business, unbundling it to pick up the value creating parts and leaving to banks the thankless task of producing commoditized financial products?”

Executives from the best fintech firms including Crowdcube, Transferwise, iZettle, Fidor Bank, Number26, Kreditech and Nutmeg were invited to debate this issue along with prominent bankers from banks such as BBVA, ING and BNP Paribas. Unsurprisingly, most fintech leaders argued that fintech startups and network of startups would indeed suck banks dry. Their arguments went as follows:

  • Banks are not customer-centric, fintechs are. Banks have lost a lot of trust. Customers are waking up to the low level of service traditional banks provide, which makes them as prone to disruption as French taxi drivers. Fintechs are customer-centric; they’re obsessed with improving the customer experience.

“People are dissatisfied with existing financial services, we’re only 5 year old, but every day we onboard thousands of new businesses.” Jacob de Geer, Co-Founder and CEO, iZettle.


“If you project the growth of fintech startups 10 year out, you can see how the market will shift. Our The Future of Finance research shows that 50% of consumers expect to use a tech company to handle their finances in five years’ time and… 20% anticipate that they will trust technology providers for all financial services in ten years.” Taavet Hinrikus, Co-Founder and CEO, Transferwise.


Mondo Mastercard“Customer readiness to switch away from traditional banks is well evidenced by the fact that startup bank Mondo was able to raise £1 million from retail investors in 96 seconds on Crowdcube.” Darren Westlake, CEO and Co-Founder, Crowdcube.

  • Banks can’t match fintech’s innovation culture. Banks lack the agility to adapt to fast-changing consumer behaviors such as the customers’ shift to mobile. Fintechs have a lean management culture of constant and quick adaptation.

“Our main advantage is speed, the speed at which we integrate new things and adapt to them… and the speed at which we deliver the customer experience. In a downturn we’ll be adapting faster than others. We operate in Russia and we adjusted our model to the recession there.” Alexander Graubner-Müller, Co-Founder and CEO, Kreditech.

  • Banks are weighted down by their legacy systems. Mainframe back offices eat up more than 80% of banks’ IT budget and even more of their energy. fintechs start from scratch with cloud-based open systems and open APIs that enable them to integrate with each other.

“The potential of fintech startups working together by mashing up our services is much more powerful than the current universal banking model.” Darren Westlake, CEO and Co-Founder, Crowdcube.

  • Money Dollars Art 100Banks are hampered by regulation. Basel III, PSD2, Capital Union… compliance costs cripple banks. Smaller fintech work they way through and around regulation: some, such as crowdfunding platforms, benefit from relaxed regulations, others fly under the radar, and others simply view regulation as an opportunity.

“Every financial services company is strictly regulated. KYC (Know Your Customer), AML (Anti- Money Laundering)… we’re not complaining and whining about it. We look at it as a massive opportunity. We rewrite the process from the ground up. We can onboard a business in a compliant way in 5 minutes.” Jacob de Geer, Co-Founder and CEO, iZettle.

To these four arguments, one could add that banks are viewed by their investors as cash cows that must return profits whereas Fintech startups, by contrast, as venture investments, are expected to make losses or reinvest whatever profits they make. The leading startups are flush with cash and make very expensive acquisition targets. For example, payment startups Transferwise and iZettle are so-called unicorns, i.e. startups already valued at more than $900 million.

Future of Banking by The Economist in Paris March 10th 2016

Becoming Banks

Summarized as above, the case for fintech startups seems pretty compelling.

However, opposing nimble fintech startups to sluggish banks is an oversimplification. The fact is that becoming an efficient part of an unbundled financial services value chain is all but easy:

“We rebuilt our entire systems last year. It was the worst year in the company’s existence but it’s the only way to compete.”  Nick Hungerford, Co-Founder and CEO, Nutmeg.

In addition, as Ben Robinson, Chief Strategy and Marketing Officer at Temenos, observed, many startups operating in the unbundled model feel limited by their dependency on their partner bank.  As they become more successful, they tend, like PayPal did, to seek a banking license and become more vertically integrated.

Fidor BankThis was Fidor Bank’s strategy from the start:

“Fidor Bank is about creating customer lifetime value, not accumulating losses with high customer acquisition costs but cross-selling to existing customers. To that end, we offer good products, great user interface, never compete on price but always give a fair price, and we nurture a community of customers who exchanges day to day on money matters. To do all this we need a banking license. Our banking license is our declaration of freedom. It enables us to operate our customer-centric operations on a very cost-efficient infrastructure.” Matthias Kröner, Co-Founder and CEO, Officer, Fidor Bank

Unbundling banks or becoming one of them? There may not be a single winning strategy. As Sean Park, Founder, Chairman and Chief Investment Officer of Anthemis Group, puts it:

“It’s not a question of label, it’s a question of your business model, of knowing where you fit in the stack and how much value you deliver there. “


Therese TorrisTherese Torris is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.

Silicon Valley vs London? No Competition, London Fintech Dominates, Says UK Treasury Fintech Envoy Eileen Burbidge

Eileen BurbidgeSilicon Valley can’t compete with London in terms of Fintech, says UK Treasury special Fintech envoy Eileen Burbidge: “Wall Street Talent doesn’t come to Silicon Valley.”

UK Treasury special Fintech envoy and partner at tech VC Passion Capital, Eileen Burbidge took the stage at Fintech Week and discussed the dominance of the UK’s Fintech sector globally:

Eileen Burbidge“London and the UK will lead the Fintech sector,” she said in her opening statement. “It can’t be the Silicon Valley, they have produced a few start-ups like Stripe but numbers are tiny compared to the UK.” She pointed out that the “collaboration between the eco-systems finance, technology and government is unique to the UK and can’t be replicated in the US…Wall Street Talent doesn’t come to Silicon Valley.”

The UK government seeks to support the UK’s advantage over other countries and is eager to increase competition in order to further innovation.  During her speech, Burbidge mentioned the 2007/2008 crisis which was due to having too few companies with too much capital. The government recognizes this and is therefore supporting Fintech in order to create more banks and more firms disrupting the banking sector.

Azimo 2When asked about investment tips, Eileen Burbidge mentioned the following familiar fintech companies:

In addition, Fintech Week 2015 posted the following infographic, noting that $49.7B has been invested globally into the fintech sector:

Fintech Heat Map 2015


To view Burbidge’s lecture, please view the video clip below; for additional video streams from London Fintech Week 2015, click here.


Revolut Raises £1.5m through Balderton Capital for its Alternative Foreign Exchange Service

Fintech company Revolut has raised £1.5m in a funding round led by leading tech VC house Balderton Capital, reported TechWorld’s Sam Shead. Funding will be used to launch the business’ money transfer app on iOS and Android. Revolut’s technology allows people to transfer money through a smartphone app without incurring the fees that banks and other financial services levy on consumers as they travel.


Balderton, the funding round’s leading firm,  includes fintech trailblazers Nutmeg, Zopa and Crowdcube in its portfolio.  Revolut seeks to provide an alternative to traditional banking services in the foreign money transfer space. With the cost of spending and sending money abroad from the UK in 2015 estimated to hit $1.67B, companies are looking to follow successful young businesses such as TransferWise in the alternative money services space.

Nikolay Storonksy“Revolut has an ambition to change the way money is transacted, sent and spent around the world,” Nikolay Storonsky, founder and CEO of Revolut, commented. “We are proud and delighted to introduce the world’s best-value digital currency exchange service. The app and card are intuitive to use, free for all and offer customers the peace of mind that, with Revolut, you can use your money across borders at unbeatable value.”

The Revolut app works in tandem with its free MasterCard app that can be ordered through the app after the user sets up her account. The card can be used globally with no fees when the customer spends or withdraws cash from an ATM.

Balderton CapitalBalderton is one of many venture capital firms investing millions of pounds in fintech companies in London.  According to Shead, “Global investment in fintech ventures tripled from $4.05 billion (£2.6 billion) in 2013 to $12.2 billion (£7.8 billion) in 2014, with Europe the fastest growing region in the world, according to a report by IT outsourcing and consultancy firm Accenture.”

daniel waterhouse “As you probably know, we have a long history of investing in the fintech category and a very deep understanding of it,” Daniel Waterhouse, general partner at Balderton, explained. “We spend a lot of time looking at companies in all sorts of areas and clearly the foreign currency market is interesting as consumers have been paying pretty ridiculous fees and costs on currency conversion in the past.We looked at lots of players and when we saw Revolut we thought, ‘Wow, this has really cracked it in terms of what it does and the user experience.’ Revolut can remit stuff and send money to other people, but the primary use cases are going to be spending money in a foreign currency, so when I go on holiday and want to pay foreign bills or transfer money from the UK to my US bank account I can do that from the phone in my pocket.”



Innovate Finance Honors Women in Finance as it Holds Inaugural Event in London

Women in Fintech Innovate FinanceInnovate Finance, a new organization that represents the fast growing FinTech sector in the United Kingdom, is holding its inaugural conference today in London.  The summit will discuss the impact of new innovative FinTech firms on the traditional financial industry.  Innovate Finance is expected to announce its 2015 regional study to connect FinTech hubs across the United Kingdom as it pushes to drive the growth of innovative financial firms across all of the UK.  Last year, Chancellor of the Exchequer George Osborne declared, “I want the UK to lead the world in developing Fin Tech”.  Pursuing that objective, Innovate Finance is the result of the ambition and vision of Claire Cockerton, the founding CEO.  Innovate Finance has over 100 members today including the largest names in the FinTech industry.

As part of the gathering Innovate Finance is acknowledging the women in FinTech. As part of International Women’s Day, Innovate Finance has published a list of over 100 women who are active in the FinTech industry in the UK.

The list includes women of different backgrounds, ranging from CEOs of major banks and startups to educators, policy makers, thought leaders and media professionals.  Some are well known in the industry while many others are the unsung heroes that operate behind the scenes and make signification contributions to the future of the sectors.Claire Cockerton Speaking

Claire Cockerton said,  ‘We regularly hear from our members about how we need to do more to encourage diversity, and help to attract suitable talent to grow their businesses.’ ‘We must do more to encourage diversity, given the higher returns that diversification it is expected to bring. We hope that our Women in Fintech supplement will raise awareness of how much women have done in this industry and help foster a more diverse workspace.’

Innovate Finance MembersWhile gender diversification continues to grow in the financial services and technology sectors women remain under-represented. Pay gaps and participation remain relatively low.  According to Gartner, the number of female entrepreneurs in fintech accelerators, on good years reaches 17%.

“As in any sector, diversity is crucial within fintech if the industry is to maintain momentum and stay at the cutting edge of innovation. There is lots of work still to be done here in the UK, not only to encourage diversity in the workplace but also to nurture entrepreneurial spirit from an early age”, said Nick Hungerford, chief executive and founder of Nutmeg.


Australian Financial Tech Firm Launches Equity Crowdfunding Campaign For Financial Advisory Platform

Australia-based company, Rimbal Ltd., has launched an equity crowdfunding campaign on Seedrs to raise £60,000 to fund technology and business growth.

RimbalAccording to its campaign page, Rimbal is an online financial advisory platform that automates investment advice and allocation for retail clients. It is scheduled to be functional and operational with fully regularity compliance by late 2014. By using Rimbal, users have the ability to build a tailored investment strategy for their investment goals.

It was also revealed that the tailored investment strategy for each user incorporates up to 12 asset classes, spread across different countries and industry sectors, with the portfolio composition varying according to the market conditions and financial goals and circumstances of the user.

In regards to the targeted customers, Rimbal team added, “With strong precedent for the business model through, Rimbal is initially targeting the Australian market (as a springboard for Asia) with a focus on the 80% of people aged 25 – 44 who don’t feel confident managing their finances.”

Also sharing details about the company and its employees, it was revealed that the Rimbal Team has “a combined 35 years’ experience in the technology and financial sectors and starting, running and selling companies in the UK and Australia.”

It was also noted that, “Rimbal has agreements and/or strong relationships with technology firms including a market-leading investment platform company, Edentiti who operates greenID verification technology among others. The initial stage of the platform development has been completed including the technical architecture/design, end-to-end user workflows, the investment risk/return diagnostics/algorithms and the diagnostics for user profiling, identification, verification (including greenID verification test environment).”

Angus MacNeeManaging director of Rimbal, Angus MacNee stated, “The potential for seed fundraising in Australia is limited and crowdfunding and the UK Seed EIS tax relief program is extremely efficient structure to attract start-up capital for Rimbal and our investors.”


He then added, “Over the past few years, I have engaged many corporate advisors and it is clear that crowdfunding is the future to raise seed capital or complement a funding strategy for certain companies like Rimbal.”

The Rimbal team also noted that the funds would be put towards the following:

  • 80% towards ongoing platform development
  • 10% towards completing the basic compliance structure and system
  • 10% towards business development with financial advisors and “affiliate partners”

They noted, “The platform development is progressing through three phases with the Alpha stage complete. We expect that this fundraising will facilitate the completion of an operating and compliant web platform.”

“The compliance system requires the input of specialist advisors to ensure the platform meets all regulatory and compliance requirements to operate. We believe that the Rimbal compliance engine will provide a considerable competitive advantage as a robust system and potential revenue generator through licensing to financial advisors.”

UK Crowdfunding Leaders Chime in Support for Haldane

Tower Bridge London (Wikipedia)

Following the comments by Bank of England Director Andrew Haldane which challenged the hegemony of the traditional banking industry in the UK several Crowdfunding leaders voiced their support in CityAM for his comments;

“pretty strong evidence that we are becoming a major threat”, and that “our biggest competitors, the banks, are in a weak position”.

…Stated Zopa founder Giles Andrew.  He continued the chastising;

“Even if they weren’t doing things that damaged their reputation, they’ve forgotten the consumer is at the heart of their business. We could easily have 10 per cent of that market,” Andrews said.

Neil Hungerford, CEO of Investment Manager Nutmeg piled on with;

“Every segment of the banking world is being sliced out by each company that’s doing each niche better,” Hungerford said. “Each bit of clothing is being stripped off and they’ll be left with nothing on. Until they can adapt to that they’re going to be struggling.

Ouch.  It would appear that UK banks are a bit of a target these days..