The Fintech Growth Fund: What Is It, And What Could It Do For The UK Fintech Sector?
The UK has produced some of the most successful fintech businesses in the world, from Monzo to Wise and Revolut. In fact, the UK is now home to 16 of the world’s top 200 fintech companies, and has firmly established itself as a hotbed for innovation.
However, the UK fintech sector has also grappled with several major challenges in recent years. Industry reports suggest that the growth of UK-based fintechs may be restricted by a sizable funding gap, while post-Brexit regulatory issues have caused complications for many start-ups.
Fortunately, help is on the way.
A new dedicated Fintech Growth Fund is being set up for UK businesses, designed to provide companies with the strategic support and capital they need to accelerate growth.
But what are the details behind this growth fund? And how might UK fintechs (and the wider industry) benefit from this initiative? Let’s take a closer look at the background of the Fintech Growth Fund, and explain how this scheme might impact the industry moving forward.
What is the Fintech Growth Fund, exactly?
The Fintech Growth Fund is being introduced by the UK Fintech Growth Partners - a collective that includes industry leaders from venture capital, fintech, and government backgrounds.
The fund is an investment vehicle designed to help growth-stage UK fintechs (primarily between Series B and pre-IPO) scale up and drive growth. Worth approximately £1bn, the fund is backed by major players such as Barclays, NatWest, Mastercard, and the London Stock Exchange Group.
This growth fund is currently expected to fuel between 4-8 annual investments, ranging between £10m and £100m. Not only that, but the first investment is scheduled for Q4 2023, meaning UK fintechs could be receiving much-needed financial support in the coming weeks.
The Fintech Growth Fund initiative isn’t just about cash injections, either. The scheme is also intended to provide promising fintechs with strategic support and networking opportunities, helping them to maximise growth and access valuable resources.
While a £1bn growth fund may not be enough to revolutionise the entire industry, it represents a big step in the right direction for the future of UK fintechs.
Why has the Fintech Growth Fund come about?
The UK has positioned itself as one of the most innovative, future-facing fintech markets in the world - but there is still a huge amount of room for improvement.
The Kalifa Review (a government-backed report on the UK fintech industry) identified a £2bn funding gap in the sector, which incentivised the creation of the Fintech Growth Fund. The review also identified further opportunities for fintech advancement in the UK, such as improving tech visas and updating listing rules for IPOs.
Phil Vidler (CEO of Fintech Alliance and a managing partner of the growth fund) claims that:
“The UK has always been at the forefront of innovation in FinTech but there is a very clear and well-evidenced funding gap…[the fund] will address the lack of available growth capital by providing a first-of-its-kind domestic, growth-stage, fintech-focused venture capital fund backed by strategic investors.”
Regulatory issues following Brexit have also created obstacles for fintech entrepreneurs, and the growth fund is designed to help re-establish the UK as a fintech powerhouse.
What does this all mean for fintech start-ups in the UK?
The most obvious benefit of the Fintech Growth Fund will be a series of investments (ranging from £10m to £100m) in UK-based fintech companies.
These investments will allow UK fintechs to develop new products, expand their footprints, pursue strategic acquisitions, and ultimately scale up their offerings. On a broader level, the fund signifies a commitment from industry leaders to help the UK retain its status as a fintech hub and support rising businesses.
The fintech sector is an incredibly important part of the UK economy, and the Fintech Growth Fund has the potential to remove some of the barriers preventing the industry from reaching its full potential.
If this momentum continues alongside long-term funding opportunities, the future will be looking considerably brighter for the wider fintech market and the growth of UK businesses.
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