UK fintech startups to watch in 2016: The hottest UK fintech startups, from challenger banks to peer-to-peer lending

Scott Carey
Scott Carey

Scott Carey

Scott graduated from Cardiff University with a degree in English Literature and a diploma in Magazine Journalism. He has a keen interest in disruptive tech, sport and the media.

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Fintech is booming in the UK, with venture capitalists and the big banks circling companies that can transform financial services, and make everyone lots of money.

According to research by Let's Talk Payments more than $5.5 billion (£3.8bn) of investments were made in the fintech industry between July 2015 and January 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 the way people and businesses manage their finances.

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Anthony Thomson, Atom Bank Chairman © Atom Bank

Atom Bank

With barriers to entry coming down fast startup, digital-only banks are starting to get their licences. Atom is one of the first, receiving its licence in June 2015 and launching services through its mobile app in April 2016.

Read next: The UK’s new breed of digital challenger banks: Atom, Mondo, Starling and Tandem - Ranked

Based in Durham, Atom Bank is marketing itself to young, internet savvy users tired of traditional banks. The website, branding and marketing is both cuddly and slick. Chief Marketing Officer Lisa Wood explained in a blog post: “So where do you start when you’re building a new bank? Well first off we needed an identity, what most people would see as a company logo. But not us. If we were going to have an identity, we wanted one that reflected our customer obsession. We were building a bank for ‘you’ (the customer) and not ‘us’ (the bank).” The marketing strategy is outlined in a blog post if that interests you at all.

But what about the money? Atom Bank hopes to launch with a full portfolio of products and already has lending, savings, financial planning and business banking leads on its staff of over 50. The bank was founded 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 £135m in capital so far.

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© Mondo

Mondo

What sets Mondo apart from other challenger banks is that it is building from the ground up instead of providing a nice digital front end for pre-existing banking software.

Mondo is building a full stack mobile platform that will, eventually, allow it to provide customers with a current account that lives on your smartphone. This could include transparent, real-time information about your money, geolocated transactions, peer-to-peer transactions and historic data on your spending with specific retailers.

Mondo hasn’t got a banking licence yet but it is letting 3,000 customers to sign up to the Alpha service. Without a licence Mondo customers can’t have an account number or sort code, so no faster payments, direct debits or standing orders, and your money isn’t protected by the Financial Services Compensation Scheme (FSCS) yet.

Instead, alpha users will get a Mondo MasterCard that can be pre-paid using the iPhone app (Android isn’t live yet) and used at cash machines, in-store, online and at contactless terminals. Alpha users are guaranteed against losing money during testing though.

CEO and former GoCardless co-founder 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.”

Mondo Bank has raised £5 million from a single investor: Eileen Burbidge’s Passion Capital, as well as £1m in crowd funding through CrowdCube (which is also on this list) in just 96 seconds in March. You can keep up to date with what Mondo is up to through its product roadmap, which is a publicly available Trello board.

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TransferWise

While working for Skype in London, Taavet Hinrikus grew tired of paying fees when transferring money back to Estonia to pay his mortgage. Along with Kristo Käärman he launched TransferWise in 2011 as a peer-to-peer money transfer platform which would save people and business owners paying hidden bank fees and inflated exchange rates when transferring money into different currencies.

The easy to use online platform lets you convert currency using a calculator tool which shows transparent pricing on the exchange rate and the TransferWise will charge, which is typically 0.5 percent for GBP transfers, as well as how much they think this is saving you.

TransferWise is UK Financial Conduct Authority authorised and attained unicorn status in May. The company was valued at $1.1 billion following an additional $26 million (£17.7m) funding round led by Scottish asset manager Baillie Gifford and existing investors like Andreessen Horowitz, Richard Branson, Peter Thiel, and Max Levchin.

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© iStock

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 1 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 raised $7m in Series B funding round led by Balderton Capital and was funded at seed level by Passion Capital.

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© Revolut CEO Nikolay Storonsky

Revolut

Revolut is one of a burgeoning group of fintech startups trying to eliminate fees when you want to use your money abroad.

Revolut works like a mobile wallet but with 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.

Revolut is currently set up in 90 countries across three currencies (pounds, Euros and USD). The app also allows you to send money easily through WhatsApp, SMS, email and social media platforms without fees or commissions, the recipient will simply receive a link from which they can instantly claim their money.

Revolut has raised $4.8 million (£3.2 million) to date, led by Balderton Capital, Index Ventures, Seedcamp, Point Nine, Venrex and business angels.

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© Nutmeg CEO Nick Hungerford

Nutmeg

Nick Hungerford left his role as a Barclays wealth manager to try and make the service he offered to the wealthy more accessible as an online platform. Nutmeg acts as an online wealth manager from as little starting capital as £500 and charges a management fee of 0.3 percent to 0.95 percent compared to a UK active fund average of 1.58 percent.

Read next: Meet the team behind Nutmeg: the fintech upstart that hopes to democratise investing

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, no algorithms. You can withdraw your money whenever you want with no exit fees. All the hallmarks of a good fintech company are there: an user-friendly online interface, transparent pricing and a mission to bring down barriers.

Nutmeg has raised £37 million to date from investors including ICAP founder Michael Spencer, Balderton Capital and asset management company Schroders.

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© Curve

Curve

Launched in February, Curve allows you to combine all of your bank cards under a single app and card. Not only does this make your wallet lighter but you can track all of your transactions in one place, in real time.

How does it work? Just take a picture of your cards (current account, credit card: regardless of which country that account is based in) and Curve pulls them together into an Apple Pay style display. You then set a default card using the app, allowing you to use your Curve card for chip and PIN, contactless, cash withdrawals or mobile payments, all under a single PIN. The Curve card is build on MasterCard rails, meaning it is accepted anywhere MasterCard is and comes with all the same security, with the added assurance that your actual cards are safely left at home.

You also won’t get charged when using Curve abroad, regardless of which card you use or which currency you are dealing in. All transaction data is then pulled together in the Curve app. You will get a notification once a payment is made and you can tag and categorise payments on the platform to get a simple view of your finances. You will still be charged for ATM withdrawals when abroad though (£2) and Curve charges one percent on top of the MasterCard wholesale foreign exchange rate.

Update 25/05/2016: Curve has announced that it no longer supports American Express transactions. A tweet from the American credit card company’s UK account stated: “We don't feel confident in the support/service in place. We remain open to discussion with curve [sic] if we can work in the future.” One of the key selling points for Curve was being able to use your AmEx in locations where it normally wasn’t accepted and still collect reward points.

Curve costs £35 to get an account set up and a card shipped out to you, with no further fees. Curve completed a $2 million (£1.4m) seed round in December, led by Taavet Hinrikus of TransferWise, Ricky Knox of Tandem bank, Ed Wray of Betfair and former members of the Google Wallet team.

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© Wealthify

Wealthify

Cardiff-based fintech startup Wealthify launched in the UK in April with its hybrid investment platform, combining humans and algorithms to offer investment portfolios with lower barriers to entry. CEO Richard Theo told Techworld.com: "We’re trying to democratise investing to make it accessible with a much lower starting point at £250 [Nutmeg starts at £500] and the whole simplicity of design is to target the mass market."

Wealthify will ask you to select a risk proposition, which is presented in plain language. This is then backed up by a suitability test to validate their own logic on risk models, "so a safety net to make sure people aren’t going in the wrong direction," says Theo.

Then Wealthify will invest in a range of asset classes, like Exchange-Traded Funds (ETFs), with the algorithms defining which asset classes to invest in and when depending on market information and your risk profile.

According to Theo, due to regulatory reasons Wealthify cannot define the returns (although Nutmeg does with its ISA proposition) but: "Historical stock market trends over the last five years and over the MCIS stock market index shows 8.2% per year." This varies dependent on risk.

Wealthify has been funded by it's co-founders so far and will be seeking additional funding now that it has launched. Theo said: "There is no shortage of appetite for investing, no question, but crowdfunding could be good for the advocacy reason."

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© DueDil

DueDil

DueDil is the UK’s equivalent to Bloomberg business when it comes to getting information on companies, but with more detail.

The platform pulls together data from thousands of sources including company websites, financial filings, news reports, registry data, trademarks, and country court judgments. This information is then searchable by company and presented in on a user friendly platform. This helps companies do their due diligence (hence the name) and avoid risks by identifying the right companies to sell to, get insights into their business, and make a sale.

Since 2011 DueDil has raised nearly $30m (£20.6m) from investors including Oak Investment Partners, Passion Capital and Notion Capital. and includes customers like Royal Mail, Stripe and Kuoni.

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© Crowdcube

Crowdcube

Everyone has heard of Kickstarter, a peer-to-peer platform that allows people to raise funds for projects via donations from the general public. Crowdcube takes this idea and applies it to investing in actual businesses.

Users of Crowdcube can play venture capitalist but on their financial terms by investing in startups, early stage and growth businesses and receive equity, debt and investment fund options in return.

Since 2011 the platform has funded companies to the tune of £138m already via 245,690 registered investors, including tech startups like Rentify and Luxtripper.

Crowdcube itself has raised £6 million from stockbroker Numis, Draper Esprit and Balderton Capital.

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© iStock

Funding Circle

Funding Circle's peer-to-peer platform lets savers invest in small UK businesses and earn an estimated return of 7.1 percent, while the businesses themselves get access to loans of between £5,000-£1 million without having to deal with banks.

On December 29, 2015 Funding Circle passed the £1bn mark in terms of funding, coming from 46,865 investors.

The UK government backed the startup in February 2014 with a £40m investment from the British government to fund small businesses through the Funding Circle platform. Funding Circle landed in the top five of KPMG’s fintech 100 list, the highest ranked UK startup. 

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© FreeAgent

FreeAgent

As more and more UK workers go freelance FreeAgent is an online account platform that simplifies sending and tracking invoices and expenses, calculate tax bills and analyse bank statements.

FreeAgent has appeared twice on Deloitte’s Fast 50 list and boasts more than 40,000 active freelancers. The startup has raised $5.86m, with a $3m Round B led by Lightbank.

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