FinTech Fever: London

london

It seems only right to focus on FinTech in London this week, given the headlines about companies getting funding and gaining recognition in the marketplace.

While it makes sense to talk about London’s startup scene, I want to go beyond that topic to explore whether there may be a bit of frenzy going on with FinTech in London.  I think it may time to step back and be wary about a few of the headlines.

One reason London made headlines this week was that TransferWise, a popular peer-to-peer money transfer service, received major funding from Andreessen Horowitz (with the VC Firm’s co-founder, Ben Horowitz, joining its board). The total funding for the C round (including all firms) was $58m, and this startup now has a valuation of around $1B.

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Also this week there was a widely circulated article on the FinTech 50 – a list of the 50 most significant new companies in FinTech – with 50% based in London. On its face, good news for London and an interesting fact about the industry.

But, with a more critical eye, I did read that the “shortlist was judged by several of the City’s technology-focused venture capitalists, the technology giants Google, Microsoft and American Express, and the banks Santander and Silicon Valley Bank.” (according to City A.M., one of the smaller of London’s newspapers).

In other words, those voting were based in London (whose financial district is known as The City), so the vote doesn’t seem entirely fair.  But, while the panel had some bias, there’s truth to the story of a lot of good FinTech firms based in London (the article at this link has several good metrics on investment and employment for London).

Another driver of headlines is FinTech Innovation Lab (backed by the likes of Accenture, Morgan Stanley) announced the latest class for its London accelerator: Cytora, Duco, Pontus Networks, Ripjar, Torusware and xWare42.

Finally, the London Mayor’s office announced that its colorful mayor, Boris Johnson, would be headed to New York in February with FinTech on the agenda. Boris creates headlines whatever he does, so getting support and associating the London FinTech scene with Boris is a shrewd PR move.

boris

I myself lived and worked in London for many years – working with clients such as Prudential, NatWest, Abbey National, Friends Provident, Barclays, Lombard Bank, Bank of Scotland and Ford Credit Europe – so I have some first-hand experience.

London’s historic trading role, banking center, and associated advantages (talent, infrastructure, nearby banks, technology) and the startup support system (e.g. Level 39, The London FinTech Innovation LabInnovate Finance, Bindi Karia at Silicon Valley Bank‘s London office), all contribute to its momentum.

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Furthermore, given the loss of jobs in the Financial crisis of 2008-9, the general boom in technology in the U.S., and global nature of finance, it’s not surprising that London would emerge as a center (or centre, I should say) for FinTech.

The positive story here is there’s real innovation going on, with a lot of people doing thing to enable market disruption, and assist startups. Those making a difference should be applauded (and as I’ve said earlier, those who appropriate the term FinTech or startup who say provide payday loans – like London’s Wonga –  at high rates that hurt the poor, should not).

Too Much Spin?

London deserves its success, but keep in mind that London is also a marketing and press center, so without diminishing the achievements, it’s wise to be aware of a certain amount of PR and “spin” is taking place around FinTech.

As my former Morgan Stanley colleague, Julian Levy (now at Index Ventures), who also worked in the Bank’s Technology Business Development team, that put on Firms’ CTO Summit in London (and Silicon Valley) – once told me by phone when I was on Sand Hill Road, “Mate – it’s London, we’re the desert [when it comes to startups] – and you’re in the Amazon.”

There is some hype to be discounted (some “mirages in the desert”), in my view. For instance, there always were a large number of companies trying to sell to banks. (Morgan Stanley has thousands of vendors to operate its network, supports its thousands of applications, 85000+ employees, and its millions of clients.)

Let’s not be rush to label all vendors to banks as Fintech – and include in same category as disruptors, like LendingClub, (whose CEO Renaud LaPlanche attended London Business School).

Still, London is gradually becoming a bit more like SF and Silicon Valley, with arrival of funding and models to thrive in the US (e.g. Funding Circle coming to SF from London, just as Skype set up US offices and found a US buyer.)

FinTech Fever

As I’ve become more active on social media, such as Twitter, I’ve come to discover the community interested in fintech, and  its luminaries, such as Brett King, Chris Skinner, Brad Leimer and Jim Marous. I respect them, and those just starting out on Twitter to learn about Fintech, and add their voice to conversation.

I think everyone should have a voice, but let’s all try to be, as my former Morgan Stanley colleague Ian Ellis (a founder of the London Enterprise Tech Meetup) put it, “mindful of ‘overhyping’ a topic” (including FinTech).

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There’s a lot of headlines – and a lot going on in the Twitterverse on FinTech, so let’s try to keep some perspective. Personally, I think there’s actually SF startups can learn from London  — along with Australian firms, like Lend2Fund, which put up one of the best videos on Marketplace / P2P lending this week).

But the triumphalism (‘50% of World’s Top FinTech firms based in London!’ ) should be checked at the door, in my view.

I’ll keep it short this week, as I’ve been working on a guest blog for Yodlee, whose offices I visited this week in Redwood City.

Overall, a good week for London and those elsewhere following FinTech, given the the news about TransferWise, the funding round for SoFi, and the Google partnership for LendingClub.

Cheers!

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