Global: UK Launches £1 Billion Fintech Fund to Compete with Silicon Valley

The United Kingdom has introduced a £1 billion Fintech Growth Fund, partnering with major players like Mastercard, Barclays, and the London Stock Exchange Group. This initiative aims to support growth-stage financial technology companies until they can go public, enhancing the UK’s global reputation as a fintech investment hub.

The Fintech Growth Fund, advised by UK investment bank Peel Hunt, intends to invest between £10 million to £100 million in various fintech firms, encompassing consumer-focused challenger banks, payment tech groups, financial infrastructure, and regulatory technology. The fund targets companies at the growth stage of funding cycles, particularly those seeking Series C rounds and beyond.

The fund was established in response to a 2021 review commissioned by the government and led by Ron Kalifa, former Vice Chairman of Worldpay. The review explored the attractiveness of the UK’s listings environment for tech firms.

While several fintech-focused funds exist, the Fintech Growth Fund stands out as a government-backed initiative involving industry giants. However, a knowledge gap about central bank digital currencies (CBDCs) could hinder support. The survey conducted by the CFA Institute revealed that 40% of respondents had little to no understanding of CBDCs, whereas only 12% claimed a strong grasp.

The fund could potentially aid financial institutions in accessing expertise related to emerging technologies. With traditional banks and financial institutions competing against newer tech startups, the fund offers an opportunity to advance their digital ambitions.

Although £1 billion might seem modest compared to broader investments in fintech and technology, the Fintech Growth Fund is seen as a promising start. The UK’s fintech industry ranks second globally after the US, with 16 of the world’s top 200 fintech companies located in the UK, according to Statista’s analysis for CNBC.

Despite recent turbulence in the fintech industry, the Fintech Growth Fund is poised to make its inaugural investment by year-end. This timing is perceived as opportune due to the reduced entry level for investors to engage with mature privately-held companies.

According to Phil Vidler, Managing Director at Fintech Growth Fund, the UK retains its status as a business hub with strong fundamentals, drawing attention from global venture firms.