Holvi, the Finnish fintech offering banking for sole traders and small businesses, is pulling out of the UK market less than six months after launch, citing increased uncertainty due to Covid and Brexit.
“Uncertainty is increasing to a point where we have to make an adult decision.”
“In January we were confident about entering this new market, even with Brexit ahead, but then the world changed. We never imagined what would happen with Covid and it looks like we are headed for a No-deal Brexit. Uncertainty is increasing to a point where we have to make an adult decision,” said Antti-Jussi Suominen, Holvi’s CEO.
The departure comes after N26, the German challenger bank, pulled out of the UK in February, also citing Brexit (although also likely motivated by low customer traction and regulatory problems).
Holvi, which was acquired by BBVA in 2016, will focus instead on core markets in Germany and Finland. The company has some 200,000 users, 90,000 of which are in Germany. UK customers will have until October 31 to move their money and close their accounts.
Suominen said the decision to leave the UK had not been a “performance issue” and that the company had made good progress in signing up customers, although he did not specify how many users the company had managed to win in the UK. Suominen also admitted that the UK market was “very competitive”.
There are some 6m small businesses in the UK, making it Europe’s largest SME market. But many fintechs are vying for market share, including small business specialists such as Coconut, Anna and CountingUp, as well as consumer banks Monzo and Revolut expanding their offer to microbusinesses.
“In a climate of uncertainty it makes more sense to focus on markets where we have a more established presence,” said Suominen. Like many fintechs, Holvi is not yet profit-making, and Suominen says there is an increasing focus on getting a good return on investment at the business.
“When we launched we were thinking there was going to be an orderly exit [from the EU]. But right now, no one can really say what will happen.”
The increasing likelihood of Britain leaving the EU with no deal has also played a part in the decision, not least because it is still unclear if Holvi would need a separate banking licence in the UK. At the moment, it can operate in the European Economic Area (EEA) under a licence issued by the Finnish Financial Supervisory Authority (FSA).
“In January when we launched we expected this to become clearer, and we were thinking there was going to be an orderly exit. But right now, no one can really say what will happen next January,” said Suominen.
Holvi had run the UK operations largely from Germany, so the departure will mean relatively few job losses or offices to shutter. Parent company BBVA recently announced €644m in extraordinary provisions related to the Covid pandemic. Whatever Holvi’s UK winding-up costs are, these are likely to be a drop in the ocean in comparison.