London’s fintech space is booming — having raised over $2bn last year — but it’s still something of an exclusive club. Over 60% of the venture capital raised in the UK in 2018 was concentrated into just 22 companies according to Dealroom, leaving hundreds in the shadows.
To shed light on the breakout stars of the future, we’ve pulled together a list of promising, early-stage fintech startups. These companies have each raised less than £35m, and are focused on consumer-facing finance apps, insurtech and payments services, targeting the savings-averse, cautious home-buyers and insurance-shy.
We’re a tough crowd to impress but the following startups display the clear hallmarks of companies that can one day lead Britain’s brimming fintech scene. Each showed clear value propositions, low copy-cat risk and convincing founding teams — and all of whom Sifted personally interviewed. We also note their shortcomings and space for improvement. It’s time to bring them out from under the radar.
What does it do? Credit cards
App launch: Pending (in beta)
Team size: 45
Jaja is a “challenger credit card” company. At its core it’s launching a new credit card brand with new repayment options and a modern app interface, complete with spend-management tools.
But the real cash cow for Jaja (pronounced “yah-yah”) will come from white-labelling its technology to major banks. As part of that, the startup has already made a surprise £700m acquisition, buying the credit division of the Bank of Ireland (paid for by some generous loan providers). This acquisition means Jaja already has 400,000 own-brand cardholders and is providing the technology for around 500,000 others.
Its leadership team is also impressive, combining expertise in both finance and tech. Its Norwegian cofounder Jostein Svendsen is a former AmEX executive, while chief executive Neil Radley is the former Barclaycard European managing director. The team also shares an ambition to become the biggest credit card processor in the world one day.
Now, two years after being founded, Jaja is slowly preparing to roll out in beta and to break its media silence (“we wanted to be careful of over-promising,” Radley tells Sifted).
Still, the company will be up against fellow credit-card challenger Tymit and challenger banks like Tandem and Starling, who are also launching credit cards. Radley agrees Jaja could target underserved users if it finds new ways to assess customers’ financials rather than relying solely on traditional credit ratings.
Expect to see more of Jaja by the middle of 2020.
What does it do? Pay-as-you-go travel and motor insurance
App launch: 2017
Team size: 58
Cuvva offers pay-as-you-go travel and motor insurance for those who seek irregular, spontaneous coverage. It’s like the retail version of Zego, which provides hourly insurance to Deliveroo and Uber workers.
Cuvva has raised over $17m so far and is already making waves. Between January and October of this year the insurtech newcomer ranked as the 10th most downloaded UK fintech app, according to AppAnnie. And since 2016 Cuvva has sold more than 40m hours of insurance at an average of £11.40 per hour. That adds up pretty nicely revenue-wise: the company has broken even at several points since launching, it says.
Chief executive Freddy Macnamara also notes it will be “incredibly difficult” for incumbents to copy Cuvva’s hourly insurance motor model and “buy-on-the runway” single-day travel coverage due to the expert algorithm behind it.
By the end of next year Macnamara aims to be managing a 160-person staff and is optimistic that Cuvva could have 500,000 UK customers on its books. The company is not currently eyeing European expansion, he confirmed.
Note, the company doesn’t have an insurance licence yet. That means that Cuvva currently uses third-party insurers, although it has its own customer service as a mediator. Reportedly this hasn’t deterred customers but it does somewhat complicate the claims process.
In the future Cuvva could also begin to provide coverage for underserved areas, like insurance for general clumsiness (which is common in Germany).
What does it do? Mortgage brokering
App launch: 2018 (formally called Nuvo)
Team size: 50
Buying a house is a big move. The traditional route is to visit a broker, who selects a list of viable mortgage products out of the 20,000 on offer in the UK. But now digital brokers are coming into the fray, including Habito, Trussle and Mojo, which launched in February 2018 and communicates with users over live chat or telephone rather than face-to-face.
Unlike its peers, Mojo has targeted first-time buyers outside of London, using business partnerships rather than heavy marketing to acquire them.
“We’ve sold nearly as many mortgages as Habito had in their second year, but we’ve raised [~£20m] less,” chief executive Richard Hayes tells Sifted, having secured around 4,000 mortgages. He adds that Mojo currently has 11 signed partnerships and “15 to 20” in the pipeline.
“Conventional brokers make things a lot more complicated,” he added. “We think access to mortgages is broken. Not the actual mortgage sector.”
Mojo is also planning to draw in customers with its upcoming “mortgage score” service, which will assess users’ spending patterns for free using open banking. It says they can then take this to secure better rates from banks, rather than relying solely on credit scores.
Additionally, users with bad scores will get tips to pro-actively and pre-emptively improve them. Interestingly, those who have begun testing it in London have relatively low average scores, while those in Newcastle are leading.
Like most brokers, Mojo is fee-free but gets 0.4% of the loan amount secured. It also gets kickbacks if it direct users to partnered solicitors, life and home insurance providers. In four years Hayes hopes to be selling “hundreds of thousands” of mortgages and to make up 10% of the mortgage market share.
The digital mortgage model is also going international, with Spain’s Helloteca offering an online brokerage. Competition is therefore stiff but Hayes says it’s similar to the online travel market, which has allowed multiple players to thrive.
What does it do? Insurance provider and dashboard
App launch: October 2019
Team size: 9
Brolly helps customers put all their insurance policies (from car to life) onto one dashboard. This serves as an on-ramp to offer them Brolly’s own services, which so far includes standalone contents coverage for items from jewellery to phones.
Notably, the price of its policies drop by 0.5% for each claim-free month, rewarding careful behaviour. It also has a real emphasis on jargon-free writing and the coverage is underwritten by a partner company reportedly renowned for paying out claims.
The app only came out of beta in October but has already won City AM’s ‘Insurance Company of the Year’ and had 20,000 downloads.
In particular, Brolly stands out because it adopts the “platform over pipe” model. That means the company provides an infrastructure for users as well as creating content (think Netflix, which both presents an array of options and produces its own exclusive shows), which fintech veteran Jane Turner says is vital for success. Brolly has ambitions of launching a monthly subscription for unilateral coverage; from travel to house insurance.
Cofounder Phoebe Hugh — a former Aviva employee — says the “powder is still pretty fresh” when it comes to shaking up the UK insurance space. In other words, she is confident Brolly could be the “leading” contents coverage provider in future, taking market share from the big players.
Yet Hugh isn’t riding a blind race to the top or focused on vanity numbers.
“You have to grow sustainably in this space because you have to have confidence in the underwriting. So you have to grow slowly,” she says. “But we’re looking to scale at the tail-end of 2020, and we’re currently growing at 10% per week.”
Still, Brolly could eventually be up against US-insurtech giant Lemonade, which began its expansion into Europe in June, armed with a Dutch licence and launching new products summarised in a short, four-page policy. The SoftBank-backed firm has not announced an expansion into the UK, but Hugh admits it would be a “threat” if it does.
Another innovator in the space is WeFox, a giant online insurance broker currently operating across Germany, Spain, Austria and Switzerland. It uses a chatbot to offer clients tailored pension, health and dental coverage and amasses it all in a simple interface. In theory, if it expands into comparing contents coverage in the UK, Brolly could feature as an option.
Looking forward, Hugh says international expansion would likely centre on other English speaking countries like Australia or the US.
What does it do? Online wills, probate and cremations
Site launch: December 2016
Team size: ~60
Talking to people about their own death isn’t the easiest pitch. Which is why those taking on the task are set for lucrative business.
Farewill is on its way to becoming a “consumer brand for death”, backed by major players like Augmentum Fintech, Kindred Capital and Microsoft. Its core product is online will-writing, with prices that undercut traditional legal fees. This year alone, Farewill has written 40,000 wills at an average of £90 each — making it the single largest will-writer in the country and translating to an eight times increase in revenue since 2018. Farewill has also partnered with over 80 charities who encourage benefactors to leave them money, amounting to over £100m donated to charitable causes.
“The biggest financial event is when you die, yet 85% of people don’t have a will,” Farewill’s cofounder Dan Garrett told Sifted. He adds the industry has been slow to digitise and says the lack of online competition has been key to the startup’s success to date, as well as a competitive design and user-experience.
But Farewill has now stretched beyond will-writing. In June the company launched a basic probate service — the process by which a deceased’s loved one gets access to their estate, as outlined in the will. Farewill has also recently announced a funeral business, which is in beta but Garrett says could “absolutely” become the company’s main revenue source.
“Prices for funerals have doubled in the last 10 years. There’s a monopoly on local providers, so they can push up the price,” Garrett explains.
Farewill has effectively digitised “death finances”, securing first-mover advantage and a healthy market share. Its resilience as a business also seems protected by the nature of the product it offers. Still, the company is slightly behind its ambitious target of coordinating one in every 10 wills by the end of this year, being closer to “one in 18”, according to Garrett. Moreover, a will technically only needs to be signed in front of two witnesses, meaning the market may remain dominated by those who want to avoid the fee and risk going it alone.
What does it do? Pensions for freelancers
App launch: October 2019
Team size: ~11
Freelancers and entrepreneurs are an underserved group when it comes to financial services, disadvantaged by irregular incomes. Now a new wave of fintechs are working to fill that gap, from flexible liability cover to salary top-ups.
This includes the emergence of “challenger pension” apps like Penfold, which is specifically targeting freelancers. It’s a large market; over 80% of the UK’s self-employed are reportedly not saving for a pension, equating to around 4m people. Having only recently come out of beta, Penfold still has a small number of users. But the company believes it can take a sizeable chunk of the freelance market internationally, calling itself “the Monzo of pensions”.
The idea is to target those without an existing pension pot, meaning they are not already catered for by leading digital disruptors Pension Bee, which specialises in consolidating multiple pots.
“Pensions are so important. They’re such a great way to save. For every £1 you put in, the government puts in 25p. But nobody is doing it, they’re so complicated,” cofounder Pete Hykin told Sifted.
“I tried to set a pension up three times [when I was self-employed]. But I failed, and I’m quite financially and tech-savvy. You find this totally bamboozling website with all these options — and eventually you still have to call or post something off to Scotland.”
Hykin also notes that the blurring of career progress today makes this a lucrative market.
The business model is to take 0.75% annually of the amount deposited (including fund fees, which is in line with other pension managers). Additionally, the model is geared for growth given that pension users tend to be “sticky” and their deposits increase on average by 4-5% each year, thereby growing the commission. Nonetheless, Penfold’s customers can pay in at irregular intervals and pause their pension deposits when they need to.
Hykin’s next move is to invest in marketing and partnerships with co-working spaces to acquire customers, hoping to get ahead of UK-based newcomer Sixty (although it is yet to launch, having reportedly gotten behind on its fundraising schedule).
Penfold also plans to specialise in “ethical” funds and will work to better-define and structure this elusive theme.
What does it do? Deposit protection and referrals for renters
App launch: January 2018
Team size: 30
Tech innovation is also happening for renters.
Canopy is among those leading the charge. At its core, Canopy offers users a credit rating booster for rent payments, which helps when looking for a mortgage. But that’s also a key on-ramp for Canopy’s deposit insurance, which around 60% of customers take up. Here, users pay one week of rent upfront as opposed to the obligatory five weeks needed for a deposit. Users do not get that money back but the payoff is that Canopy will pay their rent if they fall ill or lose their job. This reportedly helps renters keep hold of an average of £1,200, which they’d otherwise lock up in a deposit.
Bigger picture, the idea is to replace rental deposits and to replace it with Canopy’s “trust-based network” of renters and landlords. The idea is to mimic the Airbnb model of mutual accountability, which already underpins rent agreements in parts of China. As such, Canopy will independently vet renters’ credentials — replacing the expensive referee system and financial examination process in exchange for a membership fee. The company is now seeking governmental endorsement to boost participation.
Renters can already use Canopy’s RentPassportTM with partnering estate agents, offering a “digital rental identity”. This vetting system has already been used to finalise contracts for 19,000 renters at the price of £3, and the ambition is to have 1m users by June 2021. Long term, the passport will show whether renters are good tenants and potentially remove the need for a deposit. They’ll also be able to use the passport to rent more easily around the world.
The one threat on the horizon comes from Fronted, which is gearing up to enter the “deposit-free” space next year. Fronted, cofounded by former Apple, Monzo and Bud employees, will allow renters to pay their deposit in instalments plus interest, but is yet to release its pricing. Fronted has also said it will offer “holiday mode” for renters who get into financial trouble.
In response, Canopy is launching a similar product in mid-2020, potentially spurring a price war between the two firms, Canopy’s chief executive Tahir Farooqui admitted. The company will then look to raise a Series A towards the end of next year.
What does it do? Real estate marketplace
Site launch: September 2019
Team size: 6
Proptech newcomer Dot targets wannabe “real estate moguls”. The company offers a marketplace for wealthy users to buy property-to-let in a click with a 30% deposit. It’s a “hands-off” e-commerce experience, with Dot managing the legal work and any restoration or construction on the client’s behalf, before renting it out at a profit.
“We were shitting it when we launched in September,” cofounder Lucy Sharp told Sifted. Yet, a month later, Dot has sold eight properties to a community of “dream investors” and were on track to sell two more.
The company is now projected to make £480,000 on the next 11 houses and is expecting to nearly double that by March 2020. It’s also looking to expand into the US when it completes its next raise. There are also plans to create a secondary marketplace (like an estate agent) when investors want to take a property off somebody else’s hands.
The benefits it offers are both the increased speed of home ownership (it usually takes three to six months to close a deal) and the discounted rates of renovation, which is taken care of behind the scenes. It also promises to reduce void tenancy periods thanks to long-term lease agreements.
“It’s different from pension funds who are just building soulless white boxes,” noted Sharp, one of the UK’s relatively few female fintech entrepreneurs.
Potential buyers are able to see mock-ups of renovation plans through CGI imaging. The properties on the marketplace are concentrated in the north of England (“higher yields”), which include old, empty warehouses that are converted into accommodation.
One potential grievance with this product, however, is that it could push rent prices up and encourage gentrification. Like a bank Dot assumes a level of risk by buying the option to the house on investors’ behalf and loaning them the mortgage.
Meanwhile, for those who can’t afford to buy property outright, there’s Propio. It allows retail clients to invest in property (loans) via its ISA system. However, due to regulatory issues, the company is not currently accepting new investors.
Elsewhere, Reitly allows you to compare property investment products, but is still in test-mode.
What does it do? Savings and investment bot
App launch: 2017
Team size: 39
Plum is an automated savings bot, which doubles up as a wealth-management app for millennials.
To date, Plum says it has over 650,000 users (although it won’t disclose its deposit base). It targets first-time investors, particularly women, and cuts out the need to scroll through the stock market by offering 10 pre-made funds, which vary by risk-level and genre. It also caters to smaller investors unlike Nutmeg, which requires a minimum of £1,000.
Despite facing stiff competition from the likes of Oval, Plum has certain advantages. Firstly, it targets the broadest segment of mid-level earners, thereby maximising its potential user base. As a result, it’s more accessible than specialised micro-savings apps like Cashmere, which targets shopaholics.
Plum also offers an easy on-ramp by calculating how much you can responsibly save (or automatically invest). In that sense, it’s a combination of both smart savings bots like Chipand investment apps like Wombat. Wombat has more categories than Plum, complete with catchy names like The Adventurer, The Techie and The Social Media Guru, but costs more, charging 0.45% on your portfolio annually (Plum takes 0.15% plus £12 in fees a year; Nutmeg charges around 0.75%).
Nonetheless, revenue generation could still be difficult for Plum given its target age-group (<35s) hold less than 15% of the UK’s total wealth and can therefore deposit less. For instance, Moneybox, which takes your spare change from each transaction and invests in one of three categories, reportedly sees average weekly investments of only £20.
Plum would also benefit from a speedier interface and deposit service (although most iOS users seem happy, giving it 4.7 out of five). Equally, Plum only gives daily insights on your account balance and how much it can put away to save, rather than serious analytics. It also doesn’t yet offer interest on the money it stores, unlike Tandem Bank and Moneybox, which additionally offers a pension portal and rewards scheme.
Watch out for a new boom of open banking add-ons in 2020. These still need regulatory approval but will allow customers to pay online merchants directly from their current accounts rather than via card. Merchants will save around 0.4% on each transaction, in comparison to using market leading payments processor Stripe — so expect to see them offering rewards to customers for using this payment option.
Open banking services on their way in the UK include Trilo, which will offer cashback to users for using their payment portal. The other perk is you’ll see how much money is in your account when clicking “pay” — unlike when tapping a card.
Similarly, we’re excited to see Lumio roll out. It aims to be the portal for all your accounts, savings and investments, sitting at the forefront of what venture capitalists are calling the “open finance” paradigm. When it fully launches it’s also set to offer smart behavioural insights, which are still in short supply in Europe. There’s a real gap here; even pure spend-management tools like Cleo, Emma and Yolt don’t offer users tailored saving advice or hacks. Inspiration could be drawn from the US’s Pluto, which tells users where they are over-spending each month and sets savings goals in specific areas.
Are there are early-stage consumer-facing fintechs you think should have been included? Please comment below.