The biggest investor in the latest technology in the world has turned its gaze towards the UK’s most promising fintech start-ups. Softbank’s Vision Fund, the $100 billion investment vehicle that is a major shareholder in technology-centric start-ups and growth companies such as Uber, WeWork, British chipmaker ARM Holdings, NVIDIA and OneWeb, is said to be in negotiations with Revolut and Oaknorth.
Both are already fintech ‘unicorns’, meaning they have raised money at a valuation of over $1 billion (£0.78 billion). Regardless, major investment from the Vision Fund, which famously offers companies it invests in more cash than they are looking for with a ‘go big or go home’ approach, would be expected to propel the two companies into a different league. The world’s biggest tech investor eyeing UK fintech success stories is another sign that the UK has become a leading cradle of financial technology following the recent stock exchange listing of peer-2-peer lender Funding Circle. Revolut is an online-only bank and Oaknorth an online-only lender, providing loans to SMEs and property developers.
It’s also a sign that traditional financial institutions such as high street banks are now about to see some genuine competition. Until now online only banks such as Revolut and Monzo have been labelled ‘disruptors’, without having actually reached the scale to really make a meaningful dent in the client base of traditional banks. The ‘disruptor’ tag has been more marketing than reality with account holder numbers in the hundreds of thousands until recently. Account holders also have balances that average at just a few hundred pounds at best. However, in recent months Revolut has been growing quickly and is said to have surpassed 2 million account holders across Europe.
Oaknorth is also encroaching into the territory traditionally serviced by banks but this time on the business lending side of things. The company has already lent over £2 billion to small property developers and SMEs. Oaknorth is also fully regulated and offers personal and business bank accounts as well as loans.
Negotiations between the Vision Fund and Revolut around a potential investment are thought to still be at the early stage and more advanced in the case of Oaknorth. Both fintechs already have high profile investors. However, becoming part of the Vision Fund stable would not only lift the pair onto a different financial plane in terms of the cash available to them to push aggressive growth but provide authority and boost trust levels – vital in the consumer-facing financial services sector.
The Vision Fund has pedigree when it comes to UK investments. Its biggest holding is UK chipmaker ARM, which it acquired for £24 billion in 2016. It has also invested over £400 in Improbable, a London-based virtual reality start-up. However, 40% of the Vision Fund’s capital comes from Saudi Arabia’s sovereign wealth investment fund, which may raise ethical questions should final agreements be reached between the fund and the 2 UK fintechs.