Tech Weekly: Robinhood aims for the UK

Host 0:07
Hello and welcome to Tech Weekly, a podcast by City A.M. where we go through some of the most important news in tech, crypto, FinTech and beyond. We’ve got a shorter episode this week later, Charlie will go over the $30 million funding injection for payments startup Super Payments, and will take us through online pension provider PensionBee’s move on to London stock market. But first Lilly will give us the latest from the crypto world. Lily what’s been happening this week then?

Lily Russell-Jones 0:41
So the retail trading platform Robinhood is expanding into the UK and has agreed to buy Ziglu which is a UK based crypto startup, which runs a mobile banking app and a trading platform. We don’t know how much Robin Hood paid for the firm, but it was valued at 85 million in November last year when it raised 7 million in funding round. The deal marks Robin Hood second attempt to entering the UK market and insider from Robin Hood told me that degree could essentially become the firm’s UK arm if the deal gets approval from the FCA. So there’s still a bit tentative about whether that’s going to get full approval and go ahead. But Robinhood last tried to enter the UK in 2020, but abandoned the plans and said it would focus more on its core business in the US instead. So it seems like it’s finally ready for international expansion to start.

Host 1:28
And so what can UK customers expect from its expansion to the UK then?

Lily Russell-Jones 1:33
So Robinhood is a retail trading platform, which was made famous by the Gamestop incident in 2020. It removes fees to allow non professional traders to invest in stocks and shares. It got really big during the pandemic through the games, for instance, which showcased the ability of retail traders to become market players. But also because people were bored at home, they’ve been trading a lot more crypto has been a really key growth area for the platform. So looking at the final results from the last quarter of 2021 monthly active users topped 17 million, up from 11 million in 2020. And crypto revenues have jumped 304% year on year to 48 million in the final quarter. And they made 419 million in total across the year up from just 27 million in 2020. So a real kind of area of explosive growth. But then it’s like latest earnings presentation. The firm said it plans to launch a crypto wallet for users in the first quarter of the year. And aggressively expand its crypto offering internationally. So this is very much a sign that Robin Hood is doubling down on its support for crypto by snapping up a digital asset start in the UK.

Charlie Conchie 2:45
So as we’ve seen sort of ministers selling their weight behind the kind of crypto ecosystem, is this a bit of a vote of confidence. It’s such a big US firm as kind of snapping up a UK crypto startup.

Lily Russell-Jones 2:55
Yeah, I’d say so I think we’ve had some real mixed messages around crypto from regulators versus sort of certain members of the government that we’ve repeatedly heard from regulators that crypto is a financial stability risk. And firms have been finding it very difficult to get regulatory approval from the FCA for anti money laundering purposes. I think the overwhelming majority of firms which have tried to enter the UK market and get approval from the SA have failed to do so just that three out of 100 firms have managed it. However, we did hear earlier this month that Rishi Sunak wants to turn the UK into a global hub for digital assets. There are plans to integrate stablecoins into the UK financial payment system. So I think this does show that firms are starting to take that messaging on board and see the UK as somewhere that they’re comfortable launching crypto services and taking that risk potentially.

Host 3:47
And why is Robinhood picked Ziglu then?

Lily Russell-Jones 3:49
So I think a major attraction of deadly could be the fact that it’s FCA regulated. So as I said, like we’ve hardly seen any firms secure regulatory approval from the FCA, who deal with crypto assets. Some of the UK is largest digital asset providers, including revolute and blockchain.com, and COPPA, which is a digital asset custodian advised by the former chancellor Philip Hammond. They’ve all been stuck on the SCA temporary register, and we’re unable to get approval ahead of a key deadline. And that means that a lot of firms have had to seek regulation elsewhere in Europe to operate in the UK and they’ve gone offshore. But we’ve seen this mini wave of mergers and acquisitions in the crypto space over the last few months where large firms are snapping up this handful of sort of 33 firms which have received FCA regulation. So in February of a crypto exchange bit Tandur picked up trustology, which is FCA regulated and then a month later by Nance announced a partnership with Equinix which in turn owns Digi volt, which is a crypto asset custody platform, again registered by the FCA as money laundering regime and then this could be seen as continuation of that trend. The SCA has said though about all of the To acquisitions that they’re not able to actually assess whether the firm’s which takeover FCA approved, firms or firms which are on their list would actually receive FDA approval themselves. So it’s not a done deal, so to speak. And they’ve sort of, especially when by Nance actually took over Equinix, they raised concerns and said, Look, we’re not sure that this firm would meet all of our regulatory requirements, which is why it’s not regulated here. But it’s we’re still not able to stop it from picking up a UK registered firm. So that’s, that’s been quite an interesting sort of development, and we’ll have to see where that goes.

Host 5:35
And so is there anything to stop one regulated firms from taking over an FCA approved crypto company?

Lily Russell-Jones 5:41
So interestingly, the FCA has said that it did not have the powers to stop such a takeover from happening. And it doesn’t have the powers to assess the fitness and propriety of new owners of regulated crypto firms before a change in control takes place. What they have said those that they can take steps to suspend or cancel the registration of a crypto asset business once it’s been taken over by one of these firms. If it’s not satisfied that the new beneficial owners is fit and proper. So we could see the FCA launching some sort of assessment into these companies and cancelling the registration of certain crypto firms as a result, that hasn’t happened so far.

Host 6:21
So Charlie, what’s been going on in FinTech looks like there’s been some news from payments startup Super Payments.

Charlie Conchie 6:27
So an interesting couple of sort of big headlines the word of London and UK FinTech this week. So the founder of funding circle, which is one of London’s sort of big, you know, stalwarts of the FinTech sector, and one of the biggest firms and original firms have listed has reportedly bagged $30 million worth of backing for a new payments startup, which is going to aim to sort of snap up market share from giants like Visa and MasterCard, this sort of details of the firm are still relatively mysterious and unknown at this stage. But he’s got sort of cash backing from a number of big venture capital firms, including one of Facebook’s early investors, XL partners, local globe and Union Square Ventures also back around, and I think it’s worth bearing in mind, this is a pre revenue startup and the round has valued it at over $60 million already. So there’s clearly is some potential that they have seen there, and those that have slightly more details and at this stage do see some potential in the firm. Interestingly, Samia Deysi, the founder of funding cycle hasn’t sort of severed his ties with the lender bosses there have given him their blessing to go and pursue this. This new venture, while he does does still sort of sit on the board as a non executive director. So it will be interesting, I think, to see over the next few months where that firm really does sort of start to emerge from the shadows. And we do get a few more details about what that will look like and whether it really will start snapping up market share from from those giants.

Host 7:56
And there’s been some other news from PensionBee as well.

Charlie Conchie 7:59
Yeah, so nice positive FinTech story to end the week with pension be announcing its shift on to London’s top markets that listed on the high growth segment of the market last year, and announced its intention last week and actually shifted on rang the bell to open the market yesterday and had its Debbie on that main market yesterday. So I think what was interesting was we spoke to boss and found a roaming survivor who founded the firm in 2014. And she was quite quick to call for reform and sort of the few measures that government can push through to make it a bit more of a friendly process and make it a bit more of a sort of nice environment for tech firms like pecha betta grow on the capital markets. And interestingly, she’s been quite a big part of government sort of pushed a boost the international profile of London as a destination to list tech firms. So interesting to see that on that first day, she was quite punchy, and

Host 8:51
calls for reform. What were the specifics of the causing

Charlie Conchie 8:55
said tax rules were one of the key elements which we’ve heard from a few different FinTech founders in various industry figures. Now, there are reports that ministers are sort of kind of mulling over tax treatments that would mirror something similar to the enterprise investment scheme, which has caused a real surge in investment into private firms, and would essentially allow investors to claim back on investments on to publicly listed companies so it’d be a means of sort of incentivizing investors to take a slightly more bolshie view on investing in longer term growth tech opportunities,

Lily Russell-Jones 9:27
and how his pension be fed as a publicly listed tech firm.

Charlie Conchie 9:31
So it’s been a mixed bag, I’d say on the on its year as a listed firm, it was pent up was kind of weird act a number of big name FinTech firms earlier in the year as a sort of British success story. But as we’ve seen, with quite a few different tech firms that floated in London the past year, it has sort of seen its actual share price slide. It was trading at 16% below its IPO value just the day before it moved on to the main market. So it’s been a mixed bag, but Romi when I spoke to yesterday was quite sort of bullish looking ahead and said this is a natural factor of a public firms lifecycle, and sort of, you know, double down on the fact that this was the place they want to be. And in the long run, she seemed confident that the share price would come to mirror the underlying operations of the business. So I think interesting to see that yeah, like many other tech firms that have less than London, and it hasn’t exactly been a smooth ride. So Right.

Host 10:26
Brilliant. That’s all we have for this week. Thanks, Lily and Charlie, and thank you for listening. We’ll see you next time.