Five fintechs that had a tough 2019

Funding Circle, Metro Bank, Zopa, Growth Street and Funding Options.

There was lots of positive news in the fintech world in 2019, but a number of digital challengers endured a rocky 2019. Here AltFi charts five which will be relieved 2019 is over.

Funding Circle

The peer-to-peer lender Funding Circle endured a difficult 12 months, with a plundering share price amid a number of challenges.

The P2P lender conducted an internal review after it was discovered investors were having to wait more than 16 weeks to withdraw cash. Funding Circle said it was “exploring a range of options” to tackle the problem delaying investors from selling their loans in its secondary market. Funding Circle has now introduced a tool allowing investors to sell access to funds more quickly and regularly.

Funding Circle also fell out of the FTSE 250, marking a further blow. In August. Funding Circle, which had a disappointing float in 2018, reported a pre-tax loss of £31m over the last six months, compared to a £27m loss the year previous. Its share price is now 90p, compared to the 440p float price.

P2P sites have come under intense regulatory scrutiny since Lendy, which focused on property development loans, collapsed last year. The Financial Conduct Authority has clamped down on the sector, including limiting the amount individuals can invest.

However, there was good news in October when Funding Circle’s shares climbed over 10 percent after its loans under management soared 31 percent to £3.7bn, but the company cautioned of "an uncertain economic outlook”.

Metro Bank

Metro Bank is another disruptor which will want to draw a line under 2019.  The year ended with the announcement that its CEO was stepping down just two months after the departure of its high-profile Chairman.

Craig Donaldson, who had been in the role since the lender was founded in 2009, agreed to leave after leading it through a “challenging period” following the discovery of a significant accounting error in January.

The announcement of Donaldson’s departure came just weeks after Metro Bank’s founder and chairman, Vernon Hill, resigned with immediate effect. It has been a rocky period for the bank, which is still awaiting the outcome of a probe by City regulators after it falsely classified £900m of loans as less risky than they were. 

Zopa

Zopa managed to hold on to its aspiration of becoming a challenger bank when it secured a late stage £130m cash injection, just before Zopa’s banking licence expired.

Zopa gained its bank licence with restrictions in December 2018, having been building its bank platform since early 2017, but needed new cash to meet regulatory capital requirements within 12 months of the issuance for it to convert into a full license.

The 11th-hour deal would have cheered its investors who include Augmentum Fintech, which delayed the publication of its annual results citing Zopa’s impasse. However, it is thought the funding had been negotiated at a steep discount to Zopa's last capital-raising in 2018.

Growth Street

The departure of its CEO and a string of redundancies after it defaulted on two loans meant a tough 2019 for P2P lender Growth Street. Growth Street said it had cut around 30 percent of its workforce as it restructured its business, shifting to a new digital-only strategy in the way it sources loans.  

The redundancies are thought to have primarily impacted Growth Street's regional sales staff and are understood to have reduced Growth Street's headcount from more than 70 to around 50.

The restructuring comes after the platform told investors that two loans worth more than £1m each had defaulted. In December, Greg Carter, Growth Street CEO, stood down from his role. 

Funding Options

Executive departures and “crisis meetings” meant that 2019 marked a difficult year for Funding Options. Conrad Ford, the CEO of the small business finance broker, stepped down after eight years leading the company.

Ford, who founded the business in September 2011, said it was “the right moment to step aside”. Also exiting the company was Managing Director Ryan Edwards-Pritchard. The exits followed what company insiders described as "crisis meetings" among company management.

Since the start of 2019 Funding Options says it has been appointing a new leadership team after a string of senior executive departures, most recently including Chief Operating Officer Emily Trant, Marketing Director Richard Leader, Head of Sales Jake Garbutt, Head of Partnerships Roisin Levine, and Head of Relationships Jenny McRobb.

Last year, Funding Options secured £5m from the RBS competition fund to help an additional 10,000 small firms find funding. "2018/19 has been a transitional year for Funding Options,” said Nick Ogden, non-executive Chairman.