The Monday Roundup: what we are watching this week | March 6th

By Puja Sharma

The Monday Roundup sets the scene for the week’s biggest news stories, industry deals, and upcoming events. For Prime subscribers only.

Future of FinTech

The Centre for Finance, Innovation, and Technology (CFIT) is the first of its kind in the world and is backed by £5.5 million of Treasury and City of London Corporation funding.

This new body seeks to build on the dominance of the UK’s FinTech sector – which supports around 2,500 firms, and tens of thousands of jobs in the UK and is second globally only to the US for FinTech investment – powering ahead of economic behemoths such as China and India.

It will provide a much-needed boost to people and businesses up and down the country, enabling them to benefit from new waves of technological change and innovation – widening consumer choice, cutting costs, and increasing efficiency for firms.

Economic Secretary to the Treasury, Andrew Griffith said, The UK is a world-leading location for FinTech growth and investment – it’s a real British success story and one that’s spread across the whole UK. Today’s launch of the Centre for Finance, Innovation, and Technology doubles down on this, boosting prosperity and investment in exciting cities for growth and innovation such as Leeds.

It’s also great to see the UK Infrastructure Bank delivering on its mission to invest in the clean energy revolution and much-needed infrastructure – using its £22 billion of taxpayers’ money to help communities across the UK.

In 2022, newly listed tech companies spent more than $12 billion in cash. Despite falling share prices, many of these companies are having trouble raising more capital, according to the Financial Times. It’s a situation that highlights the trouble non-public companies face when trying to drum up capital. After a mad dash for dealmaking in 2020 and 2021, companies are now faced with either having to slash costs, undergo costly capital raises, or takeovers by bigger competitors or private equity groups, the FT noted.

“[Those companies] benefited from the very high valuations, but unless you’re bucking the trend your stock is way down now. That can leave you kind of stuck,” Adam Fleisher, a capital markets partner at law firm Cleary Gottlieb, told the FT. “They have to figure out what is the least bad option until things turn around.”

Despite a shift towards profitability after last year’s market downturn, the FT says its analysis of recent filings shows many companies still have a long road ahead of them.

Selective hiring

Amid the rising layoffs in the tech world, Thought Machine plans to boost headcount by 20% in 2023: Core banking vendor Thought Machine is to increase its global headcount by more than 20% this year, making 125 new hires throughout 2023.

The firm intends to hire across India, Japan, and South Africa for the first time, although most of the new intake will join Thought Machine’s engineering team in its London headquarters.

As well as a hiring spree, Thought Machine’s expansion plans also include opening a new office in Florida, USA. Although Thought Machine made 200 hires during the first Covid-19 lockdown in 2020, the firm says it operates a “selective hiring process” that ensures roles critical to the company are filled “without overhiring”.

Paul Taylor, CEO and founder of Thought Machine, said, “It’s not all doom and gloom in the technology sector. While many businesses are cutting staff, we are not taking this approach.

BNPL giant Klarna posts £1bn loss for 2022: Buy now, pay later (BNPL) fintech Klarna has reported a $1 billion loss for 2022, following on from the $680 million loss it recorded in 2021.

Despite the losses, the firm says it is edging towards profitability thanks to growth in its gross merchandise volume (GMV) of 22% year-on-year (YoY) and a 19% revenue boost in Q4 2022. The Q4 2022 operating losses also declined. The company also embarked on a series of layoffs in May and September last year.

Despite gloomy macroeconomic conditions, the firm has made substantial inroads into the US market. The US now represents Klarna’s biggest revenue stream, a milestone it passed in December last year. GMV in the US market has rocketed by 71% YoY and the firm claims more than 34 million Americans are now Klarna customers.

What is the buzz

BlackRock and Ritholtz Wealth Management announced that FutureAdvisor’s direct-to-consumer business will be sold later this year. Despite the lack of information about Ritholtz Wealth Management’s first acquisition, both sides assure their clients they will continue to serve them.

FutureAdvisor, the robo-advisor that BlackRock made a $152 million deal to scoop up in 2015, had amassed client assets of $1.7 billion and more than 30,000 accounts as of last spring, according to a Form ADV filing dated April 2022.

“We are proud of having served FutureAdvisor clients over the last eight years and are confident that Ritholtz, a national, multi-billion-dollar wealth management firm, can meet the demands of clients seeking digital solutions for their investing needs,” said a statement provided to Financial Planning by a BlackRock company spokesperson. “BlackRock will continue to serve wealth management firms with our Aladdin Wealth technology offerings.”

Officials from Ritholtz, which managed more than $2.8 billion in client assets as of November 2022, said things will be business as usual for FutureAdvisor clients as the direct-to-retail business makes the transition.

“Ritholtz expects that FutureAdvisor clients will seamlessly transition to Ritholtz, where they’ll receive access to dedicated goals-based financial planning and cutting-edge technology,” a Ritholtz company spokesperson said. “Ritholtz advisors and support staff are looking forward to helping them achieve success in all aspects of their financial lives.”