Revolut, Allica, Zopa: Analysts back ‘enduring value’ of UK fintech
UK fintech received a wealth of praise from Peel Hunt analysts in a fresh sector note following a year of rapid growth for the industry.
Fintech firms booked record profits in 2024 and have transitioned from disrupting the banking climate to direct competition with traditional lenders.
Revolut topped 52.5 million customers in 2024, surpassing Europe’s largest lender HSBC, which had 41 million according to its latest annual report.
“These are no longer just digital interfaces; indeed, they are becoming full-stack banks,” analysts Gautam Pillai and Barun Singh said.
They added firms were “combining technology, capital discipline, and product depth to reshape SME and consumer banking.”
Flipping the script
A fleet of firms published full year-guidance in recent months, revealing a bolstering of takings and swelling of customer bases.
Allica Bank, dubbed the UK’s fastest growing private company by The Times Hundred, increased pre-tax profits by 86 per cent to £29.9m.
The digital bank targets small- and medium-sized enterprises (SMEs). The fintech’s chief Richard Davies told City AM the SME market was a “barren wasteland” five to 10 years ago and Allica’s “strategic focus” on the area was key to its growth.
Analysts reiterated Allica’s strategic positioning as “the only full-service digital bank built specifically for SMEs” had propelled it to be “one of the UK’s fastest-growing neobanks”.
Amidst this, the neobank picked up ‘Bank of the Year’ at the latest City AM awards.
Meanwhile, Zopa Bank doubled its pre-tax profit to £34.2m in 2024 and is plotting to double its office footprint in 2025 in a move to Canary Wharf.
Whilst firms were once criticised for their “scale-before-profit approach,” Pillai and Singh said UK neobanks had “flipped the script.”
Fintech passes the tariff test
Geopolitical tensions triggered a global share-sell off, but analysts said “tariffs tested sentiment, not spending” for the fintech industry.
Global payment giants Visa and Mastercard reported no material slowdown in consumer spending and maintained their targets for the year in earnings reports.
“Whilst tariffs have entered the conversation as a potential risk factor, both Visa and Mastercard have indicated that current conditions do not warrant changes to their near-term forecasts,” Pillai and Singh said.
Mastercard indicated tariffs and geopolitical tensions had weakened sentiment but emphasised underlying fundamentals, including low employment and wage growth, and continued to support resilient spending.
The payment behemoths, while not traditional fintech players, are crucial in the ecosystem due to their collaborations with firms and leadership on digital payments.
UK fintech’s ‘competitive strength’
Private equity firms have begun to spark interest in UK fintech, which analysts say “underscores the ongoing appeal”.
Bridgepoint secured payment software firm Eckoh’s exit from the AIM market last year, after a bid that valued it at 54p per share or £169.3m.
The price offered was 15.9 times Eckoh’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending March 2024.
The trend extends back to 2023, where Alfa Financial Software was bombarded with offers from EQT and Thomas H. Lee Partners regarding a potential takeover.
Pillai and Singh said: “We see a wealth of opportunity as resilient companies are positioned to leverage evolving technology, regulatory tailwinds, and strategic acquisitions to drive sustainable growth.”
Analysts said global markets’ continued embrace of digital transformation bode well for the “well-equipped to capitalise on shifting industry dynamics.”
“This momentum not only fuels organic growth but also attracts significant interest from strategic buyers and private equity firms, underscoring the enduring value and competitive strength of UK fintech.”