Payment processing company Worldpay had London’s biggest stock market listing of the year so far this week — and it’s a huge moment for fintech, short for financial technology.
Worldpay was valued at £4.8 billion ($US7.4 billion) when shares listed on Tuesday, and the stock price popped over 3% on the opening day.
The reception of the listing could cement London’s reputation as the fintech capital of Europe, if not the world. If London can prove its public markets “get” fintech it could herald a wave of floats here.
‘We expect to see more multibillion-dollar events’
Worldpay’s listing coincides with a bit of a “moment” for fintech. The sector has become the latest hot area for venture capital investment, with money pouring into everything from peer-to-peer lending marketplaces (Funding Circle, Prosper) to bond market technology (Algomi).
Worldpay makes payment terminals and does payment processing for businesses. But most in the fintech sector don’t regard Worldpay as a fintech business.
It started out as innovative — the company was one of the first to offer internet payment services back in 1994 — but Worldpay was bought by Royal Bank of Scotland (RBS) in 2002 and quickly became pretty corporate. It was spun out of RBS as part of the bank’s state bailout in 2009 and bought by private equity groups Advent International and Bain Capital.
Fred Destin, a partner at VC firm Accel Partners, told Business Insider: “It’s a large card processor — we don’t really see it as a fintech like [Swedish card reader maker] iZettle or [Dutch payment processor] Adyen or Accel-backed Braintree [an online payment processor]. But it’s a relevant, comparable, and clearly great to see a large IPO coming to the UK market “
While Worldpay may not be seen as fintech by many close to the sector, traditional public market investors may well lump it in with newer businesses.
For European fintech startups it’s the best indication of appetite for listings in the UK market
Yann Ranchere, finance director of fintech-focused investment group Anthemis, told Business Insider: “For European fintech startups, especially UK ones, it’s probably one of the best indication of appetite for listings in the UK market.”
“For London, the saying had historically been that one of the constraints for startups was on later stage and liquidity events so having a sizable IPO is a good validator.”
Despite its best efforts, the London Stock Exchange failed to capitalise on the tech boom of recent years, with companies like Candy Crush maker King choosing New York over London.
Just Eat became the first to join the newly created “High Growth Market” specifically set up for tech businesses when it IPO’d last year, but quickly moved to the main market instead.
Ranchere says: “Obviously Worldpay has a different profile than startups in terms of growth trajectory/multiple but as they announced they will do substantial investment in technology (important use of IPO proceeds). They are a significant data point.”
The London Stock Exchange knows it’s good business to pull in fintech and trumpeted Worldpay as a fintech float in an email announcing its success this week. If Worldpay can demonstrate the UK stock market understands and supports financial technology businesses, it could mean plenty more business down the line.
Jan Hammer, a partner at VC firm Index Ventures who has backed firms like TransferWise and Adyen, told Business Insider: “The IPO demonstrates that payments is a mega large space, and that omni-channel is the direction things are going. We expect to see more multibillion-dollar events over the next few years.”
London’s play for fintech also comes at a time when US markets so far haven’t nailed it. Peer-to-peer lending platform Lending Club has been the highest profile IPO in the US and shares have fallen over 35% since the company listed at the end of last year.
If Worldpay can avoid the kind of stock price pit falls of Lending Club, companies will have to seriously think about whether London could be a better option than one of the US markets.
Square, the high-profile card reader and payment processing company set up by Twitter’s Jack Dorsey, this week filed documents to go public in the US. How that float goes could be a defining moment for fintech in the US.
‘It’s good for fintech to have an independent potential partner’
There are other benefits to the fintech “ecosystem” from Worldpay going public too. Dan Cobley, CEO of fintech VC firm Brightbridge, told Business Insider: “It’s good for fintech to have an independent scale player outside of the big banks as a potential partner.”
One such partner is Trustly, a Swedish online payment company that this week expanded to 21 new European countries including the UK.
Johan Nord, Trustly’s chief commercial officer, told Business Insider over email: “The company [Worldpay] has long been a driver in the fintech payments industry and is helping to establish alternative payment services to consumers and merchants across Europe as well as further afield.”
Worldpay is more than happy to work with fintech payment startups like Trustly — in fact, the company sees it as good for business.
When I spoke to Worldpay’s chief product and marketing officer Kevin Dallas earlier this year he told me: “What you actually have is the whole payment landscape is becoming more complex, not less. The value that someone like Worldpay can bring is helping them navigate that.”
So the fintech startups there are, the more complex it gets, the more business for Worldpay.
We could look back on Worldpay’s stock market listing in a few years and see it as the point fintech in London kicked up a gear. To have a £4.8 billion FTSE 100 goliath batting for the sector is huge.