The fintechs rewriting the rules to drive exceptional growth

Allica Bank

Richard Davies says he is a magpie. “I love to see what others have done,” he explains. “I may have experienced it firsthand, I may know someone who has been there, or I have read about what has been done. I am a big believer in trying to assemble what best practice looks like.”

But don’t be fooled into thinking that Davies is some kind of traditionalist. The next thing he says is eye-opening.

“I am also a big believer that [best practice] often doesn't look like traditional management theory. I think a lot of that stuff is wrong. Over the last decade, companies have very rarely followed traditional management practice as they have been built.”

What makes this comment particularly noteworthy is that Davies has been at the centre of the blossoming UK fintech industry and played key roles at three of the companies on the Growth 500. He was chief executive of OakNorth, chief operating officer at Revolut and is now chief executive at Allica Bank, the digital bank for small and medium-sized businesses.

He arrived at Allica in 2020 to what was effectively a blank sheet of paper. Allica had just won a banking licence from UK regulators and it had investment from venture capital firms. But its founder had departed and Allica had loaned just £5m to businesses.

Since then, Allica has been one of the fastest-growing companies in the UK. The company’s appearance in the Growth 500 reflects its stellar performance. Our data shows its revenue has grown by 268 per cent, or £213m, across the period we measured to £292m. What’s more, Allica also reported healthy pre-tax profits of £29.9m in its most recent financial year.

Allica has grown quickly by, says Davies, “doing a dramatically better version of what already is out there”. By that, he means that Allica is trying to offer a far better service to medium-sized businesses in the UK than the traditional high street banks.

“Sadly, this space has been vacated by most of the major banks,” Davies says. “They've been cutting back on all their client-facing staff. They haven't really invested properly in the digital services for this segment. I'd say part of the reason we've seen such fast growth is that the bar is fairly low.”

But, as his initial comments demonstrate, Davies is also thinking about how to run a business in a different way to others. He recommends the book The Geek Way: The radical mindset that drives extraordinary results by Andrew McAfee as something he has learnt from.

“One of the things I think a lot of large companies, but also many start-ups, get wrong is that execution is such an important thing and iterative execution is super crucial,” Davies says. “The view that you can get decisions right via lots of upfront analysis and brainstorming I think is fundamentally wrong.

“Get the thing live. Get it working with some clients, then iterate it very fast with those clients to develop it. That ability to execute – to get something live, to get feedback and to iterate – is often what sets companies apart. It is very different to the classic process of ivory tower thinking.”

The speed of Allica’s progress since Davies started shows he is on to something.

ClearBank

In 2017, ClearBank became the first new clearing bank in the UK for more than 250 years. Its USP, says founder and former CEO Charles McManus, is that it has been able to build its offering from scratch, unencumbered by the legacy platforms that limit its rivals. That means it can focus on being efficient, cost-effective and fast, all areas the other clearing banks are criticised over.

A clearing bank is one that verifies a financial transaction, ensuring for both the payer and the payee that everything goes according to plan. Services include Faster Payments, Chaps and Bacs payments, with the market dominated by the big four of Barclays, NatWest, Lloyds and HSBC. ClearBank counts Chip, Tide and Wealthify among its customers, which total more than 240.

Its 1,175 per cent growth rate over the past three years has been fuelled by expansion following the approval of its European banking licence. To fund that, it received £150m from investors including Apax Digital, and is spending around £70m on its European moves. It became profitable in the UK for the first time last year.

McManus, who is now a non-executive director, believes key to its success has been a focus on product, which is critical to business success. “You really must make sure there is a market – and you can compete and win. Your product has got to be brilliant, and you have to understand what your customers are buying off you.”

Payhawk

Payhawk’s co-founder and CEO Hristo Borisov experienced firsthand the headache of managing corporate expenses – and decided to do something about it. After roles in engineering and product management, he quit and, needing to cut unnecessary expenses, cancelled all his subscriptions.

He found it so hard to do so that he thought there might be an opportunity there. So he founded Payhawk, in 2018, to enable companies to manage their spending, from corporate cards and expenses to subscriptions, more easily.

The company was rejected by more than 60 venture-capital firms before getting funding. But within six months of launch it had customers in 16 countries. Recent growth suggests Borisov is definitely on to something. Revenues are up 1,681 per cent in the three years we monitored, hitting £10.9m in its most recent annual results.