Unforeseen tempest battered the vision of fintech for London Stock Exchange

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London's aspiration for a fintech-led revitalization of its city markets took a blow on Thursday as money transfer giant Wise opted out of its primary listing. The beleaguered London Stock Exchange faced another setback, with Wise selecting a dual listing in the US instead, making the States its primary base.

It's no secret that both the Treasury and market officials held high hopes for a fleet of fintech listings to revive the market. Chancellor Rachel Reeves and City Minister Emma Reynolds have coursed a number of top names to advocate for a London float. However, with high-profile firms like Monzo, Revolut, and Zilch rumored to be prepping for a float, Wise's decision might offer a sneak peek into the market's near future.

Waning Treasury Hopes for Fintech

Claire Trachet, the chief executive of tech advisory firm Trachet, stated, "At one point, fintech was meant to be the crown jewel of London's IPO revival. But Wise's move makes it painfully clear that the gleam the Treasury aspired for is fading, and that UK markets still don't meet the demands of high-growth firms."

Wise explained the shift would help "significantly increase [its] profile" and "closely align with major growth opportunities." The firm had floated on the London market in 2021, pegged at £8.75bn. Despite speculation earlier this year that it was considering a FTSE 100 listing, chief executive Kristo Käärmann cited the US as hosting "the biggest market opportunity in the world" and offering "better access to the world's deepest and most liquid capital market."

This isn't the first time a fintech chief painted a bleak picture of London markets. Revolut's CEO Nik Storonsky had earlier deemed a London listing "not rational" compared to the allures of a US listing.

Treasury officials have been racing to dispel the notion that London couldn't compete with New York, prioritizing growth and deregulation on their agenda.

City Market's Tarnished Reputation

Lee Holmes, INFINOX's CEO, said Wise's decision "lends weight to an expanding narrative that UK and European public markets are finding it tough to retain, let alone attract, leading homegrown tech heavyweights."

The exodus from the London Stock Exchange, which has included prominent names such as tech darling Darktrace and Paddy Power owner Flutter, has dented market sentiment, with recent listings failing to reignite optimism. Fintech firm CAB Payments had debuted on the LSE in July 2023, but post an adverse profit warning and unfavorable market conditions in cross-border payments, its share price plummeted 70%.

Rumors of a potential £6bn listing from fintech darling Monzo have swirled after reports of the neobank seeking investment bankers. However, Monzo's CEO TS Anil has repeatedly dismissed such hopes, reiterating that a public listing was "not a priority." Despite the City buzz, uncertainty lingers regarding where the digital bank may eventually choose to list, with rumors of a US IPO circulating while the board shows signs of favoring a London listing.

Fintech Needs a Strong Reason to Stay

Reeves strived to charm fintech moguls at Innovate Finance's global summit in April with her promise to turn the UK into the best place "to start up, scale up, and list." But the Chancellor's promises have failed to convince firms of the appeal of the London market.

Trachet added, "London still offers some of the strongest post-IPO trading conditions in the world. But founders are making trade-offs, and without a bold, unmissable signal from the government, fintech will increasingly treat the LSE as a second choice."

Simplifying listing rules and reducing regulatory burdens have been among the UK government's efforts to make the London Stock Exchange more competitive with US markets. Creating more tailored offerings to attract companies from high-growth sectors like fintech and improving market liquidity are also on the table. At this juncture, fintech leaders are closely observing the Treasury's financial services growth strategy, set to be published on July 15, to discern any actionable steps.

Fintech leaders attended a summit with the Treasury earlier in the year, armed with ideas to enhance UK competitiveness, according to sources told Sky News. With a wish list from the industry's biggest players, the upcoming July strategy could either mark the salvation or downfall of a London Stock Exchange revival.

The decision by Wise to list in the US instead of London signals a potential trend for high-growth fintech firms, suggesting that UK markets may not yet meet their demands.
The exodus of fintech firms from the London Stock Exchange, such as Darktrace and Paddy Power owner Flutter, has raised concerns about the City's ability to retain leading tech companies and has dented market sentiment.
Simplifying listing rules and reducing regulatory burdens have been among the UK government's efforts to make the London Stock Exchange more competitive with US markets, with improving market liquidity and creating more tailored offerings for high-growth sectors like fintech also on the agenda.
The upcoming financial services growth strategy from the Treasury, set to be published on July 15, could either mark the salvation or downfall of a London Stock Exchange revival, given the industry's list of recommendations for enhancing UK competitiveness.