Executives warn Britain’s digital finance businesses under pressure following banking upheaval

Executives warn Britain's digital finance businesses under pressure following banking upheaval
Image: Reuters

Following the failure of U.S. technology lender Silicon Valley Bank (SVB), executives told an industry event on Monday that higher interest rates and investor reluctance would make it more difficult for digital finance enterprises in the United Kingdom to acquire capital.

The Bank of England has raised interest rates 11 times since December 2021, when living standards started to collapse as a consequence of soaring inflation. Companies must now pay extra to get financing as a result of pricing hikes.

TS Anil, CEO of British digital bank Monzo, remarked at the Innovate Finance conference in London, “The bar on capital has been raised, from an era where there was (effectively) 0% interest rates and relatively easy access to cash and capital.”

According to Anil, the collapse of SVB last month, which alarmed investors, may cause a wider shakeup in the digital banking sector.

Last month, trade organization Innovate Finance warned that Britain’s digital banks will need support in dealing with the fallout from SVB’s bankruptcy in the coming months.

Tim Levene, CEO of the fintech-focused investment company Augmentum, projected during the event that the value of start-ups would continue to plummet.

Furthermore, “we’re going to see stories over the next 12 months of businesses that have failed, but that’s part of the venture (capital),” he said.

According to The Financial Times on Sunday, the Bank of England is considering revising its deposit guarantee scheme, which might include raising the amount insured for corporations if lenders have difficulties.

“The Bank of England looking at the regulations… is the sensible course to take,” said Sam Everington, a senior executive of the British digital bank Starling, during a London event.

Despite rising pressure on their business models from the present economic environment, executives in the digital banking sector have voiced hope.

Despite the fact that many in the digital finance industry had only witnessed historically low-interest rates, Funding Circle CEO Lisa Jacobs was confident that the sector could establish its value.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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