Big banks losing ground to fintech: 2 FTSE stocks to buy

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  • FCA found the percentage of personal current accounts holders with digital challenger banks rose about 8 per cent compared to 1 per cent in 2018.
  • Startups have been attracting customers via easy to use and innovative mobile apps.
  • Some surveys also found legacy banks feared neo-banks would overtake them.

The latest data released by the UK’s Financial Conduct Authority (FCA) on Friday found that around 8 per cent of personal current accounts holders were now with digital challenger banks, an increase from the 1 per cent seen in 2018.

The FCA stated that challenger banks such as Monzon, Revolut and others managed to gain customers due to having easy-to-use and innovative banking apps.

Legacy and traditional banks now anticipate that such fintech may overtake them. A survey of over 250 senior bank executives for the Standard found that they felt a high degree of frustration with getting new technology.  They added that old IT infrastructure systems oftentimes interfere with a new technology, which thereby causes them to have IT-related crashes.

Another recent survey, by research firm Censuswide, for a technology company, Yobota, found that around 40 per cent of those surveyed were worried about not being able to keep up with their rivals on innovation.

About 50 per cent complained their firm relied on old tech too much, while about 60 per cent estimated that neo-banks would overtake legacy tier-1 grade level banks.

Given this development, let us explore the investment prospects of 2 FTSE listed fintech stocks:

  1. Augmentum Fintech PLC (LON: AUGM)

Augmentum Fintech is a venture capital fund that is focused on investments in the fintech sector. It belongs to the FTSE All-Share index.

Asset management company abrdn PLC (LON: ABDN) agreed to acquire Augmentum’s portfolio investment, interactive investor. AUGM stated in its proposed acquisition of ii note that it estimates its interactive investor investment thus has an implied valuation of £42.4 million.

The realisation of this deal would thereby indicate an internal rate of return of 87 per cent. The deal is expected to be completed by Q2 2022.

Image source: Refinitiv

Augmentum’s shares closed at GBX 137.00 on 21 January 2022.  The company’s market cap stood at £262.47 million, and its one-year return was at 0.35 per cent as of date.

  1. Trufin PLC (LON: TRU)

Trufin is a UK based fintech and banking company. It belongs to the FTSE AIM All-Share index.

The group said in its latest statement regarding Satago and trading update, that Lloyds Bank (LON: LLOY) had expanded its partnership with Trufin’s subsidiary Satago and was now exploring further functionality areas within it. Due to this widened scope, the partnership’s commercial pilot phase is now expected to go on till the early part of this year.

Image source: Refinitiv

The group’s shares closed at GBX 84.00 on 21 January 2022. The company’s market cap stood at £70.32 million, and its one-year return was at 47.02 per cent as of date.


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