ALEX BRUMMER: Wise float puts fintech centre stage

ALEX BRUMMER: Wise float reinforces the UK’s reputation as a good place to launch fintech enterprises

There is much to like about the upcoming float of Wise. By choosing London for its listing it reinforces the UK’s reputation as a good place to launch fintech enterprises.

Fintech has become a lynchpin of the City’s global ambitions five years after the Brexit referendum.

Wise is choosing to use the London Stock Exchange’s direct listing process to set the price rather than allow investment banks to dictate terms. The latter approach backfired at Deliveroo and Made.

Wise decision: Fintech has become a lynchpin of the City’s global ambitions five years after the Brexit referendum

Founder chief executive Kristo Kaarmann wants to deepen the relationship with both consumers and business customers by encouraging them to buy shares, and is offering a bonus share for every 20 bought.

The founders are not shrinking violets. Kaarmann describes the behaviour of banks, which dominate money transfers, as scandalous. 

Customers may think the cost of a bank transfer at £5 to £10 is reasonable. The reality is banks make big, undisclosed profits on the exchange rate spreads.

Wise has a modest fee, makes nothing on the spread and deploys faster, less clunky tech. It reckons it is eight times cheaper than the big banks and has a competitive infrastructure in the UK through 85 institutions, allowing processing in 88 countries.

Payments innovators such as Wise are tolerated by the banks, which are so dominant. Businesses, a key target for Wise, tend to prefer one-stop shopping for banking services and Wise has no loan facilities.

It operates deposit and debit operations but doesn’t want to get involved in the regulatory hassle of offering credit.

The founders don’t much like talking about the eventual valuation, although £9billion is discussed. If that is the case then it will be a big morsel for a take-out.

Among the cornerstone investors Edinburgh-based Baillie Gifford is comfortable that the dual class share structure will enable Wise to concentrate on customers. That should serve as a warning to marauders: steer clear.

Purple haze

Prospects for Premier Inn owner Whitbread are brighter since hospitality picked up after the May 21 easing of lockdown.

There is a tendency to think of Premier Inn as a destination for travelling business people but the confusion over holiday flights ought to be good for summer bookings. 

The difficulty is that discussion about restored health of the underlying enterprise, under chief executive Alison Brittain, has been swamped by division among investment advisory groups over bonuses.

The 35 per cent dissident vote against the decision to carry over a cancelled bonus payment for 2020 until the current year is an own goal for the pay committee.

It is unusual to have the august legions of the Investment Association dissing bonus arrangements when radicals at Pirc have not objected. 

After decades of controversy over executive rewards, dating back to the row over Cedric Brown’s pay at British Gas in 1995, the system remains flawed. Remuneration reports are long and complex and are stuffed with obfuscation.

Doubtless the Danish chairman of Whitbread’s pay committee, Frank Fiskers, is a fine fellow with great experience of European hotels. 

But it doesn’t require genius to recognise that committing to a future bonus in a pandemic for a firm which has made necessary redundancies and benefited from Government support schemes is naive.

Chairman Adam Crozier, at the core of many pay rows of his own, should have recognised this.

One explanation for Brittain’s carried-over award is that she lacks a long-term bonus plan. But whose fault is that? 

The fundamental problem is the cosy relationship between pay committees and remuneration consultants, most of which are offshoots of the Big Four accounting firms.

Potential conflicts of interest are manifold and the ability of some bosses to game the system and wreak unnecessary havoc among investors is only too easy.

Chasing assets

Another reminder of how UK fintech is lighting up the City. JP Morgan Chase is to snaffle up the digital fund manager Nutmeg, with its 140,000 customers and £3.5billion of assets, for a figure not far short of £1billion.

Nutmeg will be an adjunct to new UK digital bank Chase. The deal is both a compliment to UK ingenuity and a disappointment, as it ends up in overseas hands.

It makes chairman Jamie Dimon’s warnings of decline for the City look rusty.