ALEX BRUMMER: Wise rings up the changes with its direct listing

Britain has a new tech champion. The £8billion direct listing of digital payments innovator Wise makes it the most valuable recent float on the London Stock Exchange and has turned its Estonian creators Kristo Kaarmann and Taavet Hinrikus into paper billionaires.

It is sobering to think that Wise, focusing on overseas money transfers, has built a valuable enterprise in a decade.

In contrast, TSB, which can trace its origins back to 1810 and a branch network, was valued at just £1.7billion when it was bought by Barcelona-based Sabadell in 2015. 

One has to think that there is something wrong with a system which places low prices on historical assets, goodwill and a loyal customer base compared with a bank embracing new technologies.

That is not to deprecate the achievement of Wise. It has taken a traditional financial activity, the remittances of money from richer countries to generally less well-off destinations, and revolutionised it by using modern technology.

Because it operates entirely online and uses modern data processing, it chews away at traditional money transfer outfits such as Western Union with vast networks of offices. Moreover, it has exposed what amounts to profiteering by banks.

It conducts transfers at about a tenth of the price when the exchange rate turn made by traditional banks is taken into account.

The opportunity is vast. At their peak in 2019, remittances from the G20 most wealthy nations to the developing world reached £400billion, according to World Bank data. Covid led to a 20 per cent dip last year but the scale is obvious.

That is before one considers transfer opportunities among richer countries and the surging business market.

The bigger question about Wise is: how long will it be before the significant international players such as HSBC and JP Morgan recognise newcomers could eat their cake? JP Morgan is starting to get the message. 

Refinitiv reports it has made some 33 acquisitions since the start of 2021, many of them in the digital space, ranging from the Brazilian digital bank C6 to the UK’s online asset manager Nutmeg. It clearly is marking fintech as the next big thing.

The value placed on Wise by the market will have other UK start-up financial firms rubbing their hands with glee. 

Atom Bank, based in the North East, has just announced two online milestones with £3billion of mortgage completions and £1billion in its instant savings account. It plans an initial public offer (IPO) within the next two years.

Atom and other IPOs could take a leaf out of the Wise direct-to-the-market playbook. Wise reckons its advisory fees for coming directly to market totalled £13million.

 Contrast that with another well-received but much smaller IPO, Dr Martens, where the advisory fees were £26million and the £39million which flowed to private equity sponsors Permira.

Wise is not only a pioneer in payments but also has blazed a new path in coming to the public markets.

Diversity gain

Everyone in the City and wider corporate community talks a great diversity story. But when one drills down progress is shamefully slow. There are still only half a dozen women chief executives in the FTSE.

And if agitators Elliott Advisors have their way, one of those, Emma Walmsley at Glaxosmithkline, could be endangered.

Plans by City enforcers the Bank of England and the Financial Conduct Authority (FCA) to link pay at the top to gender and ethnic diversity targets could change matters dramatically.

The City may be one of the world’s great financial centres but only two of its cornerstone institutions – Natwest and Aviva – are headed by women.

When it comes to ethnic diversity, the FCA, headed by Nikhil Rathi, is showing the way. Financial regulators and City lobby groups are still Anglo-Saxon male-dominated and could lead by example.

Tying pay and bonuses to diversity could be a great agent of change.

Sporting life

Investors in ITV have reason to toast the broadcaster’s head of sport, Niall Sloane. In divvying up the match rights for Euro 2020 with the BBC, he guessed England would reach the semi-finals.

In so doing he has hit an advertising sweet spot the equivalent of the American Football revenue gusher – the US’s Super Bowl.

Cheers!