Investec sets aside €57m for UK fintech loans

In a sign that a sweeping new European Union (EU) banking law may be spurring banks and fintech startups to tie-up, Investec has formed a pilot programme with MarketInvoice, a British online lender to businesses.

London-based MarketInvoice, which arranges loans for small companies secured by accounts receivable, will handle the underwriting for Investec customers in the partnership, according to the bank’s website.

Investec will provide £50 million (€57 million) in the first year to fund the loans, Anil Stocker, the startup’s co-founder and chief executive, said in an interview.

A spokesman for London and Johannesburg-based Investec declined to comment.

The deal is just the latest in a series of tie-ups between traditional financial services companies and UK online lenders in the last year.

In August, Dutch insurer Aegon placed £160 million with Funding Circle for loans to small companies.

Three months later, LendInvest raised funds from Citigroup to offer buy-to-let mortgages on its website.

More deals may be coming in 2018 thanks to the EU's new open banking law, Stocker said, even as the UK's departure from the EU appears to slow down the British economy and stoke inflation.

The legislation, set to take effect in January, will direct lenders to share their clients' financial data with rivals to bolster consumer choice in financial services.

"There are a lot of banks looking for ways to collaborate with fintechs," Stocker said.

"We think that open banking could be a bigger shift in the market than Brexit."