By Lars Mucklejohn
London fintech savings platform Flagstone has landed £108m funding from US private equity firm Estancia Capital Partners as it looks to tackle savings inertia and ramp up international expansion.
Estancia is set to take a minority stake in West End-headquartered Flagstone, while its co-founder and managing director Takashi Moriuchi and vice president Keegan Mitchell will join Flagstone’s board of directors.
Simon Merchant, co-founder and chief executive of Flagstone, told City A.M. that there was a “huge addressable market opportunity” in both the UK and international savings markets.
“The same principles that apply to cash in the UK market – being an ignored asset class that suffers from inertia – apply internationally at least to the same extent if not more so,” he said.
The firm, which launched in 2015, provides a platform for savers to access and maintain more than 200 account offerings from 60 UK banks. It also whitelabels services to firms including St James’s Place, Revolut and Saga.
Its international subsidiary, based in Jersey, has built several distribution relationships outside of the UK.
Flagstone noted that within the UK’s £1.7tn savings market, £1.1tn is held in accounts earning two per cent or less per year, while just 23 per cent of UK savers switched accounts to earn more interest in the first half of 2023.
The firm boasts 600,000 customers, assets under administration of £11bn and has been profitable every quarter since December 2022.
The funding boost for Flagstone comes during a tough time for the wider fintech sector as valuations tumble and higher interest rates drive up funding costs.
“It is a difficult funding environment broadly,” Merchant said. “But I think there are some signs that may be changing.”
The agreement announced on Monday is the second largest UK fintech deal so far this year, after digital challenger bank Monzo unveiled a £340m funding round led by Alphabet’s Capital G last week that valued it at £3.9bn ahead of a potential IPO.
On the possibility of a public listing for Flagstone, Merchant said it was “certainly something that’s on the list of alternatives – we’re always keeping our options open”.
He added: “We’ve got plenty of growing to do before we reach that stage. This funding is essentially intended to enable us to create a business that is three or four times as big as the business that we have today, so that’s our primary focus.”
Flagstone did not share at what valuation it had raised the money with Estancia.
Moriuchi commented: “We are excited to mark our entry into the UK savings market at a time when the opportunity to disrupt this status quo is enormous, and innovators like Flagstone must take the lead.”
The deal between Flagstone and Estancia, subject to regulatory approval, is expected to close in the second quarter of 2024.
