Case Study

Lloyds Banking Group | using CVC to invest for meaningful growth

Lloyds Banking Group has origins going back over 250 years. First launched in 1765, it has been through many phases, growing and adapting as the world it was part of changed. Today, its purpose is clear: to help Britain prosper. 
To help achieve that purpose, Lloyds has led the way in pursuing Corporate Venture Capital (CVC) as an investment opportunity. We spoke to Kirsty Rutter, Lloyds’ Fintech Investment Director. She told us about the company’s recent investment in UK-based fintech startup, Moneyhub, and why CVC is such a crucial part of Lloyds’ strategy. 
Tell us a bit about Lloyds’ approach to CVC. Why have you pursued this investment model? 

For us growth is, on the one hand, making smart investments. But on the other hand, what I'm really doing is identifying opportunities that our business can benefit from and the fintechs can benefit from to create a win-win synergy. We've got a lot to do, and we want to transform really quickly. The ability for a fintech to move fast is something that we want to be closer to and learn from. 
I'm not investing for pure returns – but don't get me wrong, I work for a bank so if the returns were awful, I'm sure I'd hear about it. Really, this is a strategic investment play. We see this kind of investment as being as important a strategic solution for us as building tech ourselves or buying tech in. 
The returns might take, on average, about five years. That can be a challenge, because you're putting money to work for things that are likely to blossom in the future.

My philosophy is that if you invest money in teams and products and capabilities that you're simultaneously working with, then that relationship is much stronger. You're on that journey with them, and it's an easier way of engaging hearts and minds.

Why did you decide to invest in Moneyhub? 

The decision for us to invest in Moneyhub was an easy one, because it aligned to our strategy. Open finance and open data is going to grow in ways that we don't yet understand, and the Moneyhub team are experts in this area.  

But it’s not just about what Moneyhub do, it’s about who they are. Our alignment to purpose and purpose-led organisations led us straight to the Moneyhub team, because they’re all about the purpose. Their mission to help customers make better financial decisions is at the core of everything they do.

The vision that I have, and that other executives across Lloyds share with me, is that we can work together to bring the open banking technology that Moneyhub have developed – which is their USP and their IP – to our customers. It can even drive better outcomes on the corporate side of the business. That's what I saw when the opportunity to invest in Moneyhub came along.

Lloyds is an integral part of the UK banking landscape, and Moneyhub is a UK-based startup. Why do you think the UK is a great place for this kind of investment?

We’re really lucky in the UK. About 10% of the world’s fintechs are here, around 2,500 companies. We’re the third largest hub of fintech globally, and that’s a gift. Talent has come out of that – it’s a body of talent you can’t argue with.

And where do these founders come from? They typically come from banks or financial services industries. Which the UK, especially London, is an expert in. 
We're also blessed with an awesome regulator. They've got to keep up, which isn’t an easy ask, but they're really trying – they're on that journey with us.

What excites you most about the UK’s fintechs?

The main thing I think fintechs are awesome at is imagining the future. They typically see two to three years ahead of what larger organisations are thinking about. When I started in the fintech industry 10+ years ago, it was very much the stereotype of two engineering software graduates in a garage having a cool idea. But that’s transitioned so much, even more so in the last three years.

What I see now is that fintech founders are typically ex-industry professionals, who have lived and breathed large corporates. They know their business, they know what they want, and they know how to achieve it. They’ve got frustrated with how hard it is to change things from the inside, so they go out and they solve the problem that they wanted to solve.

And because they are so laser focused on that one thing that they're going to nail, their purpose is so very clear that they can take swathes of people with them. Their speed to execution is phenomenal.  
Lloyds wants to work with purpose-driven, focused, fast execution teams, who are in it to do great stuff – to solve a problem, to deliver a fabulous outcome for a customer, to help clients do amazing things.

Who better to partner with than organisations who do nothing else but that thing that they do brilliantly? Why would you not want to work with the best?

Looking ahead to the future, what do you see happening in this space? 
Periods of constraint always create innovation. The cost of living crisis is really hard for everybody in different ways. But when you've got something terrible going on, amazing things get born from it, particularly when it comes to health. How are we going to use tech in different ways that we hadn't thought about before? It can start to solve really interesting problems. And I think that's coupled with the fact that the people graduating over the next five years come from a totally different space than I grew up in. We’re going to have this real mash up of different ways of looking at what value is and what we care about. I think it could get really exciting.  
And at Lloyds – we're  blessed with the capability of investing in companies that become an extension of what we are and what we want to be. We’re creating the ties that mean we can do things differently. And the ecosystem that comes from that, I think has phenomenal potential.

Related content