M&A Consolidation in the Fintech LandscapeNovember 27, 2018
Fintech or financial technology is a term that can broadly apply to any kind of financial activity through digital/online means like money transfers, depositing checks through one’s smartphone, raising money for a business through the online medium, so on and so forth. Basically when one carries out any kind of financial activity only through technology and without the assistance of a person is when one has adopted the Fintech landscape.
The Growth of Fintech M&A
New businesses, even a few years back, were met by issues like inertia, funding problems and even the fear of their own obsolescence. However, now with Fintech being the “in” thing, large corporations are now beginning to view fintech startups as an opportunity to scale up what they offer and even amplify their customer experience at a faster pace in comparison to their competitors.
‘The Global Fintech Report’ by PwC published in 2017 states that “82% of financial institutions expect to increase fintech partnerships between 2018 and 2023”, thus making the fintech M&A the core for the development of the financial service sectors.
Large Corporate Opting To Acquire/Merge with the Fintech Landscape
With technology being extremely important in today’s world, large corporates across businesses are now opting to get into the M&A space in Fintech. These organizations realised that, to deal with the company’s financial needs they would need to establish calculated partnerships with lean, tech-savvy teams that would help in bringing about significant benefits to their business.
Such M&A consolidation would mean:
- Cost-effective and speedy routes into the market with the help of the latest technology.
- Easy access to the demographics of a new client who prefer to engage with businesses through digital channels.
- Easy cross-selling opportunities through the digital platform.
Mergers and Acquisitions in 2018 in the Fintech Landscape:
2018 in fact has seen some of the big names in the corporate world merge and acquire some fintech startups to further their business need in various ways.Earlier in 2018 JLT Employee Benefits (JLT), acquired the award-winning digital saving and investment service Moola! The acquisition of Moola by JLT’s was to help UK businesses deliver better performance through the improved financial, emotional and physical wellness of its people. Basically with this acquisition JLT aimed at helping its clients and employees at better wealth management.
Marsh the insurance broking giant invested in ‘Bought By Many’ this year (2018). With this investment Marsh aims at collaborating with insurtech firms in a bid to open distribution channels and create innovative insurance solutions for clients.
Cake Technologies, the U.K. fintech startup was acquired by American Express as well this 2018. Cake Technologies aims at bringing about more convenience to pay restaurant or bar bills and with American Express onboard the plans are to beef up its payment options for Amex members.
Best Performing Fintech Sectors Currently
Lending: After the financial crisis in 2007-2008, the lending sector dried up, thus making space for a host of alternatives in the lending business. These made use of technology largely and the need for middlemen were cut off. Fintech being a part of this sector also meant greater returns.
Investment: With banks being reluctant to increase the rate of interest on investments the fintech landscape stepped in. Fintech courses aims at solving this issue by delivering online investment platforms.
Payments: Transferring money between accounts has also been made easy with the help of technology. It’s also less expensive as compared to the pre-fintech era!
As the fintech M&A is picking up pace and formation of partnerships and alliances among companies and fintech is gathering momentum it is becoming increasingly important for large corporates to have a targeted M&A strategy as it is highly needed for businesses to keep up with the technological growth. On the other hand, fintechs need to carefully plan and decide with whom they would like to get into an M&A space so as to be able to grow exponentially.
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