The Robots Are Coming. Our Fintech M&A Report for October 2018

Oct 25, 2018

The Robots Are Coming. Our Fintech M&A Report for October 2018

Fintech, Market Update, New M&A Addition, Newsletter 0 Comments

Dear Clients and Friends,

Our latest Fintech m&a report can be found here. It highlights m&a trends and transactions in the seven segments of the Fintech world that we follow and sometimes lead. Please click here for our October Fintech M&A Update.

Just over a year ago, we published a piece on the relationship between “AI” (Artificial Intelligence) and North Korean missiles. We noted the AI focus of investor Masayoshi Son (the founder of Softbank) and his new “Vision” Fund and pointed out that Mr. Son and Kim Jong-un are not alone in chasing the pot of gold at the end of the AI rainbow. China is investing billions in AI, as are GE, Google, IBM, Intel, Microsoft, Salesforce, Softbank, the CIA and the Department of Defense. A critical mass of the logical first applications for AI are upon us – and we call them robots.

Robots and Fintech have long been intertwined; we even use the prefix “robo-advisors”, some of which have replaced many functions once performed by wealth managers. Sometimes we call them by other names such as “ATMs”—automated teller machines—that replace human tellers receiving and dispensing money and information; or “chatbots”—computer programs—that have text conversations with human users; or “virtual assistants”—interactive programs—that have voice conversations with users. Despite what we call them, all of these examples use AI to access databases and CRM systems to answer questions and direct users to other resources (often human) 24 hours a day, 7 days a week—thereby replacing the intermediary human agents.

Last year, Deutsche Bank’s CEO, John Cryan predicted “a bonfire of industry jobs” as the robots march forward.

He may be right in the long run. Robots are certainly eliminating manual intervention in many Fintech tasks including loan origination, customer on-boarding, account validations, customer service, trend analysis, quantitative research, algorithmic trading, report writing and more. Accenture writes of “Robotic Process Automation” as a route to “… better service, fewer mistakes, a full audit trail, more scalability and yes, lower costs.”

While robots may have replaced off-shore customer service representatives just as they once replaced pool typists and mail room sorters, so far, robots have not been all bad for most mortgage bankers, payment processors, P&C insurers, private bankers and wealth managers. Instead, robots have allowed them to spend less time on repetitive labor intensive roles and more on roles that require more creativity and brain power. So we’re more sanguine than Mr. Cryan. We aren’t seeing total Fintech industry employment decreasing by much yet, instead we’re seeing more industry creativity.

We know many Fintech companies around the world that are leveraging AI, and we enjoy advising them as they seek to buy, sell or raise capital. More information on the trends, transactions and m&a values in the seven segments of the Fintech world that we follow and sometimes lead can be found in the following report.

A few of the more interesting recent transactions include:

  • Stripe (San Francisco, CA) raised $245mm in an equity funding round led by Tiger Global Management, increasing the company’s valuation to $20bn,
  • Nasdaq (NASDAQ:NDAQ) agreed to acquire Cinnober for SEK1.7bn (~$190mm), valuing the company at an implied 4.4x LTM revenue,
  • Lianlian (Hangzhou, China) raised ¥1.0bn (~$147mm) in a Series C funding round led by Sequoia Capital China and Boyu Capital,
  • Enigma Technologies (New York, NY) raised $95mm in a funding round led by multiple investors.

Please see our October Fintech M&A Report here.

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