Fintech

FinTech: The End of the Beginning – Our July 2018 Fintech Market Update

July 2018

Dear Clients and Friends,

Our latest FinTech m&a report can be found below. It highlights m&a trends and transactions in the seven segments of the FinTech world that we follow and sometimes lead.

Recently Capgemini, the consulting, technology and outsourcing services company, in collaboration with Efma, a global non-profit organization, issued its second annual World FinTech Report. The authors may not have intended their report to call the “End of the Beginning” of consumer FinTech, but that is what they have done – and we agree. The Beginning is over. The Future is before us.

Consumer-oriented Fintech isn’t new. We started replacing human bank tellers with technology in the 1960s (ATMs); stock brokers in the 1980s (E*TRADE and other on-line brokers); PayPal was founded almost 20 years ago. Betterment and other robo-advisors began replacing wealth managers a decade ago; 15 years ago Prosper, Funding Circle and other Peer-to-Peer lenders did the same to bankers.  

A few things are new: one is the sheer number of consumer FinTech apps that have proliferated – combined with the speed of adoption, both of which surprised many in the industry. Another is the aggressive (if belated) response by many “traditional” firms.  Suddenly, the “hunted” are becoming the hunters, as firms like American Express, Citi, Goldman Sachs, JP Morgan, MasterCard, Visa and others invest in technology, acquire, integrate and offer the sorts of “…quick, convenient, seamless … efficient, portable, and delightful…” financial services that consumers – and businesses – have come to expect. And to them we now add BigTech firms like Alibaba, Facebook, Google, Oracle, TenCent, and WeChat. As Capgemini noticed – and we talked about in our October 2017 Report – FinTech is increasingly BigTech. All this has given new impetus to companies that sell “tools” to allow clients to compete in this brave new world.

The disrupters are far from dead and the incumbents are far from safe. There is plenty of room for both. And both are finding growth more expensive and profitability more challenging than they had assumed. (See for example CAN Capital, OnDeck and Lending Club – or, if you prefer, try to find Beepi, Dealstruck, or Pay By Touch.) The smart ones (old and new) have realized that success requires more than technology. It also requires knowledge of pain points, trust building, brand building, customer centricity, a sustainable organization – and a lot of money. This is certainly not the beginning of the end for the innovators in Consumer FinTech; but it’s is clearly the End of the Beginning.

We provide unbiased expert counsel to those who would buy, sell, raise capital or invest in excellent middle-market FinTech firms. It’s a good place to be. Many recent transactions are discussed in the report found below. A few of the more interesting ones include:

  • PayPal (NASDAQ:PYPL) agreed to acquire HyperWallet for $400mm,
  • Dataminr (New York, NY) raised $392mm in funding at an implied valuation of $1.6bn from new investors including Morgan Stanley,
  • Deutsche Börse (XTRA:DB1) agreed to acquire GTX ECN from GAIN Capital Holdings for $100mm, valuing the company at an implied 4.35x LTM revenue,
  • Nets (Ballerup, Denmark) agreed to acquire a majority stake in Dotcard for PLN 255mm (~$85mm),
  • LendingPoint (Kennesaw, GA) raised $53mm in a debt funding round from Paragon Outcomes.

Please see our July Fintech M&A Update below.

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