July 15, 2016 – Solganick & Co. has issued its latest Financial Technology (FinTech) M&A Update for Q2, 2016. The volume and size of completed FinTech M&A transactions have been increasing globally. Here are the highlights of the report:
- Overall M&A activity across the Financial Technology industry remains robust YTD 2016. Several notable deals were announced in Q2 2016, encompassing payments, software, outsourcing, etc.
- In Q2 2016, the largest transaction announced in the Financial Technology sector was Brazil’s BM&F Bovespa announced acquisition of Cetip for $3.3 billion.
- Other notable M&A transactions announced this quarter include Blackboard’s announced acquisition of Higher One and Mercury UK Holdco Limited’s announced acquisition of ISP Processing.
- The median revenue multiple in H1 2016 fell to 1.7x from 2.0x in H2 2015.
- Within Financial Technology, the M&A environment remained favorable. In Q2, FinTech totaled 58 deals, with a value of $23.81 billion in closed transactions.
FinTech M&A Trends & Drivers 2016
Transaction Security: As technology continues to advance within FinTech along with steady growth in e-commerce and mobile usage, more people are starting to turn to card-not-present transactions. This is creating a need for better security measures in order to combat fraud and to safeguard users’ information. Looking forward into the next couple of years, it can be expected that many more merchants and issuers will adopt and integrate newer security measures such as encryption, tokenization and biometrics.
Global Money: Consumers and businesses with global mobility are addressing their cross-border transaction needs through the emergence of International Payment Specialists. These specialists can provide customers and businesses with cross-border payment and foreign exchange services that are more cost-effective, efficient and transparent than what traditional banks can offer. Some notable players in the space include Currencies Direct and FIRMA Foreign Exchange.
Partnerships Between Old And New: While traditional banking institutions still maintain the majority of customer relationships, there are niches in FinTech where the new and innovative combine with the more traditional methods of banking. FinTech presents financial institutions with new strategic options, with the most interesting and notable option being partnerships. We already see banks and FinTech companies partnering in lending and wealth management.
Digital Wealth Management: Digital wealth managers or robo advisors are beginning to emerge. Although digital wealth managers currently manage a small portion of the assets within the industry, digital wealth managers have the potential to cause massive disruption in the wealth management industry. Robo advisors like Personal Capital and Wealthfront are providing many of the same services such as financial planning at a fraction of the cost that traditional advisors charge.
Blockchain: Blockchain is a distributed ledger of all transactions between counterparties across a peer-to-peer network. Adopting blockchain can reduce counterparty and operational risk, eliminate market inefficiencies, reduce fraud and increase transparency. In the financial services industry, blockchain opens up various revolutionary possibilities such as smart contracts. Firms like IBM are exploring and developing new forms of blockchain applications.
You can review and download the complete report here: Solganick Co FinTech M&A Update (Q2 2016) Final