The financial technology sector is currently seeing a boom in investment and strong mergers and acquisition activity as new technology and changing customer behaviors transform financial services. Much of this activity involves new FinTech companies that are developing innovative and disruptive products.
Start-ups focused on new payment solutions and peer-to-peer (P2P) lending in particular are challenging financial institutions’ existing business models. With estimates suggesting investment into FinTech tripled between 2013 and 2014, the sector offers exciting opportunities for both strategic buyers and financial investors.
Key conclusions from this report include:
- Technological advancements are reshaping financial services. The unrelenting development of mobile devices, modern methods of data analysis (big data), social media and the migration of data into the Cloud have created opportunities for new FinTech companies looking to complement and challenge existing financial services providers.
- Changing customer behaviors are also a key driver. New regulation and strict bank lending requirements have come at a time of general consumer disillusionment with traditional banking products, meaning they are willing to turn to new banking products and technologies.
- Accelerated investment activity. Global FinTech investment has increased considerably in the last 18 months. A number of start-up companies in the payments and P2P lending subsectors are using these funds to accelerate growth, develop new products, move into new markets or expand their global presence.
- Active M&A landscape. Innovative companies in the payments and P2P lending spaces have triggered significant M&A activity in the last couple of years. Established market participants have targeted new generation payment companies to integrate new technology and products to their offerings. New market entrants have also been active buyers in the payments and P2P lending spaces as they look to move into new markets and expand internationally.
- M&A outlook is favorable. Further consolidation is likely between market participants. The growing fragmentation of the FinTech sector and the highly innovative nature of payments and lending in particular will see trade buyers continue to actively pursue niche players that are developing new solutions in these areas. Investor exits through trade sales and initial public offerings (IPOs) are also likely to increase.