2019 has already been a record year for the FinTech industry, with the three largest acquisitions in the sector to date – Fiserv’s purchase of First Data, Global Payments’ acquisition of Total System Services, and Fidelity’s purchase of Worldpay – alone totalling $87 billion.
All were in the payments processing subsector. However, M&A activity in enterprise financial software accounted for 50 percent of all FinTech deals in 1H 2019 and for 75 percent of remaining deal value, as customers bet on new software saving time, reducing costs, and/or enabling regulatory compliance.
The upbeat assessment comes from corporate finance consultants Hampleton Partners. According to their latest report, venture capital in the first half of 2019 also beat previous records.
Financial Technology Partners’ figures quoted in the report reveal that Q2 funding rounds generated the highest value to date (Ant Financial’s $14 billion mega-round in 2018 notwithstanding). Analysts predict that Europe and North America will both reach record levels again this year; Europe has already exceeded 2018 deal values, with $5.8 billion raised in the first half of 2019 alone.
New banking players have seen high investment levels too, with a total of 272 rounds closed worldwide in 2019 and funds pouring into challenger banks, such as Chime, OakNorth, and N26.
Despite the positive figures, other assessments this year have revealed a sector that is fast consolidating, with investors circling more established players rather than early-stage startups – fewer, but larger, deals. The picture is inconsistent globally. For example, the Asian FinTech market saw reduced M&A activity in the first half of 2019 compared with the same period last year, with deal volume falling by almost one-third. China, where economic growth is slowing in the headwinds of the US trade war, spent only $35 billion in outbound M&A in the first half of the year – a 75 percent decrease from recent highs.
The Hampleton Partners report also reveals that professional services giant Accenture has been the biggest purchaser of FinTech companies over the past 30 months, racking up nine deals against seven apiece for Broadridge and the Investoo Group.
So how are things shaping up for the second half of 2019? According to the report, demand for real-time payment capabilities and shorter payment value chains are leading to record-setting acquisition rates. AI and machine learning acquisitions have also been rife. Meanwhile, record levels of fundraising are still flooding into challenger banks and RegTech is on the rise.
Blockchain adoption continues to spread through collaborative platforms such as Bitpay with Visa, although consumer adoption is only making gradual progress, it says.
- A separate sector assessment by CBInsights reveals that the most active US bank investors in FinTech (by number of portfolio companies) are Goldman Sachs, Citigroup, and JP Morgan Chase & Co.
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