Tech control: How fintech M&A is shaping the financial future

Fintech M&A dealmaking set to soar in 2019

November 2018: 91% of fintech-focused investors and 94% of banks and financial institutions are planning two or more fintech acquisitions in the next 12 months, according to a new survey by Reed Smith and Mergermarket.

The report, which features interviews with 100 corporate senior executives (CEO, CIO, Director of Strategy) globally, highlights the increasing importance of the fintech M&A market.

“There isn’t a significant financial services institution that isn’t already either a consumer or developer of fintech,” said Herb Kozlov, a partner at Reed Smith. “I think it’s on the radar of every major institution because they’re at a competitive disadvantage if they’re not as well positioned as their competitors to adopt new technologies.”

Key drivers for fintech investment identified by respondents included the need for enhanced compliance and reporting functionality, the need to upgrade legacy IT systems, and improved customer outreach through digital/mobile.

Maria Earley, a partner at Reed Smith, added: “There has been a lot of adoption of machine learning and AI in the investment and payment spaces. I think that payments are really moving to machine learning as well as blockchain. Technologies that are moving forward are then being gobbled up by the bigger institutions.”

While dealmaking activity in this space has been most apparent in European markets such as Germany and the UK, there is growing potential in other markets, with China and Singapore, for example, being seen as possible key regions for investment in technology.

“In Singapore, the jurisdiction has made becoming a fintech hub a priority,” said Reed Smith partner Matthew Gorman. “And the monetary authority has attempted to be supportive with sandbox initiatives and some regulatory guidance, without being overly restrictive.”

Other key findings from the report include:

• 76% of banks/financial institutions feel that fundraising for fintech firms will increase considerably over the next 12 months, compared to 67% of fintech-focused VC/family office/PE investors.
• 54% of fintech-focused VC/family office/PE investors are considering investing in data analytics companies. 28% of banks/financial institutions see robo-advisory companies as their most important future M&A targets.
• 46% of banks/financial institutions expect distributed ledger technology focused on cryptocurrency to see the biggest increase in valuation over the next 12 months, compared to 42% of fintech-focused VC/family office/PE investors.

Download the Report directly from Reed Smith

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