Tuesday, 21 May 2019

We’ve written recently about the record amount of venture capital funding that fintech companies are receiving, but 2019 is also shaping up to be a bumper year for mergers and acquisitions in the fintech sector. According to S&P Global Market Intelligence, the first few months of 2019 alone have produced three of the biggest fintech merger announcements ever made.

In January, payments processor Fiserv agreed to buy First Data, which owns the popular merchant processing platform, Clover, for around $22 billion.

In February, an investor group comprised of Hellman & Friedman, Blackstone Group, Canada Pension Plan Investment Board, JMI Management and GIC acquired Ultimate Software for nearly $11 billion. Ultimate Software is a Software-as-a-Service platform that provides HR software solutions and HR payroll for businesses.

And in March, Fidelity National Information Services (FIS), a processor for debit and credit card transactions, agreed to buy Worldpay, a merchant processor, for $33.5 billion. When that deal is finalized, it will be the largest fintech deal ever.

Why all this activity in such a short space of time? Motley Fool’s Matthew Cocrane, who wrote about S&P’s findings in a recent article, says it’s a product of disruptive fintech upstarts giving traditional financial services firms a run for their money.

 

“Newer players, such as PayPal and Square, are much more digitally savvy than the industry’s legacy participants and continue to introduce innovative solutions that disrupt the old way of doing business. To fight back, companies are joining forces.”

–Matthew Cocrane, Motley Fool

 

He cites, for example, the fact that Fiserv CEO, Jeffery Yabuki, specifically mentioned the success of credit card processor Square for causing fear within the banking industry and serving as a catalyst for the First Data acquisition. He points out that FIS CEO, Gary Norcross, has also noted the intense competition in payments processing from industry disruptors.

Cocrane doesn’t think the pace of consolidation will abate any time soon.  “Newer players, such as PayPal and Square, are much more digitally savvy than the industry’s legacy participants and continue to introduce innovative solutions that disrupt the old way of doing business,” he writes. “To fight back, companies are joining forces. With disruption showing no signs of abating, don’t expect the industry’s consolidation to cease.”

We’d have to agree – and not just in the payments processing space. Throughout the banking and payments industry, new fintech companies and new technology are disrupting the old and inefficient ways of doing business and providing consumers and businesses with far more convenient solutions.

 

Throughout the banking and payments industry, new fintech companies and new technology are disrupting the old and inefficient ways of doing business and providing consumers and businesses with far more convenient solutions.

 

White label banking and payment APIs, like the ones provided by Open Platform, are just one part of this rapid transformation, but we believe they play a crucial role. They provide fintech companies with secure and convenient access to banking and payments technology that speeds up time to market and allows them to roll out even more innovative solutions for their customers.

That’s likely to drive more merger and acquisition activity among established players, so buckle up. 2019 has already produced some record-breaking deals, but it may not be done yet.

If you would like to find out more about how your company could use Open Platform’s suite of banking and payments APIs, contact us.

 

The Open Platform team

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