Report shows fintech sector flourishing with $40bn in M&A action

Blockchain platforms and insurtech firms are expected to be prime targets to continue the surge of acquisitions for the remainder of the year.

Hampleton Partners has released its latest fintech M&A report which shows a total disclosed transaction value of $39.3bn in deals for H1 2018. This is a 26 per cent increase in value from the previous 6 months.

With the sector suffering a significant slowdown in acquisitions in the latter half of 2016, 2017 witnessed an increase in transactions which sparked speculation that an M&A boom was imminent for the UK’s fintech sector. There were a reported 141 transactions that took place in the first half of 2018 including the $17bn acquisition of Thomson Reuters by Blackstone. The Reuters deal's inclusion shows the broadness of Hampelton’s criteria when it comes to defining “fintech”.

The report suggests that the sudden surge in the value of transactions is a result of “consumer and enterprise acceptance of digital banking, payments and financial data services”.

Jo Goodson, managing director at Hampleton Partners, comments that larger corporations are seeking investments to improve the efficiency of back-office operations and customer experience. RBS acquiring FreeAgent, an accounting software provider, is one example of a big bank absorbing a software company to improve growth in trading and sales.

Digital payments and transactions is a specific area within the sector which has received significant attention. Two out of the top five deals come from the segment including PayPal’s $2.2bn fee to acquire the payment provider, iZettle.

There appears to be no signs of the boom coming to an end any time soon. For the remainder of 2018, Hampleton sees blockchain firms as prime targets when a number of platforms come to market. Additionally, insurtech could be a catalyst that instigates a surge in deals when “traditional insurers step up their efforts to innovate their consumer and enterprise offerings through M&A”.

Goodson added that PSD2 is another component that could drive M&A, saying: “Going forward, the implementation of Europe's Revised Payment Service Directive, or PSD2, is likely to be a major game changer for the deal landscape, as it encourages pan-European competition and participation in the payments industry, including non-banks.”