5 Fintech Acquisitions Illustrate Where The Sector Is Heading
An online business bank, a robo-advisor and a bitcoin exchange were just a few of the most important fintech acquisitions so far this year. Each was revealing in itself with one showing how bitcoin is yet to solve its biggest problem while another highlights the importance of design in banking.
Spanish BBVA is trying to stay ahead of the disruptors by spending heavily to invest in and acquire fintech startups. Finnish banking startup Holvi is its latest addition. The online business bank caters for small and medium-sized business, saying it’s targeting the next generation of European entrepreneurs. This acquisition helps give BBVA a foothold in Finnish banking and it can also use Holvi’s experience and technology to improve its business in other countries. Other notable BBVA fintech moves include its purchase of a 29.5% stake in UK challenger bank Atom and the purchase of US online bank Simple. Snapping up promising fintech firms is still eminently doable by any of the large banks as even the larger ones are still quite small by the standards of finance. Expect many more deals where promising fintech startups are snapped up by the big banks.
UK challenger bank Atom made an acquisition of its own this year, buying design house Grasp. It’s a move to bolster the user experience of challenger, which is one of its major selling points.
“We wanted to double the size of the development team in a very short period of time and one way to do that was to ask the guys if they wanted to join on a permanent basis,” says Atom Bank CIO Edward Twiddy.
Like all startups challenger banks are not weighed by software that’s decades old, allowing them experiment and reinvent how people use banking. Atom Bank is a good demonstration of this, as its app is based on the Unity platform – one that’s traditionally used for video games.
Buying into the new is also very much a part of wealth management and recently there’s evidence of a boom. BlackRock bought FutureAdvisor, Fidelity Investment bought eMoney Advisor and Northwestern Mutual bought LearnVest. Atlanta’s Invesco is the very epitome of an old established investment firm. It was established in 1935 and manages of hundreds of billions of dollars in assets. Jemstep, on the other hand, is a Silicon Valley startup and was founded in 2008. Yet just like with more traditional banks investment firms are trying to buy their way out of disruption by snapping up smaller firms. For businesses that require a large sales and support team the effect can be transformative, as Jempstep will get access to Investco’s 300 person strong sales team.
Transformation is also very much on the mind of Reserve, but in this case it’s restaurant reservations that it’s trying to shake up, by replacing traditional phone bookings with an app. Where fintech comes in is in the option to pay within the app. Reserve already had an option to help users pay the bill within the app, but did not integrate with many point of sales systems. The Dash acquisition helps solve this, as Reserve will now be able to integrate with systems such as Aloha and Micros. Such integrations are essential in payments as without them these apps aren’t going to work. Restaurants aren’t going to change their point-of-sales system for every new reservation app on the market.
Despite being based in San Francisco, Kraken mostly handles people going from Euros to bitcoin and back again. It’s looking to expand its USD transactions, which is why it’s buying New York-based Coinsetter. It follows a similar acquisition it made last April when it bought Canadian bitcoin exchange Cavirtex. This sort of consolidation is unsurprising as there are many bitcoin exchanges out there offering similar services. That Kraken needs to make these acquisitions to expand into other currencies also shows the limits of bitcoin, as people still need to regularly move their money back into a traditional currency, since only a handful places accept the cryptocurrency.