What do you see as the primary drivers behind fintech acquisitions?

James Wilkinson: Fintech solutions are opportunities to create revenues and growth. For example, a new trading platform may get formed externally from banks with a simple goal — to deliver more efficient results for less money, by bringing the trading costs down to the users of the exchange while still driving high profits. That may not be an M&A opportunity on day one, but there's a profitable opportunity there. It's traditional, value-driven capitalism at its heart. The sheer development of new ways to reach customers and provide new services to customers is immense and that is something that banks have not fully considered in the past. That is starting to become an increasing focus outside of the traditional business of deposit-taking. 

To what extent is the rise of fintech, and therefore fintech M&A, being driven by demographics?

JW: Banks realize that they need to reach new customer bases, because millennials and Generation Z don’t have the same ties to traditional banking that previous generations had. Any service that can be delivered via smartphones is seen as advantageous because it's so much more convenient. People rarely deposit cheques in banks anymore. The first innovation was employers making direct deposits, but now, if someone writes a cheque, you can take a photo of it on your phone and an app deposits it in to your bank account. People of all generations are now reaching the stage where they want efficient, convenient services, and that’s really driven by the start-ups. 

Is the motivation of banks pursuing fintech M&A to win new customers?

JW: That's part of it. Ultimately it's about satisfying expectations and demand, and that speaks to winning new customers but also customer outreach and retention. If Bank A offers enhanced technology solutions to its customers and Bank B does not, people are going to opt for Bank A. This is prompting banks to engage in M&A and collaborate to develop solutions to address customers' needs. For instance, we have seen a consortium of major financial institutions back mobile payments platform Zelle, and that is a clear and direct response to the success of the Venmo app.