The financial services sector is undergoing a technology-driven metamorphosis. Highly-publicised security breaches, heightened regulatory oversight and obligations and more stringent capital requirements are forcing the industry to radically rethink its entire structure
However, these three challenges pale in comparison to the transformative power of technology. Fintech is fundamentally changing financial services.
Nimble disruptors in the form of innovative start-ups have been joined by the world’s largest technology companies as they seek to take market share from incumbent financial services providers. Meanwhile, regulatory scrutiny and operational complexity demand new tools and solutions to reduce cost and improve productivity. Digital native customers have exacting demands.
For many financial services businesses – from banks and insurers to private equity firms and family offices – it will not be possible to rise to these challenges purely by looking within. Organisations will need to consider acquisitions and investments to secure access and exposure to the technologies and skillsets required to operate successfully in the marketplace of the future.
The good news is that there is no shortage of innovative fintech businesses pioneering new tools and solutions with the potential to transform every aspect of financial services – both in customer-facing functions and in the back and middle office. However, competition for these fintech stars is fierce. Dealmakers in the fintech sector face tough contests from rivals equally determined to secure the prize assets.
Against this backdrop, Reed Smith has set out to chart the current state of play in fintech M&A. Our exclusive survey of leading executives in the financial services sector identifies the sectors and regions where the competition has so far been most intense, as well as those areas that are likely to be in demand in the months and years ahead. It also focuses on deal drivers and considers the challenges that active participants in this marketplace must now confront.
Our findings reveal that, even in this highly competitive market, investors are committed to pursuing new deals. Many have ambitious plans to build fintech capacity, spurred on by the fear of being left behind. Fintech is the future and the future is now.
Partner, New York