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Financial institutions M&A: Sector trends - February 2020
Insight

Consumer Finance

Financial institutions M&A sector trends: consumer finance — H2 2019 and outlook for 2020

Financial sponsors see opportunities to back new entrants targeting under-serviced customer segments, including gig economy workers and solopreneurs.

 

Overview

CURRENT MARKET

  • Flat

WE ARE SEEING

  • Partnerships are a common route to market (e.g., Simplex/OKCoin, SoYou/Bankia, etc.)
  • Financial sponsor-backed new market entrants (e.g., Portify, backed by Redalpine and Finiata)
  • The sun sets on UK payday lending—QuickQuid collapses into administration

KEY DRIVERS/CHALLENGES

  • Banks:
    • Brexit planning (e.g., Starling's new £/€ dual currency debit cards)
    • Retaining customer touch points (e.g., Bank of America's new digital debit card)
    • Fraud prevention (e.g., Deutsche Bank's Spanish 'motion code' partnership with Mastercard and Idemia)
  • Financial sponsors—market opportunity to:
    • Disrupt incumbents and control the customer experience (e.g., Uber Money's new debit and credit card offering)
    • Conquer new market segments (e.g., finance for the gig economy)
  • Payment providers—connecting digital assets to the 'real' world (e.g., Wordline's partnership with Bitcoin Suisse and Simplex's partnership with OKCoin)
  • The UK Financial Conduct Authority's interest rate caps have done their job of crippling megamargin lending

TRENDS TO WATCH

  • Increasing appetite for new technologies to combat growing fraud risk
  • Competition from new entrants, providing consumer financing options to suit lifestyle options and needs

OUR M&A FORECAST

Disruption across the European consumer finance market is likely to continue in the short term. M&A activity is likely to experience a marginal uptick as incumbents and alternative providers lock horns for customer connectivity.

 

Publicly reported deals & situations

Healthy investor appetite

Private equity/Venture capital:

  • Redalpine and Finiata: Participation in £7 million Series A funding round for Portify (December 2019)
  • Sarwa Capital: Consumer finance JV Premium Card (November 2019)
  • Deserve: Successful US$50 million Series C funding round, led by Goldman Sachs (November 2019)

Management:

  • PPRO Crosscard: Acquisition of Crosscard by existing PPRO investors (December 2019)

Strategic investors:

  • Agos Ducato: Acquisition of ProFamily (July 2019)
  • Cembra Money Bank: Acquisition of cashgate (July 2019)

Trade consolidators:

  • Paragon ID: Acquisition of Thames Technology (November 2019)

 

New entrants

  • Portify: Successful £7 million Series A funding round, led by Redalpine and Finiata (December 2019)
  • Uber: Launch of Uber Money debit and credit cards (October 2019)
  • Starling: Launch of £/€ dual currency debit cards (October 2019)
  • Crédit Agricole: Consumer financing JV, SoYou, with Bankia (October 2019)
  • National Bank of Kuwait: NFC-enabled credit card JV with Visa (June 2019)
  • Simplex: Debit/credit card US$ deposits JV with OKCoin (June 2019)
  • Amaiz: Launch of specialist lending service for 'solopreneurs' (June 2019)
  • Bank of America: Launch of digital debit card (June 2019)

 

Payday lenders—end of an era

  • QuickQuid: Collapse into administration (October 2019)

 

Combatting growing fraud risk

  • Deutsche Bank: Spanish 'motion code' card JV with Mastercard and Idemia (December 2019)

 

Click here to download 'Financial services M&A finished strong in 2019 ' PDF

 

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Financial institutions M&A: Sector trends

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