Financial institutions M&A sector trends: credit cards/consumer finance — H1 2019 and outlook for H2 2019.
CURRENT MARKET
Consistent, marginal upward
WE ARE SEEING
- New market entrants securing funding from financial sponsors and 'big bank' venture funds (e.g., Anyfin, Salary Finance, Jaja Finance, etc.)
- Trade buyers seeking scale
- Partnerships between incumbents and technology providers (particularly biometric fingerprint technology)
KEY DRIVERS
- Financial sponsors—market opportunity to:
- Level-up in-store consumer finance solutions/ experience
- Disrupt credit card market
- Filling the void left by payday lenders
- Strategic investors:
- Big banks—tapping new markets and expanding geographical reach (e.g., Bankinter is to enter the Irish market following its acquisition of Avantcard)
- Payment providers—expanding footprint in the POS financing space
- Existing card operators—seeking technology to combat growing fraud risk (e.g., Visa's and Mastercard's partnerships with Nitecrest for the manufacture of biometric fingerprint cards)
- Decline of appetite for payday lending
TRENDS TO WATCH
- Competition from new entrants, keen to disrupt the credit card market by introducing new consumer finance alternatives and a smoother/richer retail experience
- Increasing risks associated with card businesses:
- Clampdown on "unfair" business practices (e.g., 40% reduction of fees for tourists using their cards in the EU)
- Low tolerance for IT meltdowns and malfunctions resulting in loss of coverage/customer data
OUR M&A FORECAST
The European consumer finance market is ripe for disruption. M&A activity is likely to experience an uptick as incumbents jostle to retain market share and remain competitive.
Other financial services—Publicly reported deals & situations
Healthy buyer appetite
Market highlight:
Card payments in Germany eclipse traditional cash-based payments for the first time in 2018—card payments accounted for 48.6% of total retail sales, overtaking the 48.3% of cash payments*
Private equity/Venture capital:
- Brightly Ventures: Participation in successful £4 million Venture funding round for Kaching Retail (May 2019)
- FinTech Collective: Participation in successful US$8 million Series A funding round for Anyfin (May 2019)
- Finch Capital: Participation in successful US$14 million Series B funding round for Twisto (May 2019)
- Blenheim Chalcot: Participation in successful US$32.8 million Series C funding round for Salary Finance (April 2019)
- LMK Industri: Participation in successful €48 million Seed funding round for Bynk (February 2019)
Trade consolidators:
- Paylate: Acquisition of AmmoPay (January 2019)
- NVM Private Equity and Maven Capital Partners: Participation in successful £7 million Series A funding round for Mojo Mortgages (February 2019)
- Celeres Investments: Participation in successful £3.5 million Series A funding round for Jaja Finance (January 2019)
- ING Ventures: Participation in successful US$14 million Series B funding round for Twisto (May 2019)
Strategic investors:
- Bankinter: Acquisition of Avantcard Ireland (June 2019)
- Mastercard: Acquisition of Vyze (April 2019)
- J.P. Morgan: Launch of 'My Chase Plan' (March 2019)
New entrants
- China UnionPay: European debit and credit card JV with Tribe Payments (June 2019)
- JCB International: European joint licensing agreement with Viva Wallet (May 2019)
- Marqeta: Expansion into Europe through customer relationships with Morning, Yapeal, Aplazame and Auka (April 2019)
- Apple: Launch of Apple Card and credit card/Apple Wallet JV with Goldman Sachs (February–March 2019)
- Jaja Finance: Successful £3.5 million Series A funding round, led by Celeres Investments (January 2019)
Payday lenders—had their day?
Acquisitions:
- Kruk: Acquisition of Wonga Poland (May 2019)
Disposals:
- Provident Financial: Disposal of 53,018 shares by Invesco Asset Management (March 2019)
Increasing operational risks— regulatory scrutiny
- Mastercard: Reduction by 40% of fees for tourists using their cards in the EU to settle European Commission probe (April 2019)
- Visa: Reduction by 40% of fees for tourists using their cards in the EU to settle European Commission probe (April 2019)
Combatting growing fraud risk
- Nitecrest: Partnerships with Visa and Mastercard for manufacture of biometric fingerprint card (May 2019)
- Gemalto: Biometric fingerprint card JV with Combatting NatWest (April 2019)
Wider market influence—new regulatory burdens
- Diebold Nixdorf: Merger of Diebold Nixdorf and Diebold Holding Germany Inc. & Co. (May 2019)
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