Financial institutions M&A: Sector trends - February 2020: Consumer Finance

White & Case LLP
Contact

White & Case LLP 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)

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP
Contact
more
less

White & Case LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.