Is a Wave of Dealmaking on the Way in Europe’s FinTech Sector?

Is a Wave of Dealmaking on the Way in Europe’s FinTech Sector?

After Deposit Solutions, a German fintech firm backed by U.S. billionaire Peter Theil’s Valar Ventures, recently acquired a rival, the move had Bloomberg questioning if this is a sign of things to come in the European Union.

The deal saw one deposit marketplace, which is a digital platform that connects savers with lenders, acquire its larger, Berlin-based competitor Savedo GmbH in what the publication called “unusual transaction between the startups.”

The same week, Daniel R. Döderlein, CEO of Auka of Norway, said that he anticipates bigger players in the fintech space gobbling up many other startups. Specifically, he looks for the likes of IBM and Capgemini to go on a “shopping spree” of mergers and acquisitions starting next year, according to an interview with CNBC.

“Many of these larger players in the market that have no experience of doing payments but see that this software has a very strategic disposition, including the option of reducing their payment processing cost,” he told the outlet.

The reason that 2018 will mark a new era for action, he says, is that a new EU directive, formally known as Revised Payment Services Directive, will go into effect in January. This will allow for further progression of so-called “open banking” and the established players will want to begin implementing emerging technology into their operations.

In short, one side — the fintechs — have the innovation while the other — the establishment — has the customers. And M&A is the fastest way to bring them together.

“There’s a ton of companies out there that have more or less great technology,” Döderlein told CNBC. “But they don’t have the marketing muscle, they don’t have consumer customers, and they don’t have any financial traction.”

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