Creating Strategic Value through Financial Technology

CREATING Strategic Value THROUGH Financial Technology

"FinTech is changing the landscape of the banking industry, so bankers need to get up to speed on how to respond. Creating Strategic Value through Financial Technology is perfect for the community banker seeking to understand FinTech and how their bank might benefit."
Chris Nichols, Chief Strategy Officer, CenterState Bank

"FinTech is here and community bankers are discovering the best ways to utilize new and game–changing opportunities. This book provides a great roadmap to understanding FinTech and subsequently using it to create real value for your institution."
Al Dominick, Chief Executive Officer, Bank Director

"Community bankers are asking: ′How will FinTech change the operations of banks?′ Creating Strategic Value through Financial Technology helps provide answers. Dealing with valuation issues, this book offers FinTech success stories and failures. For bankers looking to enhance their business models through FinTech, I recommend this book as a go–to resource."
Jonathan S. Hightower, Partner, Bryan Cave LLP

Preface xi

Acknowledgments xv

SECTION ONE

CHAPTER 1 What Is Financial Technology? 3

Technology s Impact on Financial Services 3

What Is FinTech and Who Are the Players? 5

Why the Hype for FinTech? 10

Why Is FinTech Potentially So Important to Society? 12

Recent Trends and Market Conditions for the FinTech

Industry 14

Conclusion 18

Notes 19

CHAPTER 2 Community Banks and FinTech 21

Is FinTech a Threat or an Opportunity for Community Banks? 21

FinTech s Potential Impact on Bank Valuation 29

How Community Banks Can Help FinTech Companies 31

Conclusion 32

Notes 33

CHAPTER 3 The Historical Context for FinTech 35

Introduction 35

FinTech History 35

Visa and MasterCard: The Largest IPOs in FinTech History 40

Core Vendors 43

Notes 50

SECTION TWO

CHAPTER 4 State of Community Banks Embracing FinTech Today 53

Introduction 53

Overview of U.S. Community Bank Industry Trends 53

Banks and FinTech Increasingly Intersect 56

Serving More Customers Digitally 56

Evolving Regulatory Oversight of FinTech 61

Conclusion 66

Notes 67

CHAPTER 5 The Alternative Lending Niche 70

The Mortgage Market 70

The Consumer Lending Market 72

Government Regulation of Alternative Lending Platforms 78

Conclusion 79

Notes 80

CHAPTER 6 The Payments Niche 82

Trends to Watch 82

Digital Currencies and Blockchain Technology 91

Conclusion 99

Notes 100

CHAPTER 7 The Wealth Management Niche 104

Introduction 104

The Evolution of the Online Brokerage Industry 106

The Rise of Robo–Advisors 108

Conclusion 116

Notes 118

CHAPTER 8 InsurTech and the Future of Insurance 120

Introduction to InsurTech 121

Technology Trends in Insurance 123

Conclusion 129

Notes 129

SECTION THREE

CHAPTER 9 Partnering with a FinTech Company 133

Introduction 133

Conclusion 154

Notes 155

CHAPTER 10 Early Stage FinTech Valuation Issues 156

Introduction 156

Why You Should Have a Valuation Performed 157

Valuation Considerations for FinTech Companies 160

What about Preferences and FinTech Valuations? 172

Special Issues: Valuations for Other Stakeholders 173

Conclusion 183

Notes 183

CHAPTER 11 Acquiring a FinTech Company 185

Introduction 185

Recent Trends in FinTech M&A Activity 187

Metrics to Analyze FinTech Transactions 192

Accounting Considerations and Goodwill Creation in FinTech Deals 202

Special Issues to Consider with FinTech M&A 218

Conclusion 224

Notes 224

CHAPTER 12 Liquidity Options Beyond a Sale 227

Introduction 227

Liquidity Options 228

Is Your Buy Sell Agreement Solidly Built? 234

Conclusion 240

Notes 240

CHAPTER 13 Is There a Bubble Forming in FinTech? 242

Introduction 242

Factors Leading to a Bubble? 243

Signs That a Bubble May Be Forming in FinTech 246

Case Study of a FinTech Failure 246

Conclusion 251

Notes 252

Index 253

JAY D. WILSON, JR., is vice president of Mercer Capital′s Depository Institutions practice. He leads the firm′s FinTech industry team, publishes research quarterly related to the FinTech industry, and is involved in the valuation of FinTech companies, banks, thrifts, and credit unions for a variety of purposes including corporate strategic planning, transactions, equity compensation, and financial statement reporting.