FinTech Mergers Lead To Big Investment Returns

Recent data shows that 75 percent of the world's internet-enabled consumers used a FinTech application to move money last year, a sharp increase from the 18 percent that did so in 2015. So it’s not surprising that 2019 saw a record number of mergers & acquisition in the FinTech and digital payment space, with over $195 billion in deals— more than 3 times the value of the previous year.

As Daniel Laboe of Zacks recently wrote, some of the biggest deals of 2019 would also make “suitable” long-term investments for those looking to add FinTechs to their portfolio.

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Some of the biggest deals to happen last year include Fiserv’s acquisition of First Data for $22 billion in an all-stock deal. The merger of the two firms will offer leading technology capabilities for a variety of payments and financial services, including account processing and digital banking solutions; card issuer processing and network services, eCommerce, and integrated payments.

“The acquisition of First Data should progressively create substantial cost and revenue synergies that thrust this company into strong profitability,” wrote Laboe. “These shares have grown 43 percent over the last 52-weeks as the implications of this merger begin to be priced-in.”

Laboe added that the company is working to generate $500 million in revenue and $900 million in cost synergies once the two firms have completely merged.

FIS and Worldpay—the No. 1 global FinTech provider and the No. 1 global merchant acquirer, respectively—also merged last year in a $43 billion deal. The combined firm will have over $12 billion in annual revenue, as well as a “best-in-class” portfolio of digital payment solutions for merchants, banks, capital markets. In addition, FIS recently took a majority stake in Virtus Partners.

And just last month Visa announced that it was acquiring Plaid — which allows consumers to share their data with thousands of apps — for $5.3 billion. Visa noted that the acquisition will enable it to work more closely with FinTechs through all stages of their development and drive growth in Visa’s core business.

But while Laboe said that 22 out of 24 analysts are currently calling Visa a buy, he believes these shares are fairly valued right now.