Fintech CEO says tech giants like IBM may go on M&A ‘shopping spree’ for startups in 2018
- Tech giants like IBM could go on a mergers and acquisitions “shopping spree” for fintech start-ups next year, the CEO of Auka told CNBC.
- Fintech firms would provide the capability but not the customer relationship, he said – which would be where larger companies kick in.
- Auka is a cloud-based mobile payments platform that develops products for 17 banks.
Tech giants like IBM and Capgemini could go on a mergers and acquisitions “shopping spree” for financial technology (fintech) start-ups next year, the chief of one such start-up has told CNBC.
Daniel Döderlein, CEO of Norwegian fintech startup Auka, said that tech behemoths that have shared a long-standing relationship with banks but still rely on older technology would begin to show an interest in a “flood” of new fintech firms.
A new European directive, which becomes effective in January 2018, would enable third party businesses to monopolize on banks’ software and customer data to build new products – something referred to in the fintech world as “open banking”.
Döderlein, whose company helps develop mobile payments products for 17 banks, said that this would result in big, mainstream tech companies snapping up smaller fintechs to harness the newer technologies they have on offer.
“What we see predominantly throughout that whole sector is that their capability in terms of the technology you need to serve this next leg of the journey, once all the floodgates are being opened up in January 2018, is not necessarily present. So they will probably go on a shopping spree and do a lot of M&A,” he told CNBC over the phone last Monday.
He added: “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.”
‘They need technology’
Auka’s CEO said that larger players would start to acquire “fragments” and “niche verticals” – vendors that cater to a specific market – because larger players would need payments technology in place to exploit the EU’s Revised Payment Services Directive (PSD2).
“They need technology, all of those larger companies – fragments and verticals that will pop up – they need technology to do that and that is where the force of fintech is going to go,” he said.
Fintech challenger banks like Starling and Monzo would provide the technological capability, but not necessarily the relationship with consumers – in stark contrast to larger third party companies, he said.
“There’s a ton of companies out there that have more or less great technology, but they don’t have the marketing muscle, they don’t have consumer customers, and they don’t have any financial traction.”
Auka is a cloud-based white label mobile payments platform that enables financial institutions to launch their own mobile payments products to merchants and consumers.
The start-up was not able to tell CNBC which banks it provides payments services for.
Neither IBM nor Capgemini were immediately available for comment when contacted by CNBC.