Boston, MA – Capstone Headwaters released its Financial Technology & Payments Industry Update today, reporting that COVID-19 lockdowns have created heightened demand for the implementation of financial technology and digital payment solutions. The pandemic has also prompted an increase in e-commerce activity, and the widespread adaptation of contactless and digital payment methods via digital wallets such as Venmo. As the industry continues to experience such growth, established financial technology companies (i.e. PayPal, FIS, Repay, Paya), look to strategic acquisitions to safeguard their market position and bolster software suites. Payment software providers are especially attractive to buyers, with the segment representing 38% of the total mergers and acquisitions (M&A) announced in 2020, a 10% increase year-over-year (YOY).
“FinTech is here to stay. The most important paradigm shift is noticeable not only from the way consumers are interacting digitally but the way insurance companies, banks, and wealth management firms are increasingly becoming more digital in order to have more wholistic and effective engagement with their customers, vendors and suppliers,” said Managing Director David Francione, lead contributor on the report.
The way consumers pay for goods and services is becoming more digitalized and connected. The number of initial public offerings (IPOs) and public offerings via special-purpose acquisition companies (SPACs) is expected to continue throughout 2021 as companies look to unlock value in their businesses at relatively high valuation multiples. This is not expected to abate anytime soon given the amount of capital in the private equity markets and that is available in the public markets.
Throughout 2020, a number of IPOs were announced in the FinTech & Payments industry as companies scale their business through capital gained in the public markets. Notably, Lufax.com (NYSE:LU), a technology empowered personal financial services platform, raised $2.4 billion at IPO with a post IPO valuation of $32.9 billion. For small to mid-sized technology companies looking to be taken public, reverse-mergers with SPACs, serve as a more viable option as they allow the provision of financial projections based on proprietary innovations. Market activity in the FinTech & Payments industry is expected to continue through 2021, with a particularly favorable outlook on the Digital Payments segment.
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