Creating Strategic Value through Financial Technology

Jay D. Wilson, Jr.

• Publisher: Wiley
• Year: 2017
• Print ISBN: 9781119243755
• eBook ISBN: 9781119243861
• Edition: 1
• Topic: Business
• Subtopic: IT Industry
• Index: Business

Lessons in innovation from key FinTech trends and successes

Creating Strategic Value through Financial Technology explores the growing Financial Technology (FinTech) industry to provide insight on how traditional financial institutions and FinTech companies can boost innovation and enhance valuation in a complex regulatory environment. In plumbing the depth and breadth of several niches within in the FinTech sector, author Jay Wilson uncovers key themes that have contributed to the industry's success; in this book, he maps them together to provide useful guideposts for investors, entrepreneurs, and traditional institutions looking to facilitate growth as technology and financial services collide. With an expert's perspective on FinTech history and outlook, certain trends and examples of value-enhancing strategies stand out. FinTech niches covered include: payments, crowdfunding, alternative/marketplace lending, the blockchain, and technology solutions in the context of banking, insurance, and investment companies.

There is no denying the growing importance of technology in the financial services industry, and the FinTech sector offers valuable solutions for a diverse array of financial services providers and their customers. This book guides you through several niches of the FinTech sector, and highlights the most important takeaways from recent endeavors.

• Navigate the financial technology sector
• Enhance customer and product offerings
• Improve efficiency and cost structure
• Enhance profitability and company valuation from the intersection of technology and finance

Innovation and customer preference is a key driver of FinTech's growth. Customers are demanding better value and convenience, and the organizations that provide it are reaping the rewards of growth. As financial regulations grow more and more complex, and customers are presented with more and more options, it is becoming imperative for traditional institutions to modernize processes and carve out a place in the future of financial services. Creating Strategic Value through Financial Technology provides a handbook for navigating that space, with practical guidance on how FinTech companies and traditional financial institutions can enhance profitability and valuation from the trends.

SECTION Three

Section Three covers a range of topics important to both executive/board members of traditional financial services companies like banks as well as FinTech companies and their partners and investors.

Chapter 9 delves deeply into FinTech partnerships and analyzes the key strategic questions facing both FinTech companies and banks when assessing potential partnerships. This chapter provides insights into how to look at these strategic questions with an eye toward how each strategy could potentially affect the valuation and profitability of banks and FinTech companies. For example, a key question that community banks face is “Should we focus on building our own FinTech platform/tools, selectively partner with Fintech companies, or acquire FinTech companies?” A key strategic question for FinTech companies is “Should we focus on developing partnerships with existing traditional financial services companies or should we focus more on disruption?”

Chapter 10 focuses on issues important to early‐stage FinTech companies and investors/acquirers (including banks) and addresses the following questions: “How do you value an early‐stage FinTech company?,” “How do you value venture capital investments in early‐stage FinTech companies?,” and “When are valuations of early‐stage FinTech companies needed?”

The next two chapters focus on key issues facing more mature FinTech companies and their bank partners/potential acquirers and look at two potential strategies. Chapter 11 focuses on the key issues related to steering a FinTech company through to a successful exit such as an acquisition or merger. Additionally, this chapter touches on key considerations for banks that may look to acquire FinTech companies. Key questions answered in this chapter include: “What are some recent historical trends in FinTech exit activity?,” “How can acquirers analyze the potential valuation and financial impact of a FinTech acquisition?,” “How can banks compare those growth opportunities to other more traditional growth opportunities like acquiring other banks or building branches?,” “What are some challenges to structuring acquisitions of FinTech companies by traditional financial services companies like banks?,” and “What are some ways that banks can structure a FinTech acquisition to minimize some of these issues?” Chapter 12 focuses on key issues facing FinTech companies and their investors/partners when the company continues to operate independently and managing the business to maximize valuation and returns for shareholders. One key question addressed is: “What are ways to enhance liquidity if the FinTech company does not exit through an IPO or sale and continues to operate independently?”

Chapter 13 explores the question: “Is there a bubble in FinTech?” Up to this point, we have discussed the factors contributing to the excitement and interest in FinTech but this final chapter examines the potential over‐exuberance in the sector. It also explores challenges for the sector as it continues to evolve and mature. Additionally, we present a case study of a FinTech company whose ending was not successful. Hopefully, this chapter will help banks and FinTech entrepreneurs realistically assess opportunities and market potential and ultimately enhance profitability and/or efficiency through proper utilization of FinTech.

CHAPTER 9
Partnering with a FinTech Company

INTRODUCTION

Banks are starting to realize that they must develop a strategy that considers how to evolve, survive, and thrive as technology and financial services increasingly intersect. A recent survey from BankDirector noted that bank boards are focusing more on technology with 75 percent of respondents wanting to understand how technology can make banks more efficient and 72 percent wanting to know how technology can improve the customer experience.¹

For these reasons, a number of banks are seeking to engage in discussions with FinTech companies. The right combination of technology and financial services through a partnership has significant potential to create value for both FinTech companies and traditional financial institutions.

FinTech presents traditional financial institutions with a number of strategic options, but the most notable options include focusing on one or some combination of the following: building their own technology solution, acquiring a FinTech company, or partnering with a FinTech company. While we do not yet know which strategy will be most successful...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Table of Contents
• Preface
• Acknowledgments
• Section One:
• Section Two:
• Section Three:
• Index
• End User License Agreement