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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Many analysts predicted the latter half of 2020 would be flush with M&A deals. As the economic effects of the pandemic begin to take their toll, some fintechs are more open to exiting earlier than they had planned.
Additionally, volatile stock market conditions are making IPOs less appealing. This may be what swayed Kabbage, which had long-been rumored to IPO after becoming an early fintech unicorn, to agree to be acquired by American Express.
These factors have made August, which is typically a very sleepy month for fintech news, into a busy time for M&A activity. Here’s an aggregation of some of the top deals this month.
What catches your eye when it comes to fintech headlines? A big IPO? A major venture capital investment? Or a huge move on the M&A front?
For those whose eyebrows bounce highest when a major acquisition is the talk of the day, one reason why is that acquisitions often but not always signal a major recognition of value in both an individual company and in a line of business. If a venture capitalist investing in a startup is putting its money where its mouth is, then an incumbent acquiring a startup is putting its business where its mouth is, and that’s a moment worth paying attention to.
In this context, NerdWallet’s decision to acquire U.K.-based Know Your Money – announced over the weekend – is a testament to the way personal finance comparison platforms are helping consumers navigate the world of loans, mortgages, and small business banking. A financial service price comparison site in operation for fifteen years, Know Your Money helps consumers in the U.K. by providing deals on financial products and services from brands ranging from Virgin Money and Funding Circle to ANNA and Countingup.
“Recently, the volatility of the stock market, unemployment, and plunging interest rates have consumers facing financial challenges they’ve never dealt with before and searching for content and products to help them navigate their new normal,” NerdWallet CEO Tim Chen said. “Because of this, there has never been a better time to expand the reach of our financial guidance and grow our business, and there is no better place to start than the U.K.”
Terms of the acquisition were not disclosed. But NerdWallet’s interest in expanding to the U.K. likely comes as welcome news to a financial services community that has seen a number of fintech departures from the country in 2020. To this end, post acquisition, the Know Your Money team will become a NerdWallet subsidiary, with all of the company’s executive and workers remaining with the firm. Know Your Money is the premier financial services website in the U.K. with more than five million consumers and 1.2 million businesses using its platform.
San Francisco, California-based NerdWallet was founded in 2009 and has raised $105 million in funding from investors including Camelot Financial Capital Management and IVP. Know Your Money is the personal finance company’s second acquisition; NerdWallet purchased retirement planning firm aboutLife in 2016. NerdWallet boasts 160 million users and annual revenues of more than $150 million.
Here’s some acquisition news that slipped past our radar: CryptoNumerics, an enterprise software company based in Toronto, Ontario, Canada, was acquired by California-based, cloud data warehousing startup Snowflake last month.
And while terms were not disclosed when the deal was announced in July, Private Capital Journal reported that an IPO filing from Snowflake this week noted that the company had “acquired certain assets from a privately-held company for $7.1 million in cash.” Both companies have remained mum about the transaction; it is possible that Snowflake will be in a better position to discuss its recent activity, including its “business combination” after the company goes public in the next few months.
CryptoNumerics specializes in enabling businesses to create privacy protected datasets with quantifiable privacy risk. Founded in 2018, the company made its Finovate debut last spring at our west coast conference. At the event, company co-founders Holboke and Bhatti demonstrated CryptoNumerics’ CN-Protect technology that leverages differential privacy and AI to allow institutions to analyze consumer data while maintaining CCPA, GDPR, and HIPAA compliance.
Last fall, CryptoNumerics unveiled its Re-Identify solution, which enables companies to determine whether or not the identities of users in their datasets are secure. Based on CryptoNumerics’ CN-Protect, Re-Identity helps deal with a problem in typical de-identification techniques such as masking and tokenization which can fail to completely protect data.
“Our early enterprise customers are excited to partner with Cryptonumerics because we not only solve their privacy concerns but we also enable them to leverage their data assets to build cross enterprise models that create new revenue opportunities,” CryptoNumerics executive chairman and co-founder Ashfaq Munshi said.
CryptoNumerics has raised $2.5 million (CAD$3.3 million) in funding from 11.2 Capital, Data Capital Management, and Lux Capital. Last fall, the company was named one of Canadian Innovation Exchange’s top 20 most innovative startups in Canada.
Tandem Bank announced its latest acquisition this week. The U.K.-based bank has purchased Allium Money, an alternative lender that offers consumers financing to improve the energy efficiency of their homes.
Specific terms of the deal were not disclosed, but it is made possible by Tandem’s $78 million (£60 million) funding round that was led by Qatar Investment Authority and closed last week.
Tandem Bank will use Allium to enhance its existing in-house lending suite, tapping into Allium’s green lending solutions that help homeowners finance everything from insulation to efficient windows to solar panels.
“This is great news for our customers and the team that have worked tirelessly to develop the business focussing on financing improvements for our environment,” said Allium CEO Paul Noble. “The combination of Allium and Tandem will create the ability to rapidly scale a green banking proposition and help more customers access green finance products.” Noble will join Tandem’s executive team.
The partnership comes at a good time. With an increased focus on climate change and awareness of their impact on the environment, consumers have shown heightened interest in green initiatives. Along with home improvements, ESG (environmental, social, and governance) investing is also gaining interest.
Tandem Bank has raised $175 million (£134.3 million) since it was founded in 2013. The challenger bank’s 700,000 customers have access to Tandem’s accounts that include Autosavings technology, credit card, and, coming soon, cashback rewards.
The big card companies continue to make the kind of deals that underscore the importance of fintech to the future of financial services. This week we get confirmation that international payments giant American Express has agreed to acquire SME lender Kabbage.
Terms of the deal were not disclosed. Speculation on the deal in recent days has put the purchase price between $850 million and $1 billion.
The acquisition will include Kabbage’s team, its suite of financial technology solutions, as well as the company’s data platform and IP built for small businesses. American Express also plans to leverage Kabbage’s technology and talent to offer additional cash flow management and working capital solutions to its small business customers. In the acquisition announcement, American Express highlighted Kabbage’s recently introduced business checking account, which centralizes funds for easier cash flow management.
“This acquisition accelerates our plans to offer U.S. small businesses an easy and efficient way to manage their payments and cash flow digitally in one place, which is more critical than ever in today’s environment,” President of Global Commercial Services at American Express Anna Marrs said.
A Finovate alum for more than a decade, Kabbage has raised $2.5 billion in funding, with the company’s last equity round closing in 2017 after raising $250 million. This year, in addition to the launch of its business checking account, Kabbage distinguished itself as a major conduit for small businesses seeking COVID-19 related relief funding. The company said it has facilitated 300,000 Paycheck Protection Program (PPP) loans valued at more than $7 billion. Kabbage’s participation in the program was a dramatic return to its role as a resource for small business financing after the company suspended SME lending in April in response to the global health crisis.
“At Kabbage, we have always made the success of America’s small businesses our primary objective,” Kabbage CEO and co-founder Rob Frohwein said in a statement. “We have built a technology and a data platform that provides them with the kind of capabilities and insights often reserved for larger businesses. By joining American Express, we can help more small businesses succeed with a fully digital suite of financial products to help them run and grow their companies.”
As part of the agreement, both Kabbage’s securitized SME loans and its PPP laons will be serviced by an separate entity to be established by Kabbage and American Express, the Financial Times reported.
American Express’ purchase of Kabbage comes less than a month after another big acquisition in the online SME lending space: Enova International’s $90 million deal for OnDeck. For both companies, the acquisitions provide the opportunity to expand meaningfully beyond their core competencies: Enova adding to its consumer lending operations, and AMEX bringing working capital and SME financing to its commercial card business.
The acquisition is expected to close later in 2020.
In a late-breaking announcement on Thursday, Intercontinental Exchange (ICE) announced that it has agreed to purchase mortgagetech platform provider Ellie Mae from Thoma Bravo. Valued at $11 billion, Ellie Mae will add to Intercontinental Exchange’s growing presence as a major workflow solutions provider for the U.S. residential mortgage industry. This growth includes ICE’s acquisition of a majority stake in MERS in 2016, and the comany’s acquisition of Simplifile three years later.
Ellie Mae President and CEO Jonathan Corr referred to these other players and the chance to collaborate with them in his remarks about the acquisition agreement. “We are excited to be joining the Intercontinental Exchange family and having the opportunity to work closely with Simplifile and MERS in helping our industry to realize the true digital mortgage,” Corr said. “We have been on a journey, as we have long said, ‘to automate everything automatable’ for the mortgage industry, and joining ICE, which has followed a parallel journey in global exchanges, will allow us to further accelerate realizing our vision.”
Founded in 1997 – and acquired by Thoma Bravo in February of last year in a deal valued at $3.7 billion – Ellie Mae offers a digital lending platform to help mortgage lenders originate more loans, reduce origination costs, and shorten the time to close. An alum of both our developers conference, FinDEVr, and making its Finovate debut in 2017, Ellie Mae reports that its customers save an average of $813 per loan, and close loans seven days faster, producing an average annual ROI of 698%.
During its time as part of Thoma Bravo, Ellie Mae recorded “nearly double revenue” while improving profitability, partnered with firms like AI Foundry to further streamline the mortgage origination process, and acquired fellow mortgagetech company Capsilon. Both AI Foundry and Capsilon are also Finovate alums.
“We partnered with Jonathan Corr, Joe Tyrrell, and the Ellie Mae team to advance their vision to automate the residential mortgage industry while also using Thoma Bravo’s deep software expertise to greatly improve the company’s operations and accelerate growth,” Thoma Bravo Managing Partner Holden Spaht said. “We are confident that being part of ICE will enable Ellie Mae to continue transforming an industry still in the early innings of digitization, and we look forward to following Ellie Mae’s continued success as part of ICE for many years to come.”
A Fortune 500 company formed in 2000, Intercontinental Exchange owns financial and commodity exchanges, operating 12 such regulated institutions in the United States, Europe, and Canada. The Atlanta, Georgia-based company also owns and operates six central clearing houses around the world. With revenues of $6.5 billion in 2019, Intercontinental Exchange is publicly traded on the NYSE under the ticker ICE. The firm has a market capitalization of $54 billion.
Much of the technology world is puzzling over Microsoft’s moves toward a purchase of popular and controversial social media app TikTok. But more discerning observers may spend more time considering the ramifications of Apple’s $100 million acquisition of Mobeewave.
Based in Montreal, Quebec, Canada, Mobeewave enables contactless payment acceptance simply by tapping enabled smartphones (or credit cards) to another enabled device. Mobeewave’s app leverages NFC (near field communications) technology, a feature that has been on the iPhone since 2014, and could allow the devices to be more effectively used by merchants to process in-person payments. This spring, the company introduced its latest contactless payment solution, Mobeewave Limitless, that provides the varied authentication, regulatory controls, and Cardholder Verification Method (CVM) standards required by regulators in North America, Europe, and APAC when it comes to supporting high value contactless transactions.
As such, the acquisition puts Apple in competition with Square, which has been a leading innovator in providing merchants with a hardware/software combination to enable smartphone and tablet payment processing. The option of a hardware-free alternative – sans dongles and readers – could make Apple an instant player in the small business payments space.
Typically tight-lipped about its acquisitions, Apple said in a statement that it “buys smaller technology companies from time to time and we generally do not discuss our purpose or plans.” We do know that Mobeewave’s team will be retained and will continue to operate out of its Montreal headquarters.
One thing that’s especially interesting about the acquisition is that Mobeewave had agreed last fall to integrate its contactless payments technology into Samsung mobile devices, and had expected to deploy the solution worldwide this year. Samsung is also an investor in Mobeewave, having played a leading role in the Canadian company’s Series B round in January. Mobeewave has raised a total of $26.6 million in funding.
If deal-making is a sign of the health of an industry, then the fintech business – global public health crisis notwithstanding – may be doing better than some suspect.
The latest signs of hi-life from the nexus of finance and technology comes from the news released after hours on Tuesday that Enova International – an online financial services company that provides financing to non-prime borrowers and small businesses – has agreed to acquireOnDeck in a deal valued at $90 million.
“This strategic transaction, which brings together two FinTech leaders, is a great opportunity for customers, employees, and shareholders of both companies,” Enova CEO David Fisher said. “Together, our companies will be stronger because of the complementary strengths and synergies of our businesses.”
Fisher highlighted both OnDeck’s online SME lending business as well as its ODX bank platform as being able to increase Enova’s “scale and resources” and drive continued growth in the company’s portfolio. Enova has nearly seven million customers worldwide and has provided more than $20 billion in loans and financing since its inception in 2004.
Of the $90 million total deal value, $8 million will be paid in cash. OnDeck shareholders will get $0.12 per share in cash and 0.092 shares of Enova stock for each share of OnDeck they own. The deal is based on the implied price of OnDeck shares of $1.38, a 90.4% premium on its closing price of $0.73 per share on Monday, July 27. Enova’s Fisher will lead the combined company, with OnDeck CEO Noah Breslow assuming the role of Vice Chairman and taking a seat on the company’s management team.
Breslow expressed pride in the progress OnDeck has made since its founding in 2006, pointing to the $13+ billion in financing the company has provided small businesses over the past decade-and-a-half or so. He said the acquisition was “the right path forward for customers, employees, and shareholders” and posited that the combined entity would be an even more effective online lender and a more powerful ally to small businesses.
The acquisition has been approved by the boards of directors from both Enova and OnDeck, and is expected to close later this year.
When Bank Operating System creator nCinowent public earlier this month, we shared a feature on some of the other fintechs – Finovate alums all – that, like nCino, also hail from the state of North Carolina.
For those who may find North Carolina an atypical location for some of the country’s most innovative fintech companies, recall that many of these fintechs are benefitting from the proximity of the famous Research Triangle. This area of the state includes three universities – Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University, and has had a reputation as a technology hotspot since the 1950s. Hall of Fame caliber technology firms from IBM to Cisco Systems to Red Hat have made “The Triangle” their home over the years, solidifying the region’s high-tech reputation and helping attract new generations of entrepreneurs and technologists.
Recently we learned of big news from one of the members of this new generation. Cognitect, which provides engineering and software development talent and technology to clients in industries ranging from health and science to fintech, announced that it has agreed to be acquired by long-time client Nubank, a financial institution based in Brazil.
Cognitect founder and President Stuart Halloway called the company’s relationship with Nubank “a spectacular success story” for its two signature offerings: Clojure – Cognitect’s general purpose programming language – and Datomic – the company’s transactional database. Nubank currently has 600 Clojure developers, running 2.5 million lines of Clojure code in 500 microservices on 2000+ Datomic servers. “Cognitect has been there every step of the way, helping Nubank’s developers translate Clojure’s ideas into business agility,” Halloway wrote at the company’s blog.
The acquisition, according to Halloway, will pave the way for bigger teams for both Clojure and Datomic – technologies Finovate fans were first introduced to via our FinDEVr developers conference in 2016. In that presentation – and in the company’s return to the FinDEVr stage the following year – the Durham, North Carolina-based company demonstrated how its solutions enable companies to have more control over and insight into their data – including the ability to conduct analytics on real-time information without hindering performance.
Nubank’s relationship with Cognitect in general and Clojure and Datomic in specific stems from the Brazilian neobank’s decision to use those technologies to provide a data infrastructure for its microservices platform. The result, for Nubank’s customers, has been greater clarity and complete history on transactions, as well as insight into the origins of suspicious cyber incidents or problems with data.
“Because we use Clojure and Datomic, we’ve built a tool that has already moved beyond what many of our competitors do, and our speed of innovation – new features, continuous deploys – increases with every passing day,” Nubank CTO and cofounder Edward Wible said in a statement. Founded in 2013, Sao Paulo-based Nubank is Latin America’s largest fintech with more than 20 million customers. Cognitect is the firm’s second acquisition of the year, having purchased software engineering company Plataformatec in January.
Going forward, Cognitect will benefit from the continued leadership in its Clojure and Datomic teams, and the company itself will remain a U.S. C corporation. Datomic customers will continue to receive professional services from Cognitect, though the company expects to transition away from general consulting development. Customers also will likely get the next Datomic feature “a bit sooner” Halloway added, pledging to users that “the resources behind (their) software are greater than ever before.”
Global payments platform Paysafe announced its acquisition of online payments innovator Openbucks. Financial terms of the deal were not disclosed and the companies expect the acquisition to be finalized by the end of July.
Paysafe aims to leverage Openbucks to expand its cash alternative payment offering in the U.S. by tapping into Openbucks’ technology that allows consumers to pay online without a credit card.
“The cash alternative payment market is a thriving one and we are seeing increased demand from online merchants who want to enable gift cards as a payments solution in order to reach new consumers, particularly in sectors such as gaming, eSports and entertainment which are very much on the rise,” said CEO of Paysafe’s eCash division, Udo Mueller.
Openbucks maintains a network of partnerships with major retailers that enable consumers to purchase gift cards that can be redeemed at the company’s 500+ ecommerce merchant partners. Openbucks founder Marc Rochman expects the acquisition to offer a greater level of exposure to his company. “Now, with the full backing of a global payments provider,” he said, “we will be able to provide a world class alternative payment solution to thousands of additional online merchants.”
Openbucks was founded in 2011 and caters to underbanked shoppers, guaranteeing no fees to consumers. Since then, the company has raised $5.3 million.
Founded in 1996, Paysafe is a global payments innovator that offers both online and in-store payment solutions. Philip McHugh is CEO.
Cryptocurrency exchange platform Binance made a major purchase today, acquiring digital wallet and crypto debit card company Swipe. The deal closed for an undisclosed amount.
The aim of the acquisition is to help push the use of cryptocurrencies into the mainstream by encouraging payments with cryptocurrencies through traditional financial systems such as debit cards.
U.K.-based Swipe provides a cryptocurrency banking account that offers a multi-currency mobile wallet, the ability to buy and sell cryptocurrencies, access to exchanges with instant settlements, and a Visa debit card.
Users can pay with their Visa debit card at all 50 million locations across the globe where traditional Visa debit cards are accepted. The card also offers up to 4% cash back (paid in Bitcoin), doesn’t charge foreign transaction fees, has built-in security features, and more. The debit card is crypto-to-fiat, meaning the user makes a purchase using cryptocurrency while the merchant receives fiat currency in exchange.
“By giving users the ability to convert and spend crypto directly, and have merchants still seamlessly accept fiat, this will make the crypto experience much better for everyone,” said Binance CEO Changpeng Zhao. “Swipe’s exceptional team has made great strides in furthering this mission and has been instrumental in the industry for bridging the gap between commerce and crypto. The Swipe Wallet alone is unique which acts as a digital bank account for its users, providing access to traditional banking services. We are thrilled to work with a team that shares the same core values and looking forward to our larger efforts ahead.”
Swipe CEO Joselito Lizarondo said that the deal “will place Swipe in the position to make cryptocurrencies more accessible for millions of users worldwide.” He added, “We are excited to work with Binance to continue innovating in this crypto-banking space to further build towards mass adoption on our current and future product lines.”
This is the seventh acquisition Malta-based Binance has made since it was founded in 2017. The company has also purchased CoinMarketCap, BxB, DappReview, and WazirX.
If you missed the news earlier this week, here’s a recap: Personal Capital agreed to be acquired by Empower Retirement, the second-largest retirement services provider in the United States, for up to $1 billion, composed of $825 million on closing and up to $175 million for planned growth.
According to Forbes, the San Francisco-based fintech is selling for the same price as its valuation in February 2019. The deal is expected to close in the second half of this year.
After a bit of time to digest everything, Personal Capital CEO Jay Shah looked at the decision and what it means for the eleven-year-old company. Shah has been at Personal Capital since the company’s launch in 2009 and will now serve as President of Personal Capital and will also sit on the Executive Team at Empower.
Shah explained that, though many companies have expressed interest over the years in acquiring Personal Capital, none of the opportunities felt right. However, because Empower shares many of Personal Capital’s same “visions and values.”
He went on to describe how, in today’s uncertain world, the buy-out “will ensure extra strength and resources to grow Personal Capital, and bring [clients] more of the great technology and service [they’ve] come to expect. He added that combining the two companies will help Personal Capital support and further develop its features and service offerings.
As for what’s next, Shah said that Personal Capital will continue to operate as it always has. And because the company’s leadership team has committed to stay on for the long-term, the company’s culture will stay in-tact. “I recognize that this announcement feels like a major change, but I also want to assure you that your day-to-day experience with Personal Capital will remain the same,” he added.
