Weekly Briefing No. 166 | Ireland’s Fintech Explosion, Another Record-Breaking M&A Deal, and More

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Welcome to The FR. Ní lia duine ná barúil.

In this edition:

  • When Irish (Fintech) Eyes Are Smilin’

  • Fintech M&A Continues at a Rapid Pace

  • The Seamy Underbelly of Selling Cybersecurity Tech

  • March Madness—In Payments

  • Muni Quants

OPINION

The Irish Invasion (of Fintech)

Last century saw not one, but two British invasions when it came to music, but a different sort of invasion has sprung up lately from Britain’s near neighbor, Ireland. This one isn’t sonic-based (though we’d be remiss if we didn’t note our love of  The Pogues), but rather focused on fintech. The Emerald Isle has been exporting an impressive array of financial technology over the past decade or so, and indeed has become one of the global hotspots.

We were reminded of this during our attendance at the SXSW festival earlier this month; among the organizations with the biggest presence was Enterprise Ireland, which had one of the largest booths at the conference. The state economic development agency for the country has made fintech a big focus of its efforts; last year, for example, it launched a €750,000 fund for startup fintechs—and it has become one of the largest and most successful fintech investors in the world.  

So it’s no surprise that many innovative firms have come out of Ireland, and quite a few have caught our eye.

NEWS ANALYSIS

A Boomingand ConsolidatingFintech Sector

It seems as if the news breaks monthly with the “biggest deal ever” in some aspect of fintech. That’s why it was only mildly shocking this week when word came out that bank technology giant FIS agreed to pay $35 billion for Worldpay in the largest digital payments M&A deal to date.

The deal is part of an escalating arms race among the financial technology sector’s biggest players. FIS, along with Fiserv and Jack Henry & Associates comprise the “Big Three” of U.S. bank core systems vendors, whose software powers the operations of roughly 90% of the financial institutions in the country. But with all areas of digital financial services—especially payments—the pressure is on these technology vendors to offer a wider portfolio of digital services.

That’s why we could see even further consolidation in the fintech industry; indeed, one could say FIS’s move was a response to its rival Fiserv’s January acquisition of e-commerce payments powerhouse First Data in a $22-billion deal.

We’ll go out on a limb and say this won’t be the biggest value M&A deal in fintech before 2019 is said and done.

The Seamy Underbelly of Selling Cybersecurity Tech

For any technology vendor, selling to large corporations can be an exhaustive and time-consuming process. The sales cycle is incredibly long, and even getting the ear of the right executive can be nearly impossible. But a CNBC report this week shows the lengths to which some vendors will go to get the attention of top security executives in an ever-increasing and competitive marketplace.

According to the article, CNBC spoke with four cybersec experts at Fortune 500 companies and found that “all said they have been pressured by vendors and researchers who claimed—rightly or not—to have found a cybersecurity problem at their company. Some hinted at the possibility of negative news coverage if the executive did not listen to the vendor’s full pitch.”

Of course, most tech vendors undoubtedly don’t resort to such methods. But it just goes to show how competitive the technology landscape is and how difficult it can be for tech firms to get companies to listen to their pitches. We predict this won’t be the last we hear about the issue.

March Payments Madness

Although most of the $8.5 billion in bets made during the NCAA Men’s Division 1 will be illegal, things are changing thanks to the Supreme Court’s decision last year to strike down the Professional and Amateur Sports Protection Act of 1992. The result? It is possible to bet on the games legally; however, there remain plenty of impediments and ambiguities in the way (depending on where you live). According to PYMNTS.com, the NCAA itself will have influence on one key challenge that caught our attention: payments—or specifically fast payments.

Muni Quants

“At least for the foreseeable future, quants aren’t going to displace traditional fixed-income traders. Bonds—and especially munis—are by definition less homogeneous than equities and don’t lend themselves to perfect automation.” That’s the assessment by Bloomberg’s  Brian Chappatta. In the past, Chappatta has made the point that muni-related roles have been a relative Wall Street oasis for job seekers with the required skills. His latest take is consistent with that theme. Still, it’s not as though technology isn’t muscling in on the muni world. Powerful computers backed by complex math are slowly but surely making their way to this nearly $4-trillion quirky corner of the financial world.

Quote of the Week

“The advance of technology is based on making it fit in so that you don't really even notice it, so it's part of everyday life.”

— Bill Gates