Major consolidation in the fintech space unfolded on Wednesday.
Fiserv and First Data Corp. announced that their boards of directors have unanimously approved a definitive merger agreement under which Fiserv will acquire First Data in an all-stock transaction. The companies said the transaction unites two premier firms to create one of the world’s leading payments and financial technology providers and an enhanced value proposition for its clients.
According to a news release, the transaction, which is expected to close during the second half of 2019, is subject to customary closing conditions and regulatory approvals, including the approval of shareholders of both companies. The transaction is not subject to any financing conditions.
Under the terms of the agreement, First Data shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each share of First Data common stock they own, for an equity value of $22 billion. This represents $22.74 based on closing prices as of Wednesday and a premium of 29 percent to the five-day volume weighted average price as of that date.
Following the close of the transaction, Fiserv shareholders will own 57.5 percent of the combined company, and First Data shareholders will own 42.5 percent, on a fully diluted basis. The all-stock transaction is intended to be tax-free to First Data shareholders, according to the companies.
Executives highlighted this highly complementary combination will offer leading technology capabilities that enable a range of payments and financial services, including account processing and digital banking solutions; card issuer processing and network services; e-commerce; integrated payments; and the Clover cloud-based point-of-sale solution. The combined company will offer comprehensive distribution channels and have deep expertise in partnering with financial institutions, merchants and billers of all sizes, as well as software developers.
“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” said Jeffery Yabuki, president and chief executive officer of Fiserv.
“We admire First Data for its excellence in merchant acquiring and global issuing services, and the tremendous progress they have made under Frank’s leadership. We expect this combination to catalyze and support an enhanced value proposition for our collective clients and their customers,” Yabuki continued.
First Data chairman and chief executive officer Frank Bisignano added, “I have long admired what Fiserv has achieved over the years, and I look forward to working with the talented associates of both companies as we set a higher standard of innovation and service in the industry.
“Our goal at First Data has always been to provide our clients with the most comprehensive suite of innovative, highly-differentiated solutions and services, and I am excited by the significant value that the combination with Fiserv creates for all stakeholders,” Bisignano went on to say.
Wednesday’s announcement indicated the combined company will be led by an experienced board and leadership team that leverages the strengths and capabilities of both companies. Upon closing, the board of the combined company will consist of 10 members, six of whom will be from the board of Fiserv and four of whom will be from the board of First Data.
Upon closing, Yabuki will serve as chief executive officer and chairman of the board of directors of the combined company. Bisignano will assume the role of president and chief operating officer, and will serve as director of the board of the combined company. The combined entity will be known as Fiserv.
“We expect the combined company to retain our current investment-grade ratings based on our strong financial profile and excellent free cash flow. Together, this should provide the basis for continued disciplined capital allocation, including debt repayment and share repurchase,” Yabuki said.
“We look forward to welcoming First Data’s talented associates to Fiserv as we drive the global digitization of payments and financial technology services,” he went on to say.
Deloitte focused on three new technologies in an annual report that highlights on the latest trends that experts described as creating a climate of disruption and uncertainty.
The report titled, “Tech Trends 2019: Beyond the digital frontier,” explored how the convergence of new technologies with powerful forces is driving disruption across industries. According to a recap shared on Wednesday, those new technologies include advanced networking, serverless computing and intelligent interfaces as well as technological forces encompassing digital experiences, cognitive and cloud.
Back 10 years ago, when smartphones and mobile apps were gaining traction, and technologies like cloud and the Internet of Things were emerging on the scene, Deloitte released its first Tech Trends report. The organization has watched this evolution unfold as the digital imperative and the changing role of technology redefine the enterprise, yet adoption of these trends continues to vary widely.
Experts noted that some companies are only beginning to explore trends Deloitte wrote about in 2010, while others have advanced rapidly along the maturity curve.
“Make no mistake: Technology is not just an enabling function. Tech is the universal language of business today,” said Bill Briggs, global and U.S. chief technology officer for Deloitte Consulting.
“As the pace of change quickens, technology now leads business strategy. And technology trends has evolved from a CIO (chief information officer) and CTO (chief technology officer) concern into something driving CEO, management team, boardroom agendas — to redefine what enterprises can accomplish,” Briggs continued.
Authors recapped that “Tech Trends 2019: Beyond the digital frontier,” begins with a reflection on a decade of disruptive change driven by nine macro forces: digital experience, analytics, cloud, core modernization, cyber, business of information technology, cognitive, blockchain, and digital reality. The report further explores where these forces are headed.
Next, six trends that are giving rise to new operating models, redefining the nature of work and dramatically changing IT’s relationship with the business are detailed, including:
— AI-fueled organizations: Leading companies are systematically deploying rapidly maturing technologies — machine learning, natural language processing, robotic process automation (RPA) and cognitive — not just to every core business process, but into products, services and the future of industries. Deloitte believes organizations’ use of artificial intelligence is moving from “Why?” to “Why not?”
— NoOps in a serverless world: Experts asserted we’ve reached the next stage in the evolution of cloud computing with technical resources completely abstracted and management tasks increasingly automated. Freed from mundane responsibilities, the report noted IT talent can focus on activities that more directly support business outcomes.
— Connectivity of tomorrow: At both macro and micro levels, Deloitte explained technologies like 5G, mesh networks and edge computing are expanding business’ reach to both the far corners of the world — and the smallest spaces in warehouses, retail stores and other places with utmost precision. Experts contend that advanced networking is the “unsung hero,” driving development of new products and services and is transforming how work gets done.
—Intelligent interfaces: Today, Deloitte pointed out that people interact with technology through ever more intelligent interfaces that combine the latest in human-centered design techniques with leading-edge technologies such as computer vision, conversational voice, auditory analytics, augmented reality and virtual reality. Working in concert, experts see these technologies and techniques are transforming the way we engage with machines, data and each other.
— Beyond marketing with a reimagined experience: To deliver the highly personalized, contextualized experiences that today’s customers expect, Deloitte mentioned that some chief marketing officers are trading long-standing, traditional agency relationships for closer partnerships with their own CIOs. Enabled by a new generation of marketing tools and techniques focused on personalized, contextual and dynamic experiences, experts indicated that CIOs and CMOs can illuminate and engage customer needs and desires most effectively.
— DevSecOps and the cyber imperative: Deloitte explained that DevSecOps fundamentally can transform cyber, security, privacy and risk management from being compliance-based activities — typically undertaken late in the development lifecycle — into essential framing mindsets across the product journey.
The report closes by exploring how modern businesses can navigate digital transformation — building a roadmap that incorporates the right technologies, techniques, talent and executive support.
“While we take a pragmatic view, we also aspire to understand fully how forces like serverless technology, connectivity capabilities, and intelligent interfaces are reshaping industries,” said Scott Buchholz, managing director and government and public services chief technology officer at Deloitte Consulting.
“The report details how organizational leadership can shape ambitions and instill a culture to sense and make sense of what tomorrow may bring. And – importantly – a path to get there from the realities of today,” Buchholz went on to say.
The entire report can be downloaded here.
FICO recently learned its collection of patents grew by five.
Federal officials recently awarded five new patents to the Silicon Valley analytic software firm related to fraud, artificial intelligence (AI) and advanced analytics. In total, FICO currently holds 192 U.S. and foreign patents, and the company has 93 pending patent applications.
Two of the patents are connected to analytic technology used by the FICO Falcon Platform for fraud management:
• Detection of Compromise of Merchants, ATMS and Networks relates to the generation of compromise profiles for financial accounts based on reported fraud data of a payment account and merchant device. These compromise profiles accelerate detection of fraud.
• Card Fraud Detection Utilizing Real-Time Identification of Merchant Test Sites covers a system and method for detecting when criminals are “testing” compromised cards, by using real-time merchant profiles and specialized scoring models.
FICO inventors also received three patents related to analytics and decision management:
• Efficiently Representing Complex Score Models can transform predictive models into a software program for deployment in a rules engine, helping IT departments solve the problem of operationalizing analytics. This technology is integrated in FICO Blaze Advisor decision rules management system, part of the FICO Decision Management Suite.
• Automatic Modeling Farmer covers an AI system that automatically can develop and evaluate a large number of possible predictive models in order to produce optimal models. This is a streamlined modeling process to enable quick development of large-scale models using Big Data, and is used by FICO data scientists to identify candidate data sources with the most predictive promise.
• Systems and Methods to Improve Decision Management Project Testing is an invention that can visualize the validation status of components of an executable decision management project, which improves project testing. This technology is integrated in FICO Origination Manager.
“This is an exciting time for analytics and decision management, and FICO’s inventions are propelling change in this field,” said Stuart Wells, FICO’s chief product and technology officer. “Our data scientists continue to be at the forefront of the AI revolution and the progress in intelligent decision automation.”
While facing challenges on multiple fronts, report findings declared that changing customer behaviors and demands should be fueling change in the service and products retail banks are offering. Those assertions arrived as part of an in-depth study released on Wednesday by banking software company Temenos.
The report, written by the Economist Intelligence Unit (EIU) on behalf of Temenos and titled, "Whose customer are you? The reality of digital banking in North America," explored the developing fintech situation for retail banks in North America.
The regional report emphasized the need for North American retail banks to further embrace change by developing their digital marketing and engagement (cited by 53 percent of respondents) and improving product agility (cited by 49 percent).
The report also noted that when it comes to preparing for digital change, American banks, in particular, need to examine the experiences of Europe and Asia-Pacific in creating a one-stop digital journey for their customers. Authors found that those institutions with a global footprint especially can learn from Europe's open banking experience.
Although concerns about regulatory fines and recompense orders are higher in North America (56 percent versus 43 percent globally), the report pointed out there is space for banks to work together to overcome the confusing mesh of federal and state regulations.
The report goes on to note that banks in North America are already beginning to come together to collaborate — a necessary effort in order to build a truly modern banking system that supports innovation.
“North American banks need to be able to respond better to how their customers live now in terms of their digital offerings if they are to remain truly competitive against neo and challenger banks,” said Renee Friedman, editor of the report from the Economist Intelligence Unit.
Other key report highlights included:
—North American bankers see their current business model evolving to develop niche propositions for their clients, more so than their global counterparts do (71 percent versus 61 percent).
—More North American bankers (87 percent) believe that the platformization of banking and other services through a single-entry point will steer the market than their global counterparts (78 percent).
—Retail banks across North America are focusing their digital investment on cyber security (76 percent).
—North American bankers consider conforming to data protection and privacy regulation to be the biggest challenge their company faces concerning data and third-party access (31 percent versus 21 percent globally).
—North American banks’ innovation strategies are focused on investing in fintech start-ups (54 percent).
The Economist Intelligence Unit surveyed 400 global banking executives about the challenges retail banks expect to face between now and 2020, and the strategies they are deploying in response. Orchestrators said 51 percent of respondents were at C-Suite level and 10 percent were board members.
The North America report was based on 100 respondents from North America (the U.S. and Canada) and was supplemented with in-depth interviews with senior executives from leading regional banks.
“Though we have strict regulations in place, nevertheless disruption is happening here in North America. We are seeing exciting developments across the region as the banking industry explores what it means to bank in a digital world,” said Emily Steele, Temenos’ president for North America.
“Incumbent banks are setting up digital banks alongside their own operations, challenger banks are popping up, and now we are starting to see fintechs moving to become banks themselves,” Steele continued.
“Banks are awakening to the need to personalize and contextualize their digital products and services, and offer customers great customer journeys, in order to compete and remain successful,” she went on to say.
The entire report can be downloaded here.
A company that specializes in catering to customers who are low-to-moderate income individuals with soft credit histories now has the technological horsepower constructed by SpringboardAuto.com.
Oportun, a technology-powered community development financial institution (CDFI), announced on Tuesday it has acquired the intellectual property and financing platform of SpringboardAuto.com, a platform designed to be a mobile-friendly, auto finance solution to simplify a secure online transaction for customers, dealerships and private sellers.
“We’ve long wanted to find more ways to help the customers we serve, and this is an important step towards our goal of offering responsible and affordable auto loans,” said Raul Vazquez, chief executive officer of Oportun, which as a federally defined CDFI is a mission-driven financial institution that creates economic opportunity for individuals and small businesses, quality affordable housing and essential community services.
As part of the transaction, the SpringboardAuto.com team has joined Oportun. Jim Landy, previously chief executive officer of SpringboardAuto.com, will now serve as executive vice president and general manager for Oportun’s auto finance business unit.
“We are pleased to have Jim and the talented SBA team join Oportun,” Vazquez said. “Over time, we’ll work to integrate the SBA platform into Oportun and begin to develop the right offering for our customers.”
Landy is part of the collection of experts and executives set to appear during Used Car Week 2018, which begins Nov. 12 at the Westin Keirland Resort and Spa in Scottsdale, Ariz. Landy shared what it means that SpringboardAuto.com is now a part of Oportun after launching a little more than two years ago.
“SBA’s proprietary technology was developed with consumers’ needs in mind,” Landy said. “We are excited to join Oportun so we can further extend our mission to provide a transparent, personalized and empowering car buying and auto finance experience.”
Cox Automotive grew again on Monday.
The company announced the acquisition of Intersection Technologies; better known in the aftermarket industry as F&I Express. Management said the deal furthers Cox Automotive’s mission to transform the way the world buys, sells, owns and uses cars.
While specific financial terms of the deal were undisclosed, Cox Automotive mentioned all F&I Express employees will remain in their current roles at F&I Express, and the business unit will operate out of its current Grapevine, Texas location.
The company indicated F&I Express will operate as a wholly owned subsidiary of Cox Automotive, which also includes:
— Autotrader
— Clutch Technologies
— Dealer.com
— Dealertrack
— Kelley Blue Book
— Manheim
— NextGear Capital
— VinSolutions
— vAuto
— Xtime
Cox Automotive noted that F&I Express will be a part of its retail solutions group.
“Combining assets, including a vast F&I providers network and unbeatable new technology, will create a competitive advantage driving continued value for dealers, agents, providers, and lenders,” said Mike Barrington, senior vice president retail solutions group sales, digital retailing and F&I solutions at Cox Automotive.
“As both pioneers and innovators, they’ve done an outstanding job of giving lenders and dealers who use multiple providers one place to go to rate, contract and register F&I products,” Barrington continued. “Together, F&I Express and Cox Automotive will continue to deliver the services and solutions F&I Express has been delivering to the market.”
Both companies have a history dating back to spring 2013 when Autotrader and Intersection Technologies leaders first met and decided to work together to further an initiative known today as digital retailing.
“F&I Express has developed innovative solutions via its technology, to connect the automotive marketplace to F&I providers,” said Brian Reed, chief executive officer and co-founder of F&I Express.
“Joining Cox Automotive gives F&I Express deeper resources and broader talent to deliver innovative technology solutions and superior service that will help position F&I Express as an unbeatable contender in this industry,” Reed went on to say.
Reed also touched on some of the products F&I Express delivers.
Express Recoveries is an optimized eCancellation solution connecting finance companies, providers and dealerships to streamline the cancellation and recoveries process in an efficient and compliant manner.
Express Digital Media can give digital retailers the power to educate car shoppers online with accurate and dynamic aftermarket rates and content.
For more information about either company, visit Dealertrack.com or fandiexpress.com.
As the firm itself pushes additional resources into its blockchain division, KPMG pinpointed how much fintech investment grew during the first half of this year.
According to KPMG’s Pulse of Fintech report, investment in U.S.-based fintech companies surged to $14.2 billion across 427 deals during the first half of 2018 as investors poured money into startups in fintech emerging segments such as regtech and blockchain, as well as late-stage companies.
KPMG highlighted fintech investment in the U.S. reached a new high of more than $8 billion in Q2, following a strong first quarter.
Total investment during the first half of 2018 increased from $12.2 billion across 371 deals during the second half of 2017, and included more than 10 $100 million plus mega rounds, including insurtechs Oscar and Lemonade, and blockchain-based consortia company R3.
“Unlike the broader VC market, early-stage fintech companies have continued to attract a solid flow of capital in the U.S., with the several top deals in Q2 going to seed or early stage companies,” said Brian Hughes, U.S. national co-lead partner of the venture capital practice at KPMG.
“At the same time, those able to attract later-stage funding likely reflects investor confidence in their ability to become market leaders, if they aren’t already,” Hughes continued.
During the first half of 2018, KPMG tabulated that venture capital investment in blockchain in the U.S. totaled $858 million, exceeding the 2017 total of $631 million.
“There’s more VC flow available than opportunities to invest — a sign of tremendous growth in the space,” said Safwan Zaheer, financial services digital and U.S. fintech lead for KPMG.
“Investments in blockchain related firms already doubled in the first half of 2018 compared to 2017,” Zaheer continued. “Blockchain has the potential to transform banking services. If banking systems were to be rewritten today they would be based on blockchain.”
Payments companies see strong exits
KPMG noted that the payments and lending sectors continued to be one of the most mature of the fintech subsectors during the first half of 2018, with most investment activity centered on late-stage companies and those companies seeking to exit.
Traditional banks invest in digital banking offerings
During the first half of 2018, KPMG pointed out that a number of traditional U.S. banks expanded their digital banking initiatives.
The report recapped that J.P. Morgan announced the success of a digital bank pilot project and its intent to roll out the digital bank option nationally.
Authors noted Citibank also announced a digital-only bank, while Goldman Sachs announced the expansion of its Marcus initiative to the U.K.
Blank check companies on the rise in the U.S.
KPMG explained that more than 20 new blank check companies — a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company — were created during the first half of 2018, with more than 25 percent noting their intent to seek out fintech opportunities.
The report stated the use of blank check companies suggests the increasing importance investors are placing on fintech opportunities and the desire to raise the funds necessary to make a purchase when the right opportunity arises.
Upcoming trends to watch
KPMG projected that blockchain, regtech and insurtech are all expected to gain momentum, even as artificial intelligence and robotic process automation continue to drive cross sector-opportunities.
Experts added there will likely continue to be an emphasis on partnering with retailers and aggressive tech leaders globally.
KPMG announces new U.S. blockchain leadership
In light of what the firm shared in its fintech investment report, KPMG then bolstered its human capital within blockchain.
KPMG explained its new U.S. blockchain leadership to drive and expand the firm’s blockchain strategy across its core lines of business — tax, audit, advisory and industries. Arun Ghosh has been named the firm’s U.S. blockchain leader, and David Jarczyk and Erich Braun have been named the U.S. blockchain tax and audit leaders, respectively.
KPMG highlighted Ghosh, who is based in Boston, has extensive experience driving business value by leveraging blockchain, analytics, automation and artificial intelligence for high-tech, industrial manufacturing and life sciences organizations. This includes delivering enterprise-wide transformation programs across commercial, operations, R&D, manufacturing and supply chain business functions.
KMPG shared that Jarcyzk, who is based in Chicago, assesses the complex tax and finance implications of blockchain. He has vast experience in determining market needs in response to tax reform and changes, implementing technological requirements, creating unique data analytics offerings and developing go-to-market strategies.
KPMG added that Braun, who is based in San Francisco, assesses blockchain technology and its impact on organizations and on the firm’s audit practice. He also understands how companies are utilizing blockchain technology and its influence on audit procedures.
“In addition to solving business issues with blockchain, companies need to account for the complex regulatory, tax and trade, auditability, risk and compliance implications that come with any global transaction and exchange,” KPMG said.
“KPMG’s blockchain approach integrates financial management, digital transformation and industry subject matter proficiency to provide businesses with comprehensive guidance on blockchain, from strategy to implementation,” the company continued.
“The experimentation phase for blockchain is coming to a close with companies now embarking on the execution phase,” KPMG went on to say. “It is much more than a technology, serving as a global transaction platform that requires an intimate knowledge of tax, global trade tariffs, financial risk implications and core operations.”
One of the lead sponsors of Used Car Week 2018 is placing even more emphasis on its fintech operations.
On Monday, Digital Recognition Network (DRN), an AI and data analytics company that provides vehicle location data and analytics to finance companies, insurance carriers and other commercial verticals, announced the creation of its new client services unit — as part of its fintech division — to help its clients to be more strategic.
The client services unit can provide its clients with consulting services, on-site training and monthly reporting, so they can gain greater insight into DRN's vehicle location data (also known as automated license plate recognition, or ALPR data) and leverage the data to drive results.
Using the monthly reporting capabilities, the client services unit conducted a review of its clients’ usage and performance from January to August and found that DRN’s auto-finance clients receive a 193-percent average return on their investment from the suite of products in DRNsights.
DRN’s fintech division can help financing providers, ranging from local credit unions to top 100 auto finance companies, mitigate risk via DRNsights, its suite of products that combines DRN’s exclusive vehicle location data with analytics to provide new locations for targeting assets.
“The fintech division has expanded in the past year, as the demand for our ALPR technology has increased,” said Todd Hodnett, executive chairman and founder of DRN. “We created the client services unit to make sure that we continued to provide the best customer service possible, which includes ensuring our clients are taking optimal advantage of our solutions to achieve strong results for their businesses.”
The client services unit’s team works with clients to help them use DRN data to better understand vehicle location behavior analytics, so they can predict risk earlier and implement new collection strategies to reduce losses.
Additionally, to accommodate the needs of the growing fintech division, DRN has promoted the following team members:
• Jeremiah Wheeler has been promoted to executive vice president and general manager for DRN’s fintech division. In this role, Wheeler heads up the fintech business unit including sales, support and product management. He is responsible for developing DRN’s fintech strategy to ensure alignment with market needs and trends, as well as to anticipate new fintech market opportunities.
• Stephen Nethery has been promoted to senior vice president of client services for DRN’s fintech division. In this capacity, Nethery manages DRN’s new client services unit that provides reporting, training and consulting services to DRN’s fintech clients.
• Andy Cameron has been promoted to senior vice president of fintech and manages DRN’s recovery agent and provider relationships, as well as ALPR camera sales and support.
In addition, DRN has recently hired the following fintech team members:
• Nick Haaf has joined DRN as senior executive director of national enterprise accounts. In this role, Haaf partners with the DRN team on business development for all segments of indirect auto and other key industry segments. He is primarily focused on the top 100 national auto lenders and integrating the use of our data for optimal financial ROI and other key performance results. Prior to DRN, Haaf served in executive leadership roles with CU Direct Connect, California Republic Bank, Exeter Finance and Experian.
• Oscar Nunez has joined DRN to serve as director of product for the fintech division. Nunez is responsible for overseeing the technical development of new and existing solutions for the fintech market. He previously served in senior leadership roles with Uber, Capital One Auto Finance and Bank of America.
Since 2009, DRN has helped the auto finance industry recover nearly $8 billion in asset value delivered back on finance companies’ books, representing a significant risk reduction on delinquent portfolios. DRN maintains more than 7 billion nationwide vehicle sightings with more than 161 million captured monthly using ALPR technology.
DRN, along with Allied Solutions, Equifax, Millennium Capital and Recovery Corp. and SmartAuction, are the presenting sponsors of Used Car Week 2018, which begins Nov. 12 at the Westin Keirland Resort and Spa in Scottsdale, Ariz. Registration discounts as much as $600 are available through Oct. 16.
Complete details can be found at www.usedcarweek.biz.
