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Is a Fintech Shopping Spree by IBM and Other Giants on the Cards?

After the bombshell that was Chinese regulation hit last week, those who follow the crypto space closely will likely be sick of reading foreboding forecasts, and wild speculation on how the market will be impacted. Fortunately, the world of cryptocurrency is larger than just China – the clue’s in the name, really. As the climate of fear and uncertainty finally calms, better news is able to break through the diminishing noise from the East.

Speaking to CNBC, Daniel Döderlein, the CEO of Norway’s Auka, a fintech startup providing cloud-based mobile payments products for 17 banks, hinted at a mergers and acquisitions “shopping spree” early in 2018. He noted that the heavy-weights in the tech world have a long-standing relationship with banks but, drawn by innovation in payment processing, would inevitably show more interest in the sea of fintech companies springing up daily.

Döderlein stated that a new European directive enabling third parties to monopolize on banking software would help the drive towards new products — also known as “open banking” in fintech circles. This would result in tech behemoths like Capgemini and IBM buying up smaller startups and with them the innovations that they bring to finance. He argued that whereas the small fintech firms can provide new capabilities, they struggle when it comes to customer relationships — something which larger companies have already solved in many cases.

What we see predominantly throughout that whole sector is that their capability in terms of the technology you need to serve this next leg of the journey, once all the floodgates are being opened up in January 2018, is not necessarily present. So they will probably go on a shopping spree and do a lot of M&A.

He went on to say that the biggest companies would start to acquire smaller firms because they need suitable payments technology to take advantage of the EU’s Revised Payment Services Directive which will take effect in January. He highlighted the mutually beneficial relationship that will occur between young firms like Starling and Monzo, who have the technology behind them but lack the relationship with the public to take their product to the consumer, and the planet’s largest, who suffer the opposite fortune.

Many of these larger players in the market that have no experience of doing payments but see that this software has a very strategic disposition, including the option of reducing their payment processing cost.

Whilst the effect of any “shopping spree” for fintech startups won’t be felt on the market for some time, it’s certainly encouraging for general sentiment that the planet’s largest companies are still deeply fascinated by the revolutionary technology backing cryptocurrency.

Ref: CNBC
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