With the rapid development of financial technology (fintech), fintech investment banking has become a hot topic. This article will analyze the trends and opportunities in fintech investment banking industry. Fintech investment banks refer to investment banks that focus on providing services to fintech companies, such as underwriting IPOs and raising capital. The rise of fintech startups with innovative business models has brought new growth opportunities to investment banks. There are several notable trends in fintech investment banking in recent years. First, many top investment banks have set up dedicated fintech teams. Goldman Sachs, Morgan Stanley and Credit Suisse all have fintech investment banking divisions now. Second, fintech IPOs and funding deals have surged globally. In 2021, the fintech industry has raised over $91 billion in investment. Third, there is increasing consolidation. Larger fintech firms are acquiring smaller firms for technology and growth. overall, fintech investment banking is booming and will see continued growth. The opportunities lie in helping early stage fintech startups raise capital as well as advising fintech mergers and acquisitions. However, fierce competition also exists as more banks target the fintech sector.
Top investment banks actively targeting fintech sector
Major global investment banks such as Goldman Sachs, Morgan Stanley, JP Morgan and Credit Suisse have taken notice of the huge potential in fintech investment banking and created dedicated fintech coverage teams. These fintech focused bankers help fintech startups and companies raise capital through IPOs or private funding. They also advise on fintech M&A activities. The creation of fintech teams signifies the importance of this high growth sector to investment banks. Goldman Sachs FT Partners, Morgan Stanley Multiples and Credit Suisse Strategic Solutions are some examples of fintech focused divisions. By developing fintech expertise, investment banks aim to gain market share in this expanding industry.
Fintech funding and IPO deals reached new highs
The fintech industry has experienced massive growth in terms of funding and public listings. According to KPMG’s 2021 Pulse of Fintech report, global fintech investment in the first half of 2021 has already surpassed 2020’s full-year total. Several notable fintech IPOs in 2021 include Robinhood, Affirm, SoFi and Coinbase. These companies raised billions of dollars through public listings. At the same time, private fintech funding deals also achieved record levels, with large rounds raised by Stripe, Klarna, Revolut etc. The Wall Street Journal reported that fintech accounted for nearly 20% of VC investments in Q2 2021. The explosion of fintech funding can be attributed to rising investor interest as well as the growth plans of fintech firms themselves.
Increasing M&A activities driven by consolidation
Mergers and acquisitions in the fintech sector are accelerating as the industry matures. Large fintech players are acquiring smaller firms to expand their technology stack and offer more integrated services. For example, PayPal acquired Japanese buy now pay later firm Paidy in 2021 to enhance its Pay in 4 installment solution. Square acquired Afterpay for $29 billion to gain share in the BNPL space. Visa acquired European open banking platform Tink for €1.8 billion. Fintechs are also joining forces – AvidXchange and FastPay merged to create a new accounts payable and payment automation firm. Investment banks with fintech expertise play a key role in advising these M&A deals. They can expect to see increased deal flow as consolidation continues.
Early stage fintechs offer high growth potential
While the established fintech giants continue to grow, early stage fintech startups also present huge opportunities for investment banks. New fintechs looking to disrupt finance with innovative models need help from bankers to raise capital, go public and expand. Investment banks with fintech coverage can nurture long-term relationships with these startups right from seed funding rounds. Helping fintechs while they are still small can lead to highly lucrative IPO or M&A mandates down the road. Fintechs working in emerging areas like embedded finance, blockchain and digital assets are especially attractive prospects.
In summary, fintech investment banking is an exciting and high-growth field driven by booming funding levels, record IPOs and increasing M&A activities. Top investment banks are prioritizing fintech coverage while new fintechs also need the services of bankers. By developing fintech expertise early on, investment banks can capitalize on the major opportunities in this burgeoning sector.