Fintech Deals to Watch: Growing in the Digital World

Continued frothy growth – and interesting deals – in the fintech market that GonzoBanker mothership Cornerstone Advisors serves.

Fintech investing has gained near sport status. Bank CEOs are looking at fintech investment rounds. Mark Cuban is tweeting about Jill Castilla’s fintech efforts with lending system startup Teslar. Any given teenager is checking a fintech app at the skate park. Anyone remember when financial services was considered predictable and sleepy? OK, me neither. But, it’s never been more cool. 

According to CB Insights, US fintechs raised $14.6B in the most recent quarter. While that’s lower than the prior quarter, it’s up 121% for the year. Some perspective on how fast this fintech market is moving:

• Fintech Labs tracks 269 $1B+ valued fintech unicorns that have been founded in just the past two decades.
• #267 on the list is Thought Machine, a company started only six years ago that recently announced signed core system deals with Chase and Arvest Bank along with a new funding round led by banks.      

There is SO MUCH interest that there are simply too many deals and funding rounds to list, but here are some of the recent deals that caught my attention:    

Banks Acquiring Fintechs

This segment picked up speed. As I pointed out just a few months back, a wave of continued lucrative funding rounds are arming the challenger likes of Chime, Varo, and Aspiration. Even N26 (which announced a withdrawal from the U.S. market) had a record-breaking high funding round. Now, more banks are lining up to get in bigger with fintech deals including:

• JPMorgan Chase acquired Open Invest and Nutmeg in digital wealth and environmental-social-governance investing apps as well as college financial planning app Frank  
• US Bancorp acquired business travel/expense platform Travel Bank ($200M) and business payment and expense management startup Bento Technologies
• KeyBank acquired alliance partner XUP, focused on streamlined process for sales, onboarding, activation, and servicing in merchant services
• Capital One acquired travel booking app LOLA following LOLA’s split with Amex
• Goldman Sachs acquired home improvement buy now, pay later (BNPL) app GreenSky ($2.24B) and rebranded its challenger offering from Marcus by Goldman Sachs to – wait for it – Goldman Sachs Marcus       
• Cross-River Bank acquired small business app Betterfin and data analytics firm PeerIQ to integrate into its Banking-as-a-Service
• OFG Bancorp (Oriental Bank) led an investment funding round in niche bank tech provider NYMBUS
• CURQL Collective (founded by Members Development Company and including 60+ credit unions and CUSOs) made significant investments in credit tech Zest AI, cybersecurity tech DefenseStorm, and NYMBUS 

Fintechs Acquiring Banks

Led by prior SoFi and LendingClub bank acquisitions, Square’s industry bank charter approval, and Revolut’s bank charter application, the interest here continued, although at a lower pace, including a couple of deals here:  

• BM Tech (formerly BankMobile Technologies) acquired Seattle-based First Sound Bank
• M1 Finance acquired Minnesota-based First National Bank of Buhl  

Lending

As the face of lending (and generating loan growth) changes, credit tech continued a hot streak with several deals including:

• nCino acquired mortgage POS provider SimpleNexus
• Alkami acquired origination and account opening provider MK Decision
• Block (the-artist-formerly-known-as Square) announced the planned acquisition of BNPL provider Afterpay, but the deal still hangs in the balance as of this writing
• Carlyle joined Accel KKR in a significant investment in Abrigo
• Sun Capital Partners acquired mortgage quality control provider LoanLogics and LoanLogics acquired income calculation and verification tech provider LoanBeam
• LOS provider Numerated acquired financial spreading provider Fincura
• Canapi Ventures announced a funding round with loan servicing system Peach Finance
• FTV Capital announced a funding round with loan servicing system LoanPro
• BNPL provider Zilch acquired commercial lending platform Nepfin
• Porch Group acquired mortgage POS provider Floify
• SMB marketplace Lendio acquired Lasso’s LOS and AI
• Thomas Lee Partners acquired leasing software provider Odessa
• Notable funding rounds at Built, Upgrade, and Amount – all of which speak to the future of credit

Payments

In a zeitgeist moment of what is happening in payments market disruption, the Los Angeles’ Staples Center was renamed Crypto.com Arena. A number of deals either had legacy payments rolling up, emerging payments mashing up with commerce, or both:        

• Paymentus acquired bill-pay provider Payveris and bill aggregation provider Finovera
• NCR acquired cryptocurrency ATM firm LibertyX (hey, if you’re going to the Crypto.com arena, might as well drop by a crypto ATM on the way)     
• VISA announced acquiring foreign exchange and cross-border payments firm Currency Cloud
• Mastercard acquired cryptocurrency intel company Ciphertrace
• Fiserv acquired restaurant commerce platform BentoBox to complement its Clover POS
• Bill.com acquired Invoice2Go as well as spend and expense management platform Divvy
• Bottomline acquired Bora for payments straight through processing

Digital Security

This continued to be a hot area with several deals including:

• TransUnion’s acquisition of identity analytics provider Neustar
• Mastercard acquired digital identity provider Ekata
• Canapi Ventures invested in security/behavior analytics firm Neuro-ID
• The aforementioned DefenseStorm funding round

Lastly, the startup core and Banking-As-A-Service solution market continues a growth pace with the noted Thought Machine funding joined by funding rounds at Mambu and the noted NYMBUS. And in what appears to be a sign of more things to come, Rockbridge Growth Equity (ties to Rocket Mortgage) and CU Solutions Group acquired database marketing provider Marquis from Falfurrias Capital. Like Rocket Mortgage’s rise using digital tech, marketing, and outreach, Rockbridge’s portfolio reads like a checklist in new world growth methods. Chime, Square, and Rocket’s methods are case studies in how to grow a business (fintech or otherwise) now.

Like so many of these recent deals (SimpleNexus, MK Decision, Abrigo, Floify, BentoBox) and a recent partnership announcement between Rocket Mortgage and Salesforce I’m still sorting out, the common thread is the playbook on explicitly growing customers in the digital-first – and increasingly digital-only – world. 

Any other fintech deals you’ve been watching that I missed here?  Send me a note