Fintech

The most powerful woman in fintech is on the hunt for acquisitions

Published

8 months ago

15 May, 2024

The most powerful woman in fintech is on the hunt for acquisitions

Just months after completing one of the biggest deals of her career, Stephanie Ferris, CEO of National Loyalty Information Services, has a message for everyone: the FIS cannot be done. Ferris and the company she leads are trying to get back into purchasing.

In February the FIS the sale closed of a majority stake in WorldPay to GTCR, a Chicago buyout shop. The transaction helped FIS reduce its total debt, which had increased by approx $19.1 billion at the end of 2023, at approximately $10 billion once the sale is completed. As of March 31, FIS’s debt stood at $11.2 billion while its leverage ratio was about 2.7 times, a spokesperson said.

The deleveraging means FIS is resetting its mergers and acquisitions agenda, Ferris said. The Jacksonville company provides fintech software to merchants, banks and capital markets firms. FIS is setting aside about $1 billion a year for the deals and will target small, synergistic products that the company currently doesn’t have or doesn’t have enough time to build organically, he said. Last year’s purchase of Bond Financial Technologies, a banking-as-a-service startup, was an acquisition, something FIS isn’t trying to replicate this time around. “We’re really looking for products or companies that have revenue and EBITDA and a proven business model,” Ferris said.

Any acquisitions will be in areas that FIS is looking to grow, such as digital and payments capabilities in the banking space and commercial lending technology in the capital markets sector, he said. FIS will not seek to do one large transaction but multiple smaller deals. For a company to attract FIS’s interest, it would have to have revenue of between $150 million and $200 million, otherwise “it’s not really a business but just a product and it doesn’t have enough customers for us,” Ferris said.

Ferris spoke to Fortune last week after wrapping up a triumphant day for investors. FIS on March 6th reported first quarter earnings that exceeded expectations. The results marked the fifth quarter during Ferris’ tenure that FIS met or exceeded earnings expectations. The FIS also announced it the launch by Atelio, which enables financial institutions, businesses and software developers to embed financial services into their offerings. Atelio already has three customers: KeyBank, College Ave and RoyalPay. (Atelio features Bond executives including Roy Ng, Bond co-founder and CEO, who is EVP, chief business officer of FIS Platform and Enterprise Solutions.)

“It has been a very challenging first 18 months, both within the FIS and externally. I’m really happy with where we are,” Ferris said.

Ferris’ start as CEO of FIS was not easy. You were given the reins of a large publicly traded fintech that was in trouble. FIS’s heavy debt load meant the company could only complete one acquisition, worth around $800 million Payrix purchase in 2021, from 2019 to 2022.

In February 2023, a few months after Ferris became CEO, FIS announced plans to do so spin off WorldPay. He launched a sales process in April and signed a contract with a buyer for WorldPay by July, he said. The WorldPay trial has attracted a lot of interest, especially among private equity firms, among which Advent International is said to be in the running. Ferris declined to comment. “We moved quickly. Agreements die if they last a long time,” she said.

The decision to sell a majority of WorldPay meant Ferris was canceling one of the biggest payments deals of 2019. There were several that year. Fiserv acquired First Data for 22 billion dollars, while Global payments harvest TSYS for $21.5 billion and Worldline bought Ingenico for 7.8 billion euros.

FIS’s purchase of WorldPay “was a bad decision,” said Dan Dolev, senior fintech equity research analyst at Mizuho Securities USA. FIS purchased WorldPay at a time of peak consolidation for processors. WorldPay didn’t have a branded point-of-sale terminal for small businesses, like Fiserv has with Clover or Square has with Square POS, Dolev said. All of WorldPay’s competitors had a branded POS, which made it difficult to compete, Dolev said.

“[Ferris] it was very courageous to resolve the merger,” Dolev said. FIS shares also rebounded after falling to a 52-week low of $47.16 in October. The stock closed at $76.39 on Tuesday, up about 62%.

What is FIS?

FIS is one of the largest financial services companies in the world. Its software powers many of the largest private equity firms and 95% of… Forbes 2024 The best bank in the world list, Ferris said. FIS technology “underpins the entire financial services industry,” she said.

The FIS is so important that in March 2023, when several regional banks, including Silicon Valley Bank AND Signature Bank, collapsed, many CEOs of banks large and small turned to Ferris to ensure their systems continued to run smoothly, he said. That responsibility is an honor and privilege that Ferris says he takes seriously: “I’m an FIS steward…I make sure we’re here every day for our customers.”

Ferris, who has spent his entire career in finance, including as CFO of WorldPay, doesn’t think there will be a banking crisis in 2023. The financial system is very strong, according to Ferris.

“In fact, what we saw was more accounts opened throughout the banking system. More deposit accounts have been opened than the idea of people taking their money out, running away and putting it out of their banks,” she said.

Ferris has spent his entire career in finance and has held many roles. You have been CFO, COO, president and now CEO of one of the largest fintech companies. That makes her the most powerful woman in fintech, an honor she Ferris said she doesn’t think about. “There was always a group of guys in a room. Since I grew up this way, it doesn’t really bother me,” she said.

When it comes to colleagues, Ferris points to Jane Fraser, CEO of Citigroup, who she says is “badass.” As the only woman to run one of the largest banks, Fraser has a tall order, Ferris said. “I think she’s fantastic,” she said.

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

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Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

To come
Aveni Assistance
Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”