Archive for the ‘Financial Services’ Category

Fintech unicorns in the waiting room 

Posted on: April 19th, 2024 by Morgan Arnold

Fintech in Focus is part of The MHP Financial Services Pulse. 

This week’s gathering of the biggest players in UK fintech has offered a useful ‘check-up’ on the health of the sector.

The fintech ecosystem in the UK has been through a challenging 18 months with company valuations slashed, headline redundancy rounds announced, and question marks over paths to profitability. Despite the UK retaining its crown as the best location in Europe for fintech investment, this period has ‘spooked’ many – even some of those who have been the market’s biggest advocates in recent years.

Some suggest that the UK has lost its lustre for fintech during this period and is focusing too much on regulation while increasingly losing talent to Berlin and Paris. Yet, this pessimism was not shared by those attending the Guildhall this week with many seeing clear signs that the UK market is beginning to regain its confidence.

Underpinning this growing confidence, we are seeing two parallel story lines playing out simultaneously. One is being led by larger, more established players who have surfed the digital banking wave over the last two decades and are looking for support over the coming years to reach the exit door via an IPO. The second is the ‘billion dollar’ question that many are now asking: where will the next pocket of financial services innovation emerge in the UK?

For onlookers, notably, this week’s event started with the news that UK neobank Zopa Bank had turned a profit and was now eyeing an IPO in the next few years. This is revealing for a few reasons. First, it shows a rebound in performance with the sector’s relentless focus on profitability now starting to bear fruit for fintechs who have had to right-size their teams, refocusing as funding markets slowed. Second, Zopa is the latest fintech to join the IPO ‘waiting room’ which includes Starling, Revolut, and Atom Bank.

While fintechs are biding their time for the perfect window to list, the growing discussion around exit strategies – something rarely spoken of 12 months ago – highlights increased optimism at the top of the sector. This optimism is one motivation for Monzo, Revolut and others in the Unicorn Council for UK Fintech (UCFT) to call on the Government this week to ditch its tax on share trading. If the Government wants these firms to list in London, these firms are telling them that they will need some support to find the exit door.

On the second ask, the sector’s leaders are increasingly aware of growing competition between London and its EU rivals. Many know that innovation and technological development is key to keeping the UK market in pole position – this is becoming even clearer as the artificial intelligence opportunity grasps the sector. As a result, industry leaders are looking to old playbooks and new to find opportunities in the market.

In particular, the launch of an Open Finance Taskforce will provide recommendations to the UK Government on leveraging financial data to improve SMEs’ access to credit. This is a “quick win” for the industry, leveraging the UK markets strength and expertise in open banking. The Treasury also hopes that the upcoming National Payments Vision will further push the sector forward and create greater direction for the payment ecosystem.

But, to drive innovation forwards, you need knowledge and talent to enable technological development. Ernst & Young’s report on Monday that the sector’s boardrooms lack the AI ‘know how’ is a clear warning shot to policymakers and industry leaders that they need to do more attract and retain the best talent. EY’s research found that 47% of fintech CEOs believe their board lacks the essential skills and experience related to Generative AI.

Both of these discussions focus on how the sector can thrive over the next five years, and leverage the depth and maturity in the UK market. They also reflect growing criticism that the UK doesn’t have a joined-up approach to its fintech strategy. This echoes the sentiment of Revolut’s UK chief who yesterday noted that New York’s concentration of financial services talent posed a significant risk to the capital.

For the sector’s leaders and policymakers, creating a joined-up approach that compliments all the component parts of the sector and works with the wider financial services industry is key. Ultimately, this will dictate whether the next decade of fintech innovation in the UK will succeed, or if the sector needs stronger medicine.

If you would like to discuss in more detail, please email g[email protected]

Financial advice in 2070: takeaways from NextWealth

Posted on: March 27th, 2024 by Morgan Arnold

Money Matters is part of The MHP Financial Services Pulse. 

A 10ft tall image of David Bowie might not be the first to spring to mind when talking about wealth management, but there it was, looking down over the hundreds of attendees at last week’s NextWealth Live annual conference.

‘Change agents’ was the dominant theme throughout the day at The Royal Institution, where we heard discussions on democratising advice, the balance of human connection over tech, managing generational change and the potential for life coaching to retain clients.

There was recognition of the need to not only adapt new models and practices, but to leverage marketing and PR to shout about this – and meet younger clients in different spaces.

A third new era of investment and wealth management

The talk that drew the most attention was from industry innovator Sandy Kaul from Franklin Templeton’s US base. She spoke about the move to designing portfolios that would be as much about delivering personal enrichment as financial; helping clients identify what they want out of life. The increase of gamification and ‘social’ investing fed into this, with the inevitable shift towards personally relevant stocks and tokenised collectibles (imagine a Taylor ‘Swift-ETF’ that covers concert tickets and merchandise as a portfolio benefit!).

She also spoke about the move to three-dimensional, hyper-personalised portfolios that span investments through to healthcare accounts, and the progression from chatbots to ‘act’ bots – holograms that could even take on the avatar of an individual adviser and lean on the data to offer guidance.

The next generation of advisers

This is where the industry is headed – an inevitability driven by client demands and a re-set in how younger generations view and access financial advice. But an ‘ageing’ financial advice industry is a challenge to this: around three quarters of IFAs plan to retire within the next decade. Someone made the point that the RDR was the death knell for advisers, with the scrapping of the commission structure that might enable younger advisers to get started (or attract them in the first place). Another argument was that licences to practice were becoming tougher to achieve and align with regulations, not market need. Once again, a reminder that it is the end-client who will ultimately steer this next era.

Connecting via communications

It was telling that the real focus on the role for marketing came from Paddy Earnshaw, Customer and Digital Director at B&Q. When 74% of customers get frustrated if content shared has nothing to do with them, and 48% spend more when their experience is personalised, he rightly emphasised the importance of connecting with customers and their communities.

That’s why wealth and investment managers, while it might be unchartered territory for some, need to be thinking more about their brand. Take inspiration from in and out of financial services, and companies that are already showing how they understand changing lifestyles. It can start small: a narrative that defines the ambition, a one-off sponsorship to test the waters, building to something longer-term that that stretches the business into different territory.

If you would like to discuss more about what these next steps should be, do get in touch on [email protected].

 

Greenhushing: Are companies running away from communicating their climate ambitions?

Posted on: March 25th, 2024 by Morgan Arnold

It’s hard to miss Spring entering its early bloom in recent weeks following the warmest February on record last month. Blossoms have appeared around a month earlier than usual in recent years, creating disruptive effects on ecosystems, and 2024 has seen a continuation of the recent extreme weather trend that has dominated headlines. With further warnings of the coming months setting fresh temperature records around the world, climate change has maintained its grip as one of today’s most pressing global issues.

And, as more voters than ever head to the polls this year, companies are grappling with their responsibilities to the planet and the extent to which they uphold and communicate their climate ambitions.

In the wake of new legislation approved by the European Parliament in January to curb greenwashing, businesses face a new reality. Generic environmental claims and misleading product information are banned, with only sustainability labels backed up by certification schemes permissible under the new rules. It comes as the UK government announced its consultation to regulate the ESG ratings sector this month. HM Treasury seeks to improve “clarity and trust” in the sector, highlighting the need for more transparent and accountable data on companies’ climate credentials.

Sustainable positioning on the retreat

While these developments, and others, will go a long way towards stamping out instances of greenwashing and increasing data quality, they could also lead to unintended consequences. Companies may opt to stay quiet on their net zero progress out of fear of falling foul of regulations.

Some financial institutions, including Blackrock and HSBC, have decided to downgrade their funds under the EU’s Sustainable Finance Disclosure Regulation from the most sustainable category to one that requires a looser definition. Vanguard deleted two paragraphs about its “dedication to responsible investing” from its webpage on sustainable investing for several months last year. Meanwhile, ASOS has removed the “Responsible Edit” filter section from its website without any public announcement.

A recent study by South Pole confirms this concerning trend of businesses shifting away from their sustainable positioning. The study found that most respondents in nine of the 14 industries surveyed are intentionally decreasing their climate communications, otherwise known as ‘greenhushing’. It found that 44% of companies stated that external communications on climate targets have become more challenging, and 7 in 10 listed companies admitted to greenhushing. They blame a heady mix of factors, including growing regulatory scrutiny, investor pressure, customer activism and data scarcity.

Companies may underreport their sustainability efforts for genuine reasons, such as being unable to fulfil the demand for data or the regulatory costs. Some prefer to test their green credentials over time to avoid scrutiny or fines. However, research has shown that the world’s biggest brands are missing out on billions of pounds of potential value by failing to communicate their sustainability achievements and progress appropriately.

Avoiding the greenhushing trap

So, how can companies avoid the greenhushing trap? The same principles to prevent greenwashing apply, such as ensuring the communication of environmental claims is substantiated with verifiable data and providing regular reporting on progress against clearly defined goals.

But, more than that, widespread greenhushing could set a dangerous precedent that may cause the recent momentum on corporate sustainability to stall. Communications leaders and their bosses must get comfortable with a degree of scrutiny that comes with talking about their impact on the planet. No business is perfect and scrutiny can be planned for and mitigated against. Ultimately, companies have a responsibility to tell authentic stories in order to catalyse a more sustainable future. A good example of this was Apple’s short video with Oscar winner Octavia Spencer last year. By embracing the sceptic in the Mother Nature character, Apple was able to directly address her concerns, and with it, address its critics while admitting that it still has more work to do in key areas.

While the path to net zero is not straightforward for any business, and uncomfortable headlines will occasionally need to be stomached, those that preserve and demonstrate accountability will reap the benefits both commercially and reputationally. After all, companies that lead this movement can set the benchmark, prompt others into action and, more broadly, encourage an era of more authentic sustainability communications.

You can read all of our Financial Services Pulse content here. For more information about the Financial Services team and our sustainability expertise, contact Ben Carr, Associate Director & Sustainable Finance Lead, at [email protected].

Financial Services Pulse | Money Matters

Posted on: February 1st, 2024 by Morgan Arnold

Welcome to Money Matters, part of The MHP Financial Services Pulse. Our team of experts bring you their take on all things money and the communications considerations that the hottest trending topics in the space are creating. 

Are star fund managers a dying breed? 

Recent press coverage would point to the demise of the star fund manager.

Consistent redemptions seen by Terry Smith and Nick Train over the past year have been in focus, while the recently announced departure of Ben Whitmore from Jupiter sent the firm’s share price into a spiral. Meanwhile, Bobby Jain’s attempts to have the largest ever hedge fund debut seems set to fail, with expectations now being managed down. Looking further back in time, the retirement of James Anderson dominated the business pages. The less said of the fall of Neil Woodford, the better.

At the same time, we are seeing the rise and rise of passive investing. In the US, the amount of money in passive funds has for the first time outstripped that in actively managed counterparts – an eye-watering $13.3trn. How much of this is the pull to passive vehicles or more generous interest rates – and how much of this is a push from seemingly underperforming actively managed funds remains to be seen.

But the underlying debate between stockpicking versus following the market is not new. Nor indeed is the question around the value of the superstar stockpickers and their pulling power. The same questions could have been asked 10 years ago. And they were. For instance, the Financial Times questioned in March 2014 whether star fund managers are a dying breed. Since we still have well-known, highly respected names in the industry that seem to shine brighter than others and inspire client loyalty whatever the investment weather, the answer remains no.

That’s not to say nothing has changed, especially since the Woodford debacle. Larger fund houses are clearly more alive to the downsides of star managers – whether the key man risk, the perception of a lack of appropriate controls, or client concerns around long-term succession planning. That’s why they are far more disposed to communicating the infrastructure, processes and technologies that sit behind their portfolio managers and the collegiate teams that drive performance. Process over individual personality has become more common, through necessity; performance doesn’t just rest on one individual’s shoulders.

Investment personalities in The Networked Age

But of course that’s just part of the story. Star fund managers are a distribution team’s dream: they generate their own brand awareness, media interest, and ultimately inflows. As such, they will by necessity remain a core part of fund management’s marketing machine.

And in The Networked Age – the volatile, activist and polarised landscape we communicate in – there is a simple lesson that continues to help star managers cut through: the messenger is as important as the message. Essentially people connect with people they identify with or are inspired by.

We believe passions spread ideas. And through big personalities passionately demonstrating their conviction in their investment approach, they become highly effective – and often highly trusted – messengers.

Despite the advent of AI, and the rise of passives, investment involves humans, and therefore cannot be emotionless. This means there will always be a role for mavericks that we place our trust in – hoping we have found the next genius that can beat the market.

Diversify your spokesperson portfolio

Star managers deliver investment companies huge media profile. But the key lesson for communications teams is this: do not place all of your eggs in one basket. Managers do not stay in situ for ever. This means thinking beyond pure succession planning for a single manager; it means demonstrating the expertise and range of personalities across your portfolio managers. It is far better to build a small team of Galacticos than rely on one star player.

You can read all of our Financial Services Pulse content here. For more information about the Financial Services team or to discuss this topic further, contact Dan directly at [email protected].

What will 2024 bring for consumers and their finances?

Posted on: January 4th, 2024 by Kate Cunningham

“I’m going to pick a stock and talk about why I think it’s interesting. And that stock is GameStop.”

So says Paul Dano playing ‘wallstreetbets’ investor Keith Gill in Dumb Money, Hollywood’s chronicling of the 2021 GameStop saga. The real-life scenario saw a subsequent short squeeze on the stock and what the Financial Conduct Authority called a “speculative frenzy”. In the US, trading platform Robinhood imposed restrictions barring new long positions in GME, for which it later apologised in front of Congress.

It was a watershed moment highlighting the power of retail investors, but also raised questions about what responsibility trading platforms have for educating their users. That it took place in January is telling: Christmas is often a time of increased financial stress, so the chance to make a quick return is tempting. As we step into 2024, the cost-of-living crisis is entering a new phase, and Robinhood itself has launched in the UK with a promise to “drive innovation” in this market. With that in mind, here are my thoughts on the other interlinked trends likely to grow this year, driven by consumer expectations.

1. Social media’s (continued) influence on investment decisions

The surge in retail investment shows no signs of abating. Platforms that democratise access to the stock market continue to attract millions of new users, many of whom are younger and more socially connected than ever before. This is set to get a further boost with the government’s potential sale of its remaining shares in NatWest to retail investors this year. If that goes ahead, we should see even greater adoption of the platforms that facilitate this, if launched in the right way. But the battle for their attention, and for provision of reliable information, has stepped up yet another level. Investors are further delving into social media and online communities to make investment decisions, and Gen Z is largely ditching Google and instead browsing TikTok, Instagram and Pinterest as a form of search engine.

2. Impact goes mainstream

The world quite literally burned last year, and pictures of holidaymakers forced to abandon their hotels spread across social media. Like it or not, it’s when perceived ‘far-off’ problems start to seep into everyday life that people begin to sit up and take notice of the evidence. Sustainable investing is no longer a niche interest; it’s a significant force in the financial world. People want to know not only how their money is invested, but the impact it is having. Harnessing this momentum, the Make My Money Matter campaign with Olivia Colman thanking pension savers for allowing oil and gas companies to destroy more of the planet was particularly powerful. And it’s not just the E – activists speaking out on the S and the G are, again thanks to social media, given a bigger platform than ever before.

3. AI: the future-gazing financial adviser

Cost and fear of judgement have long been two of the main barriers to getting qualified financial advice. But people are increasingly seeking personalised financial experiences tailored to their unique needs and life stages. AI is already being used as an aid by the industry to offer these insights and automate often complex decision-making processes, and this is becoming more advanced at pace. While there are challenges in terms of data privacy and over-reliance on historic data, the reality is that AI-driven tools are best placed to identify future trends. It’s this hyper-personalised, predictive potential that will be the real game-changer.

4. BNPL your cab fee

Well, not yet. Embedded finance is nothing new, but the demand for convenience has reached new heights and the growth of all of the above – digitisation, transparency, personalisation – feeds into this. As the line between financial and consumer services continues to blur, so expectation of getting two, or even three financial services in one increases: a pre-approved loan for a vehicle purchase, payment facilitation, and automatic integration of that payment plan into a bespoke financial dashboard complete with those hyper-personalised tips and updates. While that’s a while away, more financial partnerships with consumer brands to offer a seamless, frictionless experience will be the only way to win – and keep – customer loyalty.

5. Financial literacy as a core focus

On the point of loans, financial literacy became more of a necessity last year, but the UK is still a weak performer when benchmarked against similar economies. A report from Wealthify and the Cebr found that three quarters of the country falls below the financial literacy benchmark. The desire is there to manage money or invest more effectively, but we have long failed to offer sufficient financial education in schools and habits then slip down the generations. We’re likely to see an increase in educational resources, workshops and interactive tools designed to demystify finance, shaping a financial landscape that is not only more innovative, but inclusive and responsible.

So what does this all mean for communications?

Understanding and embracing these trends is crucial to financial services brands looking not only to stay relevant, but to influence. Consumers are rightly more discerning, seeking services that can better fit into their lives. Reaching them should be via the spaces they already occupy and the formats they are naturally drawn to – whether that’s via video games and TikTok, or LinkedIn and broadsheets – and with content that informs without preaching, driving natural debate and conversation.

While having a set of agreed guidelines or key messages to inform activity can provide a valuable skeleton to work from, flexibility and willingness to adapt around them is key – things move quickly. As the GameStop saga showed, it only takes one post.

 

COP28: A historic agreement struck, but will it be enough?

Posted on: December 14th, 2023 by Morgan Arnold

Yesterday, the UAE Consensus was adopted at COP28 in Dubai. Only hours earlier, many were questioning whether a deal could even be reached. Several nations were angered by an earlier draft agreement that failed to include strong wording on fossil fuels. However, the final ‘Global Stocktake’ text was published early Wednesday following a dramatically swift adoption process.

Running to more than 20 pages and nearly 200 clauses, the UAE Consensus “calls on parties to contribute” to take actions including “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science”.

In what is being described as a historic moment, this is the first time there has been an explicit mention of reducing the use of fossil fuels in a COP text.

However, developing nations and campaigners have not shied away from critiquing the agreement since the moment the gavel came down on the negotiations. They claim that the deal has a litany of loopholes, appears to placate fossil fuel interests and will ultimately hamper the world from cutting greenhouse gas emissions drastically enough to limit global heating to 1.5c above pre-industrial levels.

They also argue that, despite an agreement on a loss and damage fund, developing nations still require hundreds of billions more in finance to help them transition away from coal, oil and gas. During the summit, the US pledged just over $20m in new finance, while India announced it would double its coal production by the end of the decade.

Despite its imperfections, the deal represents perhaps the biggest step forward since the Paris Agreement of 2015. It signals the start of the end of the fossil fuel era and a global push towards renewable energy.

The hope is that the commitment to triple renewables and energy efficiency by 2030 will see wind and solar replace coal, oil and gas and the requirement for nations to submit stronger carbon-cutting plans by 2025 should, in theory, help to accelerate the transition.

As diplomats and officials leave Dubai, there will be a sense that there is still much more work to be done to achieve the goal of limiting climate change and its impacts. This year was the warmest year on record and 2024 is set to pass the 1.5c threshold, according to The Met Office, and the UN recently warned that global temperatures will rise by 3-5c by the end of the century.

Away from the politics, many will be wondering if the agreement struck today is radical enough to address the scale and pace required to avoid climate breakdown.

Celebrating Fintech excellence: Our team’s triumph as AltFi’s PR Agency of the Year

Posted on: November 30th, 2023 by Morgan Arnold

Last week, we were honoured to be crowned PR Agency of the Year at leading fintech publication, AltFi’s, annual awards. Recognising the cream of the crop in fintech, the judges described us as not only supporting clients with proactive and responsive PR, but being a “valuable node in the fintech community.” This truly does reflect what we strive to be for our clients and is testament to our team’s dedication to setting the gold standard in communications. 

What got us to this position? Put simply, it’s the power of a fully integrated approach that delivers impactful results for our clients. In a year marked by unprecedented challenges, from the continued funding slowdown to regulatory pressures, if one thing has become clear, it’s that fintechs are now operating in an increasingly connected world, with an ever increasing and diverse set of stakeholders. Being able the manage the reputational scrutiny that comes in this environment has been instrumental in us winning nearly 20 new clients this year, from disruptive fintech scaleups like Wamo, Papara, Xapo Bank and Br-dge to incumbent financial institutions like First Sentier Investors. 

We’ve crafted powerful narratives that resonate across all channels, ensuring client’s messages are not only heard but also felt in this new marketplace. We’ve provided strategic counsel and developed messaging that addresses consumer concerns, offering reassurance and solutions amidst a cost-of-living crisis, while serving as a steady hand for clients facing economic headwinds. And, as the financial services sector continues to be driven by technological innovation and changing consumer behaviours, we’ve helped clients embrace digital transformation and meet the heightened expectations of today’s tech-savvy consumers; from AI to blockchain, we’ve demystified cutting-edge technologies and turned them into bigger stories that engage and inform.  

Being truly integrated, our approach has seen us tap into different areas of our expertise across the agency – be that public affairs, digital or internal comms, to name but a few – and leverage our comprehensive suite of services, from influencer analysis to AI-powered measurement tools.   

Crucially, our success is rooted in our commitment to attracting and nurturing the best talent in the industry. We’ve built a team of thought leaders and experts who are not only at the forefront of their respective fields but are also deeply passionate about the transformative potential of fintech.   

As we look ahead to 2024, the outlook for our team is one of strong optimism. With a robust portfolio of clients, a team of unparalleled talent and a relentless drive for innovation, we are excited for what the next year will bring. Our integrated proposition will continue to be a differentiator, allowing us to meet the evolving needs of our clients and to lead in a landscape that demands nothing less than excellence. Here’s to a future where our practice not only grows but continues to redefine the standards of fintech and financial services communications. 

MHP Group bolsters Financial Services team

Posted on: October 16th, 2023 by Morgan Arnold

This press release originally appeared in PR Week

MHP has made two appointments that will further support its financial services team’s focus on key growth areas: fintech and payments, asset management and sustainable finance, and insurance.

Gemma Lingham joins the business as a director, working alongside director, Matt Village to lead the fintech and payments team.

Lingham previously served as head of fintech at FleishmanHillard and has expertise in open banking and payments technology with previous clients including Trulayer, CrowdCube, Swan and Western Union.

Lingham said: “It’s a hugely exciting time to be joining the practice on the back of a sustained period of impressive growth. Both the client and talent base are first class, and I look forward to working with Nick, Matt and the wider leadership team to continue building a market-leading fintech proposition.”

Charlotte Merlin-Jones also joins MHP, as an associate director from Edelman Smithfield, where she specialised in asset management, property and mortgages.

She will join the asset management and sustainable finance team, whose recent client wins include asset manager First Sentier Investors.

Merlin-Jones said: “At a time when the financial sector is under the spotlight, the ability to combine deep sector knowledge with a forward-thinking approach that delivers creative multichannel campaigns has never been more important. I look forward to experiencing the full power of MHP’s integrated proposition while working with an extremely talented set of new colleagues.”

In the last 12 months, the fintech and payments team has won briefs from brands, including Fiserv, Feedzai, Xapo Bank, Wamo and Laser Digital. This month, MHP supported Irish unicorn Wayflyer on its new £1bn funding deal with Neuberger Berman.

MHP’s head of financial services, Nick Woods, said: “Our ability to attract the industry’s best talent has been crucial to our success over the past three years. Gemma and Charlotte are two brilliant examples of this and bring with them deep expertise which will further accelerate our growth and continue our development of sub-sector specialisms.

“This capability, coupled with our integrated approach and a commitment to helping clients tell bigger stories has never been more relevant in a sector that continues to be reshaped by technological, societal and economic forces.”

First Sentier Investors appoints MHP Group to European communications brief

Posted on: October 8th, 2023 by Alexandra Stamp

MHP Group has been appointed by First Sentier Investors, a global asset manager with more than £119.8 billion in assets under management, as its European corporate communications adviser, helping the business build and manage its reputation across the Continent.

A leading global asset management group, First Sentier Investors’ expertise spans a range of asset classes and specialist sectors focused on delivering sustainable investment success based on responsible investment principles.

MHP has been working with Stewart Investors, part of the First Sentier Group, since 2021. The expansion of the relationship will see MHP advising on group-level corporate communications and positioning, alongside growing the profile of its component sub-brands: Igneo Infrastructure Partners, a mid-market infrastructure investor and FSSA Investment Managers, specialists in Asia and global emerging markets, and other core investment strategies.

The brief includes building the profile of the business within the European investment industry by helping it to tell a bigger story about its investment strategies and its impact across the globe. It comes at a time when the role of responsible investment in addressing global sustainability challenges, such as navigating the impacts of climate change and unlocking the capital required for the global energy transition, has never been more important.

MHP will be supported by agency partner NewMark Finanzkommunikation in Germany.

The win marks another milestone in a landmark year for MHP’s Financial Services team which has already added 14 new clients to its impressive portfolio and further demonstrates its expanding asset management credentials, in addition to its deepening sustainability experience across the agency.

Nick Woods, MHP’s Head of Financial Services, said:

“We’re delighted to be appointed by First Sentier Investors to support the business across Europe. Through our work with Stewart Investors, we have witnessed first-hand the expertise and passion for sustainable investment that sits at the heart of the Group. We look forward to deploying our knowledge, skills and network to help the business tell a bigger story about its European capabilities and its wider mission and purpose.

Johan Mackenzie, Head of EMEA and US Marketing at First Sentier Investors, said:

“As a result of its success working with Stewart Investors, our shared values around sustainability, as well as its deep industry insight and expertise, MHP is the ideal partner to lead in helping us raise the European profile of the Group and our market leading brands and investment strategies. We look forward to working together to demonstrate the power of responsible investment in realising a more sustainable future.”

It’s been a long, hot summer of fintech M&A activity – here’s what to expect in the final months of 2023

Posted on: September 14th, 2023 by Morgan Arnold

The second half of the year kicked off with a flurry of fintech M&A, with more than half of the $500 million+ deals so far seen in 2023 having taken place in just June and July.

In the past few months alone, money-saving app Snoop has been scooped up by Vanquis Banking Group; Visa splashed out $1bn to acquire Brazilian startup Pismo; and headlines have been dominated by rumours that Monzo is plotting to purchase Danish challenger bank rival Lunar.

The general consensus appears to suggest that the macroeconomic landscape – with sky high interest rates, widespread deceleration in economic growth and VC funding levels experiencing the biggest dip in years (to the tune of a 49% July YoY depreciation) – is leading many fintechs to seek out a speedy exit. Those companies that had high valuations just a couple of years ago are now finding themselves at the end of their runway, and struggling to raise capital without the  risk of lowering their valuations. And those with more funding to play with are capitalising on that fact, knowing they can grab a bargain in tricky market conditions.

As a result, we’re seeing an increased willingness from smaller outfits to merge with or become acquired by their larger and often better-funded counterparts. It’s something we’re increasingly hearing from our clients too, with many having acquired more boutique firms – often direct competitors located in different markets – as a means to growth and/or customer acquisition in an otherwise testing marketplace. Fintechs that have “come of age” in the last few years are flexing their M&A muscles to strengthen revenue streams and set themselves on a stronger path to profitability.

But whilst the second half of the year has started with a flurry of M&A, activity is still down on a year-on-year basis. According to S&P Global Market Intelligence, 128 fintech M&A transactions were recorded in the first half of 2023, compared to almost double in January to June of 2022, at 248.

So what does the closing third act of 2023 hold when it comes to fintech M&A?

AI M&A to rise up the ranks

The segment which is perhaps most ripe for consolidation by the fintech sector is AI. As with the emergence of any new technology, incumbents are grappling with whether to “buy or build” their generative AI capabilities. And for many, buying smaller outfits is the most efficient and profitable answer.

Take Ramp, for example, who in June acquired Cohere.io, an AI-led customer support platform, for an undisclosed sum. Or neobank Albo, who purchased Delt.ai, enabling it to become the only digital bank to offer debit and credit products for both consumers and SMBs.

This spate of acquisitions demonstrates two things: firstly, that the value of any company able to innovate and build large-scale generative models is likely to soon peak – that’s if it hasn’t already. Secondly, that many firms believe this technology will soon play an absolutely central role to their offerings and processes.

But at the same time, AI is also shaking up the fintech M&A market by (in theory) improving efficiency when it comes to deal sourcing, valuation, due diligence and post-merger processes – something to also keep an eye on.

Other segments which are similarly crowded, in which we can expect to see further M&A activity, include BNPL (think along the lines of Square’s acquisition of AfterPay) and neobanking (see MHP Group client Papara’s acquisition of Spain-based Rebellion, or Monzo’s eyeing up of Lunar).

Floodgates are opening

There is certainly a “wait-and-see” sentiment lingering in the fintech sector, as potential sellers wait on the sidelines to gauge the correct timing to make a move. On the other hand, anecdotally speaking, we’re seeing that many buyers are waiting for more favourable valuations to take hold, for example through more downrounds which we saw plenty of in Q1.

And sellers and buyers alike will want to avoid getting washed out in a crowded market once deal flow does resume to normal levels – so the benefits of being a first mover should also not be underestimated.

In that sense, the floodgates have arguably already opened and if we are to take June and July as an example, we should expect the pace of M&A activity to pick up even more towards the end of the year and beyond.

Higher interest rates will continue to dictate the market

The M&A shopping spree which characterised mid-2020 to mid-2022 was partly driven by firms wishing to take advantage of low interest rates, so it’s little surprise that activity is down compared to last year.

But most central banks are believed to be nearing the end of their most aggressive interest rate rising cycles in decades in response to soaring inflation, with the Fed hiking to 5.5% in August and markets pricing in a fifteenth – and potentially final – rise by the Bank of England this month.

Interest rates are intrinsically tied to M&A deals as many buyers finance all or a portion of their purchase of target companies with debt. So as the economic landscape stabilises, interest rates level out and monetary policy (hopefully) continues to curb inflation, it’s likely that buyers will feel more comfortable spending their money. It’s unlikely we’ll reach 2020 levels anytime soon, but should rates decrease, we can expect to see another flood of deals to the market.

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The reality is, as the gap between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept narrows, we can expect to see even more fintech M&A in the remaining months of this year. The next few months will prove to be a critical period in which we will be able to tell which players can thrive, and which might crumble under market pressure.

This will be compounded by continued caution from venture capital firms who are reportedly sitting on $271 billion in dry powder, as well as zombie IPO and SPAC markets – not fully dead thanks to CAB Payments’ IPO in early July and Ashington Innovation’s London float in June.

The result will be a fintech segment that looks very different in 2024, with fewer players but many with more diverse offerings and broader global reach.