Jay D. Wilson, Jr., CFA, ASA, CBA, vice president, contributed the chapter to the recently published book, The Technological Revolution in Financial Services: How Banks, FinTechs, and Customers Win Together (University of Toronto Press, University of Toronto).
In his chapter, “Creating Strategic Value by Partnering with or Acquiring FinTechs,” Wilson assesses different options for banks and other incumbents who are looking to engage with FinTech start-ups. In particular, he contrasts the dominant position of the largest banks against the weaker position of many small community banks spread around the country that collectively represent the largest number of U.S. banks. Community banks are under threat from heightened competition, higher regulatory and compliance costs, a challenging interest rate environment, and demographic changes in rural America.
Larger U.S. banks have the budgets and the expertise to develop digital solutions in-house. Smaller banks are in a more difficult position, caught between well-funded competitors on one hand and low-cost innovators on the other. Wilson argues that the solution is to form partnerships with FinTech companies in order to leverage innovation and new technologies to offer customers enhanced services while remaining competitive with the larger banks. FinTech can boost revenues from fees and commissions while reducing expenses related to branch operating costs.
Wilson outlines a framework for FinTech partnerships consisting of four steps: determine how FinTech might complement or enhance the bank’s existing strategic plan; identify attractive FinTech niches and companies within those niches; develop a business case for each of the available options; and compare the costs and execute on the best strategy. Wilson provides three case studies of successful and failed bank-FinTech partnerships. He then outlines a strategy for identifying, valuing, and acquiring a FinTech start-up.
For more information or to purchase a copy, visit The University of Toronto Press’s website.
About the Author
Jay D. Wilson, vice president, is a senior member of Mercer Capital’s Depository Institutions practice. Jay also leads Mercer Capital’s Financial Technology industry team and publishes research related to the FinTech industry. Jay is also the author of Creating Strategic Value Through Financial Technology (John Wiley & Sons, 2017).
Jay is involved in the valuation of financial institutions and FinTech companies for a variety of purposes including ESOPs, mergers and acquisitions, profit sharing plans, estate and gift tax planning, compliance matters, and corporate planning. He has extensive experience providing public and private clients with fair value opinions and related assistance pertaining to goodwill and intangible assets, stock-based compensation, loan portfolios, and other financial assets and liabilities. Jay also directs projects in a litigated context, including tax disputes, dissenting shareholder actions, and ESOP related matters.