FinTech 100

Pent-Up Merger Activity Builds

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Technology is the backbone of financial services, enabling efficiency and driving innovation in products and services. And when financial institutions are faced with business or regulatory challenges, they frequently turn to technology consultants and providers for guidance and solutions. Some of the prominent issues that vendors are paying attention to are compliance and governance; big data and analytics; evolving business models, including payments; optimal utilization of cloud and outsourcing; and meeting customers' changing demands.

Three things in particular strike me about this year's FinTech 100:

• Impressive revenue growth: FinTech 100 vendors collectively grew their revenues from $53 billion in 2010 to $64 billion in 2011, almost a 20% increase. Gross World Product grew 3.5% during this same time.

• Increasing globalization: 40% of the FinTech 100 hail from outside the US.

• Predominance of outsourcers and service providers: Almost 50% of FinTech providers are in this category.

After several years of anemic merger and acquisition activity, the pace of acquisitions among the FinTech 100 accelerated significantly in 2011. In 2009, there were only two acquisitions among the FinTech and there were four in 2010. In 2011, that number doubled to eight FinTech providers acquired over the course of the year. The increase in M&A activity, still way below pre-financial crisis levels, is primarily attributable to pent-up demand and curtailed activity in the previously sour economy. Five of the eight acquired vendors were from outside the U.S., further evidence of the increasing globalization of the FinTech 100.

Acquisitions in 2011 were dominated by providers of IT services, payments, and risk management. IT services and outsourcing were due for consolidation given maturation and the search for cost efficiencies. We expect to see continued M&A activity in this space since the number of providers is still large and clients exert continued cost containment pressures.

Globalization will be a continued theme, as evidenced by U.S.-based IT services firm iGate's acquisition of Indian outsourcer Patni Computer Systems. Consultant and outsource provider Capgemini acquired a majority interest in CPM Braxis, a Brazilian IT services company. Business processing and tech management firm Genpact acquired U.S.-based Headstrong Services, a provider of consulting and IT services.

Two acquisitions occurred in 2011 by payment providers: electronic payment processor Verifone acquired US-based Hypercom upon Hypercom's divestiture of its U.S. payment systems business per regulatory approval; and payments firm ACI Worldwide acquired S1, one of the last stand-alone payments and channels solution companies in the U.S.

These three round out the M&A list: IBM acquired Algorithmics of Canada, provider of risk management solutions. Wolters Kluwer Financial Services acquired compliance and risk management company FRS Global of Belgium. Misys acquired capital markets firm Sophis of Ireland.

This year we welcome 14 new entrants to the FinTech 100: Genpact (N.Y.), Computer Services Inc. (Ky.), Simplex Consulting Inc. (Japan), BRQ IT Services (Brazil), NIIT Technologies Inc. (GA) , Silverlake Axis (Malaysia), Carlisle & Gallagher Consulting Group (NC), ARGO (TX), TransCentra Inc.(formerly Regulus) (GA), GBST Holdings Limited (Australia), Diasoft (Russia), TAS Group (Italy), eFront S.A. (France), and Primatics Financial (VA).

In the top 10, the largest revenue increases come from Tata Consulting Services (TCS) and Cognizant, both IT services providers and outsourcers, which proves the prominence of outsourcing and services providers in the industry. First Data also rose in the rankings among the top 10 from #8 to #7.

The Enterprise 25 also saw two new entrants. Financial management provider Intuit enters the Enterprise ranking at #24. Also joining the Enterprise 25 is outsourcing provider of managed computing Savvis, a CenturyLink Company based in Missouri, debuting at #25. IBM and HP continue to dominate the top spots. Microsoft achieved the greatest upward movement, jumping from #6 in 2010 to #3 this year.

Karen Massey is senior analyst, consumer banking, at IDC Financial Insights.

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The Rankings

About the Rankings

The FinTech 100 and the Top 25 Enterprise Companies in FinTech are an annual ranking of the top technology providers to financial services companies worldwide. This special report is a collaboration of the editors at American Banker and Bank Technology News and the analysts and researchers at IDC Financial Insights. The rankings are researched and compiled by IDC Financial Insights. Public relations support is provided by The William Mills Agency.

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