Financial Technology

FinTech M&A continues to be top of mind for the sector as larger players seek to grow and expand while founders and early investors look to monetize their investments.This theme was evident in several larger deals already announced in 2019 including Global Payments/Total System Services (TSYS), Fidelity National Information Services, Inc./Worldpay, Inc., and Fiserv, Inc./First Data Corporation.One important aspect of FinTech M&A is the purchase price allocation and the valuation estimates for goodwill and intangible assets as many FinTech companies have minimal physical assets and a high proportion of the purchase price is accounted for via goodwill and intangible assets.The majority of value creation for the acquirer and their shareholders will come from their investment in and future utilization of the intangibles of the FinTech target.To illustrate this point, consider that the median amount of goodwill and intangible assets was ~98% of the transaction price for FinTech transactions announced in 2018.Since such a large proportion of the transaction price paid for FinTech companies typically gets carried in the form of goodwill or intangibles on the acquirer’s balance sheet, the acquirer’s future earnings, tax expenses, and capitalization will often be impacted significantly from the depreciation and amortization expenses.When preparing valuation estimates for a purchase price allocation for a FinTech company, one key step for acquirers is identifying the intangible assets that will need to be valued.In our experience, the identifiable intangible assets for FinTech acquisitions often include the tradename, technology (both developed and in-development), noncompete agreements, and customer relationships.Additionally, there may be a need to consider the value of an earn-out arrangement if a portion of transaction consideration is contingent on future performance as this may need to be recorded as a contingent liability.Since the customer relationship intangible is often one of the more significant intangible assets to be recorded in FinTech acquisitions (both in $ amounts and as a % of the purchase price), we discuss how to value FinTech customer relationships in greater detail in the remainder of the article.Valuing Customer-Related AssetsFirms devote significant human and financial resources in developing, maintaining and upgrading customer relationships. In some instances, customer contracts give rise to identifiable intangible assets. More broadly, however, customer-related intangible assets consist of the information gleaned from repeat transactions, with or without underlying contracts. Firms can and do lease, sell, buy or otherwise trade such information, which are generally organized as customer lists.Since FinTech has some relatively varied niches including payments, digital lending, WealthTech, or InsurTech, the valuation of FinTech customer relationships can vary depending on the type of company and the niche that it operates in.While we do not delve into the key attributes to consider for each FinTech niche, we provide one illustration from the Payments niche.In the Payments industry, one key aspect to understand when evaluating customer relationships is where the company is in the payment loop and whether the company operates in a B2B (business-to-business) or B2C (business-to-consumer) model.This will drive who the customer is and the economics related to valuing the cash flows from the customer relationships.For example, merchant acquirers typically have contracts with the merchants themselves and the valuable customer relationship lies with the merchant and the dollar volume of transactions processed by the merchant over time, whereas the valuable relationship with other payments companies such as a prepaid or gift card company may lie with the end-user or consumer and their spending/card usage habits over time.Valuation ApproachesValuation involves three approaches: 1) the cost approach, 2) the market approach, and 3) the income approach. Customer relationships are typically valued based upon an income approach (i.e., a discounted cash flow method) where the cash flows that the customer relationships are expected to generate in the future are forecast and then discounted to the present at a market rate of return.Cost ApproachValuation under the cost approach requires estimation of the cost to replace the subject asset, as well as opportunity costs in the form of cash flows foregone as the replacement is sought or recreated. The cost approach may not be feasible when replacement or recreation periods are long. Therefore, the cost approach is used infrequently in valuing customer-related assets.Market ApproachUse of the market approach in valuing customer-related assets is generally untenable for FinTech companies because transactional data on sufficiently comparable assets are not likely to be available.Income ApproachUnder the income approach, customer-related assets are valued most commonly using the income approach. One method within the income approach that is often used to value FinTech customer relationships is the Multi-Period Excess Earnings Method (MPEEM).MPEEM involves the estimation of the cash flow stream attributable to a particular asset. The cash flow stream is discounted to the present to obtain an indication of fair value. The most common starting point in estimating future cash flows is the prospective financial information prepared by (or in close consultation with) the management of the subject business.The key valuation inputs are often estimates of the economic benefit of the customer relationship (i.e., the cash flow stream attributable to the relationships), customer attrition rate, and the discount rate.Three key attributes that are important when using these inputs to valuing customer relationships include:Repeat Patronage. The expectation of repeat patronage creates value for customer-related intangible assets. Contractual customer relationships formally codify the expectation of future transactions. Even in the absence of contracts, firms look to build on past interactions with customers to sell products and services in the future. Two aspects of repeat patronage are important in evaluating customer relationships. First, not all customer contact leads to an expectation of repeat patronage. The quality of interaction with walk-up retail customers, for instance, is generally considered inadequate to reliably lead to expectations of recurring business. Second, even in the presence of adequate information, not all expected repeat business may be attributable to customer-related intangible assets. Some firms operate in monopolistic or near-monopolistic industries where repeat patronage is directly attributable to a dearth of acceptable alternatives available to customers. In other cases, it may be more appropriate to attribute recurring business to the strength of the trade names, software platform, or brands.Attrition. Customer-related intangible assets create value over a finite period. Without efforts geared towards continual reinforcement, customer lists dwindle over time due to customer mortality, the ravages of competition, or the emergence of alternate products and services. The mechanics of present value mathematics further erode the economic benefits of sales to current customers in the distant future. Customer relationships are wasting assets whose economic value attrite with the passage of time.Other Assets.Customer-related intangible assets depend on the existence of other assets to provide value to the firm. Most assets, including fixed assets and intellectual property, are essential in creating products or providing services. The act of selling these products and services enable firms to develop relationships and collect information from customers. In turn, the value of these relationships depends on the firms’ ability to sell additional products and services in the future. Consequently, for firms to extract value from customer-related assets, a number of other assets need to be in place.ConclusionMercer Capital has experience providing valuation and advisory services to FinTech companies and their acquirers.We have valued customer-related and other intangible assets to the satisfaction of clients and their auditors within the FinTech industry across a multitude of niches (payments, wealth management, insurance, lending, and software).Most recently, we completed a purchase price allocation for a private equity firm that acquired a FinTech company in the Payments niche.Please contact us to explore how we can help you. Originally published in the Value Focus: FinTech Industry Newsletter, Mid Year 2019.

In the last few weeks, I presented at two events geared towards helping community banks achieve better performance: the Moss Adams Community Banking Conference in Huntington Beach, California and the FI FinTech Unconference in Fredericksburg, Texas. The FI FinTech Unconference had a recurring visual theme of the buffalo, which struck me as an insightful image for a FinTech conference.Much of the discussions at both conferences focused on the ability of community banks to adapt, survive, and thrive rather than thin out like the once massive North American buffalo herd. Both events had several presentations and discussions around FinTech and the need for community banks to evolve to meet customer expectations for improved digital interactions. Beyond thinking that I will miss the great views and weather I had for both trips, I came away with a few questions bankers should consider.How Can Community Banks Compete with Larger Banks?Larger banks are taking market share from smaller banks and have been gathering assets and deposits at a faster pace than community banks (defined as banks with less than $10 billion of assets) the last few decades. For example, banks with assets greater than $10 billion controlled around 85% of assets in mid-2018 compared to 50% in 1994. This is a significant trend illustrating how much market share community banks have ceded. Further, larger banks are producing higher ROEs, largely driven by higher levels of non-interest income (~0.90% of assets vs ~0.55%) and better operating leverage as measured by the efficiency ratio (~59% vs ~66%). The larger banks may widen their lead, too, given vast sums that are being spent on digital enhancements and other technology ventures to improve the client experience.Can FinTech Serve as a Value Enhancer and Help Community Banks Close the Performance Gap with Larger Banks?Most community banks are producing an ROE below 10%—an inadequate return for shareholders despite low credit costs. As a result, the critical role that a community bank fills as a lender to small business and agriculture is at risk if the board and/or shareholders decide to sell due to inadequate returns. Confronting this challenge requires the right team executing the right strategy to produce competitive returns for shareholders. FinTech solutions, rather than geographic expansion through branching and acquisitions, may be an option if FinTech products and processes can address areas where a bank falls short (e.g., wealth management).Can Community Banks Hold Ground and Even Win the Fight for Retail Deposits?Many community bank cost structures are wed to physical branches while customers— especially younger ones—are increasingly interacting with institutions first digitally and secondarily via a physical location. This transition is occurring at a time when core deposits are increasing in value to the industry as interest rates rise. In response, several larger banks, such as Citizens Financial, have increased their emphasis on digital delivery to drive incremental deposit growth. Additionally, as funding costs increase, some FinTech companies are being forced to consider partnerships with banks. Thus far, the digital banking push and the formal partnering of FinTech companies and banks are incremental in nature rather than reflective of a wholesale change in business models. Nonetheless, it will be interesting to see whether community banks can adapt and effectively use technology and FinTech partnerships to compete and win retail deposit relationships in a meaningful way.How Can Community Banks Develop a FinTech Framework?Against this backdrop, I see four primary steps to developing a FinTech framework:Identify attractive FinTech niches such as deposits, payments, digital lending, wealth management, insurance, or efficiency (i.e., tech initiatives designed to reduce costs)Identify attractive FinTech companies in those nichesDevelop a business case for different strategies (estimate the Internal Rates of Returns and IRRs)Compare the different strategies and execute the optimal strategyWhat Are Some Immediate Steps that Banks Can Take Regarding FinTech?The things that banks can do right now to explore FinTech opportunities are:Get educated. There are an increasing number of events for community bankers incorporating FinTech into their agenda and we have a number of resources on the topic as wellBegin or continue to integrate FinTech into your strategic planDetermine what your customers want/need/expect in terms of digital offeringsSeek out FinTech partners that provide solutions and begin due diligence discussionsHow Mercer Capital Can HelpMercer Capital can help your bank craft a comprehensive value creation strategy that properly aligns your business, financial, and investor strategies. Given the growing importance of FinTech solutions to the banking sector, a sound value creation strategy needs to incorporate FinTech.We provide board/management retreats to educate you about the opportunities and challenges of FinTech for your institution. We can:Help your bank identify which FinTech niches may be most appropriate for your bank given your existing market opportunitiesHelp your bank identify which FinTech companies may offer the greatest potential as partners for your bankHelp provide assistance with valuations should your bank elect to consider investments or acquisitions of FinTech companiesWe are happy to help. Contact us at 901.685.2120 to discuss your needs. Originally published in Bank Watch, October 2018.

Valuing a FinTech company can be a very complicated and difficult task; however, it carries significance for employees, investors, and stakeholders of the company. While FinTech companies have large differences, including niche (payments, solutions, technologies, etc.) and stage of development, understanding the value of a FinTech company is crucial to everyone with an interest in the company.

I recently attended FinXTech, an industry event where the hosts at Bank Director bring together FinTech founders and bank directors and executives for productive conversations about the road ahead as partners (and competitors).Those discussions occurred against a backdrop in which FinTech, as a concept to enhance the customer experience and to drive operating efficiencies, is widely accepted by bank management, shareholders, and regulators. How “FinTech” is implemented varies depending upon resources. As shown in the Table 1, there has been no surge of M&A in which banks buy FinTech companies. Only nine of 276 transactions announced since year-end 2016 entailed a bank or bank holding company acquirer. KeyCorp, which has been one of the nine active FinTech acquirers, announced in June 2018 that it would acquire digital lending technology for small businesses built by Chicago based FinTech company Bolstr. At best, activity can be described as episodic as it relates to bank acquisitions, which appears to be designed to supplement internal development.The very largest banks such as JPMorgan Chase & Co. are spending billions of dollars annually to upgrade technology—a level of spending that even super regional banks cannot match. In contrast, community and regional banks have been left scratching their heads about how to address FinTech-related issues when money is a constraining factor.During the FinXTech 2018, the focus shifted from the potential disruption of a bank’s franchise by FinTech to the potential to partner with FinTech companies, which stood out to me as a marked change from prior years.Both banks and FinTech companies realize that they need each other to some degree. For banks, FinTech offers the potential to leverage innovation and new technologies to meet customer expectations, enhance efficiency, and compete more effectively against the biggest banks. For FinTech companies, the benefits from bank partnerships can include the potential to leverage the bank’s customer relationships to scale more quickly, access to funding, and regulatory/compliance expertise. Several examples of successful partnerships between banks and FinTech companies were highlighted at the FinXTech event. (You can read more about some of them here.)The FinTech/Bank partnership theme also was evident in GreenSky’s recent IPO, a FinTech company based in Atlanta. GreenSky arranges loans primarily for home improvement projects. Bank partners pay GreenSky to generate and service the loans while the bank funds and holds the loans on their balance sheet. As more partnerships emerge, it will be interesting to see if FinTech impacts the valuation of banks that effectively leverage technology to achieve strategic objectives such as growing low-cost core deposits, opening new lending venues, and improving efficiency. One would think the answer will be “yes” if the impact can be measured and is meaningful.Another trend to look for will be whether smaller banks become more active as investors in FinTech companies. For the most part, investments by community and regional banks in FinTech companies remains sporadic at best even though FinTech companies raised nearly $16 billion of equity capital between year-end 2016 and June 2018 in both private and public offerings. An interesting transaction we observed was a $16 million Series A financing by Greenlight Financial Technology, Inc., a creator of smart debit cards, in which the investors included SunTrust Bank, Amazon Alexa Fund, and $619 million asset NBKC Bank, among others.FinXTech 2018 included several sessions related to due diligence for FinTech partnerships; however, with limited M&A and investing activity by banks there was little discussion about valuation issues, which can be challenging for FinTech companies and differs markedly from methods employed to value a bank.Not surprisingly, we have lots of thoughts on the subject.With the emerging partnership theme from FinXTech 2018 in mind, view our complimentary webinar “How to Value an Early-Stage FinTech Company.” Additionally, if you have questions, reach out to one of our professionals to discuss your needs in confidence.Originally published in Bank Watch, June 2018.

This discussion is adapted from Section III of the new book Creating Strategic Value Through Financial Technology byJay D. Wilson, Jr., CFA, ASA, CBA. I enjoyed some interesting discussions between bankers, FinTech executives, and consultants at the FinXTech event in NYC in late April.  One dominant theme at the event was a growing desire of both banks and FinTech companies to find ways to work together.  Whether through partnerships or potential investments and acquisitions, both banks and FinTech companies are coming to the conclusion that they need each other.  Banks control the majority of customer relationships, have a stark funding advantage and know how to navigate the maze of regulations, while FinTechs represent a means to achieve low-cost scaling of new and traditional bank services.  So one key question emerging from these discussions is: Who will survive and thrive in the digital age?  As one recent Tearsheet article that I was quoted in asked: Should fintech startups buy banks?  Or as another article discussed: Will banks be able to compete against an army of Fintech startups?Build, Partner, or AcquireBanks face a conundrum of whether they should build their own FinTech applications, partner, or acquire.  FinTech companies face similar questions, though the questions are viewed through the prism of customer acquisition rather than applications.  Non-control investments of FinTech companies by banks represent a hybrid strategy.  Regulatory hurdles limit the ability of FinTech companies to make anything more than a modest investment in banks absent bypassing voting common stock for non-voting common and/or convertible preferred.While these strategic decisions will vary from company to company, the stakes are incredibly high for all.  We can help both sides navigate the decision process.As I noted in my recently published book, community banks collectively remain the largest lenders to both small business and agricultural businesses, and individually, they are often the lifeblood for economic development within their local communities.  Yet the number of community banks declines each year through M&A, while some risk loosened deposit relationships as children who no longer reside in a community where the bank is located inherit the financial assets of deceased parents.  FinTech can loosen those bonds further, or it can be used to strengthen relationships while providing a means to deliver services at a lower cost.Where to StartIn my view, it is increasingly important for bankers to develop a FinTech framework and be able to adequately assess potential returns from FinTech partnerships.  Similar to other business endeavors, the difference between success and failure in the FinTech realm is often not found in the ideas themselves, but rather, in the execution.Banks face a conundrum of whether they should build their own FinTech applications, partner, or acquire.While a bank’s FinTech framework may evolve over time, it will be important to provide a strategic roadmap for the bank to optimize chances of success.  Within this framework, there are a number of important steps:Determining which FinTech niche to pursue;Identifying potential FinTech companies/partners;Developing a business case for those potential partners and their solutions; andExecuting the chosen strategy. For a number of banks, the use of FinTech and other enhanced digital offerings represents a potential investment that uses capital but may be deemed to have more attractive returns than other traditional bank growth strategies. Community banks typically underperform their larger brethren (as measured by ROE and ROA) because fee income is lower and expenses are higher as measured by efficiency ratios.  Both areas can be enhanced through deployment of a number of FinTech offerings/solutions.The Importance of a Detailed IRR AnalysisThe decision process for whether to build, partner, or acquire requires the bank to establish a rate of return threshold, which arguably may be higher than the institution’s base cost of capital given the risk that can be associated with FinTech investments. The range of returns for each strategy (build, partner, or acquire) for a targeted niche (such as payments or wealth management) provides a framework to help answer the question how to proceed just as is the case with the question of how to deploy capital for organic growth, acquisitions, and shareholder distributions.  The same applies for FinTech companies, though often the decision is in the context of whether to accept dilutive equity capital.A detailed analysis, including an IRR analysis, helps a bank determine the financial impact of each strategic decision and informs the optimal course.While each option presents a unique set of considerations and execution issues/risks, a detailed analysis, including an IRR analysis, helps a bank determine the financial impact of each strategic decision and informs the optimal course. A detailed analysis also allows the bank to compare its FinTech strategy to the bank’s more traditional growth strategies, strategic plan, and cost of capital.  See the table to the right for an example of a traditional community bank compared to a bank who has partnered with a FinTech company.Questions Regarding PartneringBeyond the strategic decisions and return analyses, some additional questions remain for community banks that consider FinTech partners, including:Is the bank comfortable with the FinTech company’s risk profile?What will the regulatory reaction be?Who will maintain the primary relationship with the customer?Is the FinTech partnership consistent with the bank’s long-term strategic plan (a key topic noted in the OCC’s whitepaper on supporting innovation)?Questions Regarding AcquiringShould the community bank ultimately decide to invest in a FinTech partner a number of other key questions emerge, such as:What is the valuation of the FinTech company?How should the investment be structured?What preferences or terms should be included in the shares purchased from the FinTech company?Should the bank obtain board seats or some control over the direction of the FinTech Company’s operations?How Mercer Capital Can HelpTo help both banks and FinTech companies execute their optimal strategies and create maximum value for their shareholders, we have a number of solutions here at Mercer Capital.  We have a book that provides greater detail on the history and outlook for the FinTech industry, as well as containing targeted information to help bankers answer some of the key questions discussed here.Mercer Capital has a long history of working with banks.  We are aware of the challenges facing community banks.  With ROEs for the majority below 10% and their cost of capital, it has become increasingly difficult for many banks to deliver adequate returns to shareholders even though credit costs today, are low.  Being both a great company that delivers benefits to your local community, as well as one that delivers strong returns to shareholders is a difficult challenge. Confronting the challenge requires a solid mix of the right strategy as well as the right team to execute that strategy.No one understands community banks and FinTech as well as Mercer Capital.Mercer Capital can help your bank craft a comprehensive value creation strategy that properly aligns your business, financial, and investor strategy. Given the growing importance of FinTech solutions to the banking sector, a sound value creation strategy needs to incorporate FinTech into it and Mercer Capital can help.We provide board/management retreats to educate you about the opportunities and challenges of FinTech for your institution.We can identify which FinTech niches may be most appropriate for your bank given your existing market opportunities.We can identify which FinTech companies may offer the greatest potential as partners for your bank.We can provide assistance with valuations should your bank elect to consider investments or acquisitions of FinTech companies. No one understands community banks and FinTech as well as Mercer Capital. We are happy to help. Contact me to discuss your needs. This article first appeared in Mercer Capital's Bank Watch, June 2017.

As the second part to last week’s blogpost, the following section from Jay Wilson’s forthcoming book on FinTech describes ways to think about the valuation of robo-advisors, including some real world examples of technology based investment management platforms that transacted.Build, Buy, Partner, or Wait and SeePerhaps even more so than other FinTech industry niches, robo-advisory is well positioned for mergers, acquisitions, and partnerships. As mentioned earlier, traditional incumbents are being forced to determine what they want their future relationship with robo-advisors to look like as the role of the financial advisor changes. This quandary leaves incumbents with four options: attempt to build their own robo-advisory platform in-house; buy out a startup and incorporate its technology into their investment strategies; create a business-to-business partnership with a startup; or sit out the robo-advisory wave and continue to operate as usual.Of these options, we are seeing a rise in incumbents acquiring robo-advisory expertise.  Large firms that have followed this strategy include Invesco’s acquisition of Jemstep, Goldman Sachs’ acquisition of Honest Dollar, BlackRock’s Acquisition of Future Advisor, and Ally’s acquisition of TradeKing.Other incumbents have elected to be more direct and build their own robo-advisory services in-house.  Schwab’s Intelligent Portfolio service launched in March 2015 and was on the leading edge of traditional players building and offering their own robo-advisory services.  Two months later, Vanguard launched its internally built robo-advisor, named Personal Advisor, which has already become quite large and manages $31 billion in assets.  Furthermore, Morgan Stanley, TD Ameritrade, and Fidelity have all announced plans to release their own homegrown robo-advisories in the future.The partnership strategy has also popped up among traditional incumbents.  Partnerships allow traditional incumbents to gain access to a broader array of products to offer their customers without acquiring a robo-advisor.  In May 2016, UBS’ Wealth Management Americas group announced a major partnership with startup SigFig in which SigFig will design and customize digital tools for UBS advisors to offer their clients.  In exchange, UBS made an equity investment in SigFig, showing the confidence UBS has in SigFig’s ability to create an innovative platform.  Also, FutureAdvisor, operating under the auspices of Blackrock, announced partnerships with RBC, BBVA Compass, and LPL in 2016 to offer these institutions’ clients more affordable and automated investment advice, as the institutions continue to explore the idea of building their own robo-advisory service.  Personal Capital, a robo-advisor started in 2009, announced a partnership with AlliancePartners to offer its digital wealth management platform to approximately 200 community banks.  As seen in the actions of these incumbents, partnering with a startup is becoming an increasingly attractive option, as it allows the incumbent to give robo-advisory a test drive without wholly committing to the idea yet.Lastly, we have also seen traditional incumbents elect to ignore the robo-advisory trend altogether.  Raymond James indicated that they would not be offering or launching a robo-advisory platform to compete with its advisors.  Raymond James noted that their core business is serving financial advisors and a robo-advisory solution that offers wealth management solutions directly to consumers does not fit their business model.  They did indicate that they are looking to expand technology and other services to help their investment advisors but noted that robo-advisory is not a solution that they plan to launch presently.Thus, there are a number of strategic options with varying degrees of commitment by which traditional incumbents can either enter the robo-advisory field, or elect to stay on the sideline near-term. The question of whether to build, buy, partner, or wait and see will become increasingly asked and may extend from large incumbents to smaller RIAs, banks, and wealth managers as robo-advisories continue to pop up across the financial landscape and consumers increasingly desire these products.For those financial institutions considering strategic options as it relates to robo-advisory, we take a closer look at two of the announced robo-advisory transactions–BlackRock/Future Advisor and Ally/TradeKing–in greater detail.BlackRock’s Acquisition of Future Advisor1Blackrock’s acquisition of robo-advisory startup FutureAdvisor for an undisclosed amount in August 2015 is perhaps the most notable example of a robo-advisor acquisition strategy. The acquisition showed the increased staying power of robo-advisors, as Blackrock is the world’s largest asset manager.  FutureAdvisor provides investors with a low cost index investing service that diversifies their portfolio in a personalized and holistic manner based on the individual investor’s age, needs, and risk tolerance.  A series of algorithms automatically rebalance investors’ accounts, constantly look for tax savings and manage multiple accounts for investors. Assets are held by Fidelity or TD Ameritrade in the investor’s name, to assuage investors’ fears concerning safety and accessibility of funds.FutureAdvisor was founded by Jon Xu and Bo Lu, former Microsoft employees, in early 2010.  Significant funding rounds included a first round of seed funding ($1M in early 2010), another seed funding round and a $5 million Series A issue in 2012 and a Series B issue of $15.5 million in 2014.  As previously noted, following Blackrock’s acquisition announcement in August 2015, FutureAdvisor announced several significant partnerships (BBVA Compass, RBC, and LPL) to offer low cost investment advice to each entities clients.Bo-Lu, a co-founder of Future Advisor, referred to the acquisition as a “watershed moment, not just as an entity but for the broader financial services industry as a whole.” To better understand the mindset of Blackrock, consider two quotes from members of Blackrock.“Over the next several years, no matter what you think about digital advice, you would be pressed to argue that it won’t be more popular versus less popular five to ten years from now” – Rob Goldstein, Head of Blackrock’s Tech Division2 “More Americans are responsible for investing for the important life goals, whether that is retirement, education, etc. We think that a broad cross section of that market may be slightly under-served. We believe that is the mass-affluent or those who don’t want to seek out a traditional advice model.” - Frank Porcelli, head of BlackRock’s U.S. Wealth Advisory business3The acquisition confirmed the increased staying power of automated investment advice.  Blackrock is the world’s largest asset manager and the acquisition of FutureAdvisor signaled Blackrock’s intent to stay ahead of the robo-advisory curve.  In addition, FutureAdvisor’s partnership with LPL, BBVA Compass, and RBC prompted other banks to follow suit, including UBS’ partnership with FinTech startup SigFig and Morgan Stanley’s effort to build its own robo-advisor.After the acquisition, FutureAdvisor was able to evolve into a “startup within a huge company,” according to founder Jon Xu. The company still held on to the creative culture and environment of a tech startup, but now has the resources and tools of asset management giant Blackrock at its disposal.The acquisition also reinforced the trend towards a model based on convenience for the consumer rooted in the automated processes. The evolution of financial advising and wealth management will hinge on whether or not the knowledge and personal attention of a human can add enough value to outweigh the benefits of convenience fostered by automation.Ally’s Acquisition of TradeKing4In April 2016, Ally Financial Inc., a bank holding company that provides a variety of financial services including auto financing, corporate financing, and insurance, announced an acquisition of TradeKing for a total purchase price of $275 million.  TradeKing is a discount online brokerage firm that provides trading tools to self-directed investors.  TradeKing initially offered some of the lowest cost stock trade commissions (at ~$5 share on equity trades) and was also one of the earlier online brokers to integrate social networking and an online community where customers could discuss trading analysis and strategies.  Interestingly, Ally noted that it was not interested in offering traditional advisor led investment services but it was interested in digital offerings such as robo-advisors and robo-advisory was cited as a primary consideration for Ally’s interest in TradeKing.  In 2014, TradeKing formed TradeKing Advisors, which offers robo-advisory services for a minimum investment of $500.The acquisition reflected creative thinking in the banking industry as bank M&A is typically primarily about cost savings and secondarily about expansion into new markets.  Revenue synergies are touted periodically in bank acquisitions but they tend to be secondary considerations for investors and bank managers/directors.  The TradeKing acquisition represents a shift in this mindset as the potential benefits from the transaction will largely be in the form of revenue synergies as Ally leverages TradeKing’s brokerage platform and attempts to achieve greater revenues by offering trading and wealth management services to its existing customer base.  Convenience for Ally’s customers was clearly top of mind as evidenced by the following quotes from the CEO of both TradeKing and Ally around the time of announcement:“Banking and brokerage should be together so you can save and invest—and easily move money between the two.”  Don Montonaro, CEO TradeKing5 “We have a good composition of customers across all demographic segments, from affluent boomers to millennials… Our customers have been happy with our deposit products, but are asking for more from the online bank.”– Diane Morais, Ally Bank, CEO6End Notes1Sources: Financialadvising.com, “Jon Xu Interview”; Forbes.com, “BlackRock To Buy FutureAdvisor, Signaling Robo-Advice Is Here To Stay.”; Financial-planning.com, “FutureAdvisor co-founder: Risk, robos and 'hyperpersonalization.” 2Samantha Sharf, “BlackRock To Buy FutureAdvisor, Signaling Robo-Advice Is Here To Stay,” Forbes, August 26 2015. 3Ibid. 4Sources for Case Study: Techcrunch; S&P Global Market Intelligence; Various articles including: “Ally, Fidelity to Launch Robo-Advisory Services by Theresa W. Carey on Digital Investor; TradeKing Website; and Bloomberg Business. 5Theresa W. Carey, “Ally, Fidelity to Launch Robo-Advisory Services,” Barron’s, April 23, 2016. 6Ibid.

Despite the potential for FinTech innovation within wealth management, significant uncertainty still exists regarding whether these innovations will displace traditional wealth management business models.  In this two part blogpost, excerpted from colleague, Jay Wilson's, new book on FinTech forthcoming from Wiley in early 2017, we look at the potential of Robo-Advisors and offer some thoughts on valuation. Robo-advisory has the potential to significantly impact traditional wealth management. It represents a FinTech niche that is similar to the transition from full-service traditional brokers to discount online brokers. Robo-advisors were noted by the CFA Institute as the FinTech innovation most likely to have the greatest impact on the financial services industry in the short-term (one year) and medium-term (five years).  Robo-advisory has gained traction in the past several years as a niche within the FinTech industry offering online wealth management tools powered by sophisticated algorithms that can help investors manage their portfolios at low costs and with minimal need for human contact or advice.  Technological advances making this business model possible, coupled with a loss of consumer trust in the wealth management industry in the wake of the financial crisis, have created a favorable environment for the growth of robo-advisory startups meant to disrupt financial advisories, RIAs, and wealth managers.  This growth is forcing traditional incumbents to explore their treatment of the robo-advisory model in an effort to determine their response to the disruption of the industry. While there are a number of reasons for the success of robo-advisors attracting and retaining clients thus far, we highlight a few primary reasons.Low Cost. Automated, algorithm-driven decision-making greatly lowers the cost of financial advice and portfolio management.Accessible. As a result of the lowered cost of financial advice, advanced investment strategies are more accessible to a wider customer base.Personalized Strategies. Sophisticated algorithms and computer systems create personalized investment strategies that are highly tailored to the specific needs of individual investors.Transparent. Through online platforms and mobile apps, clients are able to view information about their portfolios and enjoy visibility in regard to the way their money in being managed.Convenient. Portfolio information and management becomes available on-demand through online platforms and mobile apps. Consistent with the rise in consumer demand for robo-advisory, investor interest has grown steadily.  While robo-advisory has not drawn the levels of investment seen in other niches (such as online lending platforms), venture capital funding of robo-advisories has skyrocketed from almost non-existent levels ten years ago to hundreds of millions of dollars invested annually the last few years.  2016 saw several notable rounds of investment into not only some of the industry’s largest and most mature players (including rounds of $100 million for Betterment and $75 million for Personal Capital), but also for innovative startups just getting off the ground (such as SigFig and Vestmark). The exhibit below provides an overview of the fee schedules, assets under management and account opening minimums for several of the larger robo-advisors.  The robo-advisors are separated into three tiers. Tier I consists of early robo-advisory firms who have positioned themselves at the top of the industry. Tier II consists of more recent robo-advisory startups that are experiencing rapid growth and are ripe for partnership.  Tier III consists of robo-advisory services of traditional players who have decided to build and run their own technology in-house.  As shown, account opening sizes and fee schedules are lower than many traditional wealth management firms.  The strategic challenge for a number of the FinTech startups in Tiers 1 and II is generating enough AUM and scale to produce revenue sufficient to maintain the significantly lower fee schedules.  This can be challenging since the cost to acquire a new customer can be significant and each of these startups has required significant venture capital funding to develop.  For example, each of these companies has raised over $100 million of venture capital funding since inception. Key Potential Effects of Robo-AdvisoryWe see four potential effects of robo-advisors entering the financial services landscape.The Democratization of Wealth Management.  As a result of the low costs of robo-advisory services, new investors have been able to gain access to sophisticated investment strategies that, in the past, have only been available to high net worth, accredited investors.Holistic Financial Life Management.  As more people have access to financial advice through robo-advisors, traditional financial advisors are being forced to move away from return-driven goals for clients and pivot towards offering a more complete picture of a client’s financial well-being as clients save for milestones such as retirement, a child’s education, and a new house. This phenomenon has increased the differentiation pressure on traditional financial advisors and RIAs, as robo-advisors can offer a holistic snapshot in a manner that is comprehensive and easy to understandDrivers of the Changing Role of the Traditional Financial Advisor. The potential shift away from return-driven goals could leave the role of the traditional financial advisor in limbo. This raises the question of what traditional wealth managers will look like going forward. One potential answer is traditional financial advisors will tackle more complex issues, such as tax and estate planning, and leave the more programmed decision-making to robo-advisors.Build, Buy, Partner, or Wait and See. As the role of the financial advisor changes, traditional incumbents are faced with determining what they want their relationship with robo-advisory to look like. In short, incumbents are left with four options: build their own robo-advisory in-house, buy a startup and adopt its technology, create a strategic partnership with a startup, or stay in a holding pattern in regard to robo-advisory and continue business as usual. We discuss each option in more depth in the following section. The debate about the impact of technology on wealth management has moved on to considerations about how best to respond.  In the second part of this post, we pick up on this last thought about strategies to capitalize on FinTech in the investment management industry, and include a couple of case studies for how it has been done.

“Nowadays people know the price of everything and the value of nothing.”– Oscar Wilde, The Picture of Dorian Gray The above quote seems especially apt in the FinTech industry because the implied values of high-profile, private FinTech companies are often mistakenly reported by the media based on the share price paid by investors in a recently completed funding round. The problem with applying the pricing of the most recent raise to all shares is that the media rarely knows about investor preferences attributable to each funding. As a result, the value of the company is most likely overstated. Capital structures and shareholder preferences matter. Pari passu is not a given although it is often implicitly implied in media reports. Consider the following example. Investors in a late-stage funding invest $100 million in return for 100,000 convertible preferred shares that represent 10% of the company’s post-raise fully diluted shares. The investors also get certain economic, control rights and other preferences with their preferred shares that earlier investors did not obtain. The headline notes that a new FinTech Unicorn has arrived because the implied value is $1 billion based upon the $100 million investment for the 10% interest; however, this simple calculation typically will overstate the Company’s value because the majority of the shares do not have the same rights and preferences as those purchased in the most recent financing round. Valuing companies with limited if any operating history that involves a new technology is inherently difficult. The challenge increases when the subject has a complex capital structure. Nevertheless, valuations—whether reasonable or unreasonable—have very real economic consequences for investors, employees and other stakeholders, especially when new capital is injected into the equation. We are biased, but we believe private FinTech companies will be well served over the long-run to obtain periodic valuations from independent third parties. Reasons to do so include the following.1. To Measure Value Creation Over TimeOne of the best performance scorecard metrics to measure is value creation over extended time periods. For public companies, it is a simple process. Measure a company’s total return (percentage change in share price plus the return from reinvested dividends) and compare it to other benchmark measures such as the broader market, industry, and/or peers. For example, a publicly traded payments company whose shareholders have achieved a one-year total return of 10.0% can note on their scorecard that their performance has outpaced the returns from the S&P 500 and Mercer Capital’s FinTech Payments Index, which rose 4.0% and 4.6%, respectively, in the twelve months ended June 30, 2016.For private companies, annual or more frequent valuations have to be obtained to create a realistic scorecard. Rules-of-thumb exist in every industry, but they are at best approximations and often haphazard guesses that do not take into account the key value drivers of earning power (or cash flow generation), growth, and risk. Some privately held financial services companies like banks may be able to proxy value creation without annual valuations by tracking growth in book value, ROE, and dividend payments, but even for homogenous entities such as banks these metrics say nothing about an institution’s risk profile. FinTech companies with little homogeneity among business models are poorly suited to measure value based upon rules-of-thumbs that are applied to revenues or even EBITDA. Every company is unique, and markets in which companies are valued are not static.Also, there may be a tendency to overlook balance sheets beyond cash because FinTech balance sheets typically do not “drive” earning power as intangible assets, such as customer databases, intellectual property, patents, and the like, are not recorded unless there has been an acquisition. While understandable, ignoring the balance sheet can be a mistake because sometimes there are aspects to it that will impact value.Additionally, dividends (the other element of shareholder return) and dividend paying capacity should be an important value consideration, even though FinTech companies often do not or cannot pay dividends in order to reinvest internally generated capital to fund future growth. Another benefit of the valuation process might be insight that suggests the board should shift to distributions from reinvestment because incremental returns are too low to justify.It is advisable for private FinTech companies to measure value creation by having annual or more frequent valuations performed by an outside third-party. For example, consider Table 1 for Private FinTech Company that tracks returns to shareholders based upon changes in the appraised value of the shares and dividends paid over a three-year period. While the hypothetical 45% total return outwardly appears attractive, there is no context. Comparisons with publicly traded FinTech companies, broad industry indexes and realized returns following an acquisition for public and private companies will provide further relevance to the scorecard (Chart 1).2. For Planning PurposesProjections for an early-stage FinTech company are a given. In theory so too are rising valuations as important milestones, such as targeted market penetration, users, revenues, and EBITDA, are met. Unless the company does not require significant capital and/or internal capital generation is sufficient, the projections should incorporate additional capital raises and expected dilution based upon implicit valuations. On a go forward basis periodic valuations can be overlaid with the initial and any refreshed forecasts to measure how the company is progressing in terms of value creation relative to plan and to alternatives (e.g., a strategy pivot to a collaborative partnership from disruptor). The key is to measure and compare in order to have a contextual perspective to facilitate decision making.3. For Employee Ownership PlansFinTech companies usually attract talent by offering stock ownership so that employees share in the upside should the company’s valuation improve over time. Plus, stock-based compensation lessens a company’s cash needs all else equal. Complex capital structures with private equity investors that have preferences vis-a-vie employees create another potential valuation wrinkle. Returns to the two groups usually will differ. Well documented, periodic valuations are critical. There have been examples where employees have lost money by paying taxes based upon valuations higher than the company realized in a sale. While downside exposure to a company’s faltering performance and/or market conditions is the risk that comes with the potential upside of equity ownership, it is important to have a formalized valuation process to demonstrate compliance with tax and financial reporting regulations. Certainly, scrutiny from auditors, the SEC, and/or the IRS are likely at some point, but very real tax issues also can result from poorly structured or administered equity compensation plans for employees.ConclusionIf you are interested in discussing the valuation needs for your FinTech company, please contact us. Depending upon how it is defined FinTech is a relatively new industry “vertical.” Mercer Capital has been providing valuation and transaction advisory services to a wide swath of financial services companies for over 30 years that runs the gamut from banks to FinTech. Financials are our largest practice vertical. We have a deep bench and would be delighted to assist.This article originally appeared in the Second Quarter 2016 issue of Mercer Capital's Value Focus: FinTech newsletter.Learn More

It has been an interesting few weeks for FinTech.Coming off recent years where both public and private FinTech markets were trending positively, the tail end of 2015 and the start to 2016 have been unique as performance has started to diverge.The performance of public FinTech companies has been relatively flat through the first quarter of 2016 (see Public Market Indicators on page 3 of the First Quarter 2016 FinTech newsletter), and signs of weakness have been observed in alternative/marketplace lending, as well as some of the more high profile FinTech companies that have gone public recently.The median return of the FinTech companies that IPO’d in 2015 was a decline of 16% since IPO (through 3/31/16). For perspective, Square, OnDeck, and Lending Club are each down significantly in 2016 (down 28%, 53%, and 64%, respectively from 1/1/2016 to 5/18/2016).Also, the broader technology IPO slowdown in late 2015 has continued into 2016 and no FinTech IPOs have occurred thus far in 2016.However, optimism for FinTech still abounds, and the private markets continue to reflect that with robust investor interest and funding levels.In 2016, 334 FinTech companies raised a total of $6.7 billion in funding in the first quarter (compared to 171 companies raising $3.2 billion in the first quarter of 2015), and Ant Financial (Alibaba’s finance affiliate) completed an eye-popping $4.5 billion capital raise in April.While the factors driving this divergence in performance between public and private markets are debatable, the divergence is unlikely to continue indefinitely.A less favorable public market and less attractive IPO market creates a more challenging exit environment for those “unicorns” and other private companies.Headwinds for the private markets could develop from more technology companies seeking IPOs and less cash flow from successful exits to fund the next round of private companies.Consequently, other strategic and exit options beyond an IPO should be considered such as partnering with, acquiring, or selling to traditional incumbents (banks, insurers, and money managers).The potential for M&A and partnerships is even more likely in FinTech, particularly here in the US, due to the unique dynamics of the financial services industry including the resiliency of traditional incumbents and the regulatory landscape.For example, consider a few of the inherent advantages that traditional banks have over non-bank FinTech lenders:Better Access to Funding. Prior to 2016, the interest rate/funding environment was very favorable and limited the funding advantage that financial institutions have historicallyhad relative to less regulated non-financial companies.However, the winds appear to be shifting somewhat as rates rose in late 2015, and funding availability for certain FinTech companies has tightened. For example, alternative lenders are dependent, to some extent, on institutional investors to provide funding and/or purchase loans generated on their platform, and a number have cited some decline in institutional investor interest.Banks Still Have Strong Customer Relationships. While certain niches of FinTech are enhanced by demand from consumers and businesses for new and innovative products and technology, presently, the traditional institutions still maintain the majority of customer relationships.As an example, the 2015 Small Business Credit Survey from the Federal Reserve noted that traditional banks are still the primary source for small business loans with only 20% of employer firms applying at an online lender.The satisfaction rate for online lenders was low (15% compared to 75% for small banks and 51% for large banks).The main reasons reported for dissatisfaction with online lenders was high interest rates and unfavorable repayment terms.Regulatory Scrutiny and Uncertainty related to FinTech.Both the Federal Reserve and the OCC have made recent announcements and comments about ways to regulate financial technology.In the online lending area specifically, regulatory scrutiny appears to be on the rise with the Treasury releasing a white paperdiscussing the potential oversight of marketplace lending and the CFPB signaling the potential to increase scrutiny in the area.The lack of a banking charter has also been cited as a potential weakness and has exposed certain alternative lenders to lawsuits in different states.At the same time that FinTech companies are increasingly considering, or being forced to consider, strategic options beyond an IPO, traditional incumbents are starting to realize that they must develop a strategic plan that considers how to evolve, survive, and thrive as technology and financial services increasingly intersect.For example, a number of banks are looking to engage in discussions with FinTech companies.A recent survey from BankDirector noted that boards are focusing more on technology with 75% of respondents wanting to understand how technology can make the bank more efficient and 72% wanting to know how technology can improve the customer experience.FinTech presents traditional financial institutions with a number of strategic options, but the most notable options include focusing on one or some combination of the following: building their own technology solutions, acquiring a FinTech company, or partnering with a FinTech company.One area where we have started to see more FinTech partnerships and M&A already start to play out is wealth management and the industry’s response to robo-advisory.Robo-advisers were noted by the CFA Institute as the FinTech innovation most likely to have the greatest impact on the financial services industry in the short-term (one year) and medium-term (five years).Consider the following announcements in this area over the last few years; on the acquisition front, BlackRock’s acquisition of FutureAdvisor in August 2015, Invesco’s acquisition of Jemstep, and Ally Financial’s acquisition of TradeKing in April 2016.On the partnering front, Motif and J.P. Morgan announced a partnership in October 2015, UBS announced a major partnership with SigFig in May 2016, and Betterment and Fidelity announced a partnership in October 2014. Community banks will also have an opportunity to enter the robo-advisory fray as Personal Capital announced a partnership with Alliance Partners that will allow over 200 community banks offer digital wealth advisory tools.While we do not yet know which strategy will be most successful, discussions of whether to build, partner, or buy will increasingly be on the agenda of boards and executives of both financial institutions and FinTech companies for the next few years.The right combination of technology and financial services through either partnerships or M&A has significant potential to create value for both FinTech companies and traditional financial institutions.Any partnership or merger should be examined thoroughly to ensure that the right metrics are utilized to examine value creation and returns on investment.Transactions and significant partnerships also have significant risks and potential issues will need to be discussed.For example, significant issues with M&A and potential partnerships can include: execution and cultural issues, shareholder dilution, whether the partnership is significant enough to create shareholder value and provide a return on investment, contingent liabilities, and regulatory pressures/issues.These issues must be balanced with the potential rewards, such as customer satisfaction/retention, shareholder value creation, and return on investment.If you are interested in considering strategic options and potential partnerships for your financial institution or FinTech company, contact Mercer Capital. Financial institutions represent our largest industry focus for over thirty years. We have a deep bench with experience with both FinTech companies and traditional financial institutions (banks, asset managers, and insurance companies).This uniquely suits us to assist both as they explore partnerships and potential transactions.

2015 was a strong year for FinTech. For those still skeptical, consider the following:All three publicly traded FinTech niches that we track (Payments, Solutions, and Technology) beat the broader market, rising 11 to 14% compared to a 1% return for the S&P 500;FinTech M&A volume and pricing rose sharply over recent historical periods with 195 announced deals and a median deal value of $74 million in 2015 (Figure 1);A number of notable fundings for private FinTech companies occurred with roughly $9.0 billion raised among approximately 130 U.S. FinTech companies in larger funding rounds (only includes raises over $10 million). One of the more notable FinTech events in 2015 was Square's IPO, which occurred in the fourth quarter. Square is a financial services and mobile payments company that is one of the more prominent FinTech companies with its high profile founder (Jack Dorsey, the Twitter co-founder and CEO) and early investors (Kleiner Perkins and Sequoia Capital). Its technology is recognizable with most of us having swiped a card through one of their readers attached to a phone after getting a haircut, sandwich, or cup of coffee. Not surprisingly, Square was among the first FinTech Unicorns, reaching that mark in June 2011. Its valuation based on private funding rounds sat at the top of U.S.-based FinTech companies in mid-2015. So all eyes in the FinTech community were on Square as it went public in late 2015. Market conditions were challenging then (compared to even more challenging in early 2016 for an IPO), but Square had a well-deserved A-list designation among investors. Unfortunately, the results were mixed. Although the IPO was successful in that the shares priced, Square went public at a price of $9 per share, which was below the targeted range of $11 to $13 per share. Also, the IPO valuation of about $3 billion was sharply below the most recent fundraising round that valued the company in excess of $5 billion. In the category its great pay if you can get it, most Series E investors in the last funding round had a ratchet provision that provided for a 20% return on their investment, even if the offering price fell below the $18.56 per share price required to produce that return. The ratchet locked in through the issuance of additional shares to the Series E investors. The resulting dilution was borne by other investors not protected by the ratchet. On the flip side the IPO was not so bad for new investors. Square shares rose more than 45% over the course of the opening day of trading and then traded in the vicinity of $12 to $13 per share through year-end. With the decline in equity markets in early 2016, the shares traded near the $9 IPO price in mid-February. IPO pricing is always tricky—especially in the tech space—given the competing demands between a company floating shares, the underwriter, and prospective shareholders. The challenge for the underwriter is to establish the right price to build a sizable order book that may produce a first day pop, but not one that is so large that existing investors are diluted. According to MarketWatch, less than 2% of 2,236 IPOs that priced below the low end of their filing range since 1980 saw a first day pop of more than 40%. By that measure, Square really is a unique company. One notable takeaway from Square's experience is that the pricing of the IPO as much as any transaction may have marked the end of the era of astronomical private market valuations for Unicorn technology companies. The degree of astronomical depends on what is being measured, however. We have often noted that the headline valuation number in a private, fundraising round is often not the real value for the company. Rather, the price in the most recent private round reflects all of the rights and economic attributes of the share class, which usually are not the same for all shareholders, particularly investors in earlier fundraising rounds. As Travis Harms, my colleague at Mercer Capital noted: "It's like applying the pound price for filet mignon to the entire cow – you can't do that because the cow includes a lot of other stuff that is not in the filet." While a full discussion of investor preferences and ratchets is beyond the scope of this article, they are fairly common in venture-backed companies. Recent studies by Fenwick & West of Unicorn fundraisings noted that the vast majority offered investors some kind of liquidation preference. The combination of investor preferences and a decline in pricing relative to prior funding rounds can result in asymmetrical price declines across the capital structure and result in a misalignment of incentives. John McFarlane, Sonos CEO, noted this when he stated: "If you're all aligned then no matter what happens, you're in the same boat… The really high valuation companies right now are giving out preferences – that's not alignment." A real-world example of this misalignment was reported in a New York Times story in late 2015 regarding Good Technology, a Unicorn that ended up selling to BlackBerry for approximately $425 million in September 2015. While a $425 million exit might be considered a success for a number of founders and investors, the transaction price was less than half of Good's purported $1.1 billion valuation in a private round. The article noted that while a number of investors had preferences associated with their shares that softened the extent of the pricing decline, many employees did not. "For some employees, it meant that their shares were practically worthless. Even worse, they had paid taxes on the stock based on the higher value." As the Good story illustrates, the valuation process can be challenging for venture-backed technology companies, particularly those with several different share classes and preferences across the capital structure, but these valuations can have very real consequence for stakeholders, particularly employees. Thus, it is important to have a valuation process with formalized procedures to demonstrate compliance with tax and financial reporting regulations when having valuations performed. Certainly, the prospects for scrutiny from auditors, SEC, and/or IRS are possible but very real tax issues can also result around equity compensation for employees. Given the complexities in valuing venture-backed technology companies and the ability for market/investor sentiment to shift quickly, it is important to have a valuation professional that can assess the value of the company as well as the market trends prevalent in the industry. At Mercer Capital, we attempt to gain a thorough understanding of the economics of the most recent funding round to provide a market-based "anchor" for valuation at a subsequent date. Once the model is calibrated, we can then assess what changes have occurred (both in the market and at the subject company) since the last funding round to determine what impact if any that may have on valuation. Call us if you have any questions. For those interested in additional FinTech trends, check out our latest FinTech industry newsletter and sign up for future issues here. Related LinksFinTech Newsletter 4Q15 | Venture Capital Case Study: StripeIs a Bubble Forming in FinTechMercer Capital's Financial Reporting BlogMercer Capital monitors the latest financial reporting news relevant to CFOs and financial managers. The Financial Reporting Blog is updated weekly. Follow us on Twitter at @MercerFairValue.