- The fintech space has exploded in recent years, keeping Wall Street bankers busy.
- Some banks see fintech as an outgrowth of TMT and FIG teams, while others see it as a stand-alone.
- A dozen top fintech dealmakers gave us the scoop on the industry trends grabbing their attention.
- See more stories on Insider’s business page.
Over the past two decades, snappy tech startups have forced traditional financial-services institutions to transform the way they do business.
And as these startups grow bigger and mature, new opportunities are arising for bankers to facilitate financings, partnerships, and sales.
This year alone, the financial-technology space has seen 20 fintech IPOs worldwide, Dealogic reported, putting it on track to exceed the number of fintech IPOs (29) in 2020. Seven of 2021’s public offerings have taken place in the US this year, as compared to last year’s six. And there are more to come, including Robinhood, one of the most anticipated public debuts of 2021.
The M&A market for fintech, too, has been hot. Globally, there have been 497 mergers or acquisitions involving fintechs, with 176 taking place in the US.
Worldwide, fintech M&A has already produced more than $89 billion in deal volumes, putting it just behind 2020’s total deal volume ($90 billion). In the US, deal volume for 2021 — more than $62 billion so far — has already surpassed last year’s $44 billion.
Special purpose acquisition companies have also played a factor, as the blank-check companies have been eager to snap up the nascent tech firms and take them to public markets. SoFi, Dave, Acorns, and MoneyLion are among the fintechs that have either gone or are preparing to go public via a SPAC.
Acquisitions are also occurring both between fintechs and with traditional firms, as the latter recognizes the urgent need to step up their tech stacks.
All of it has meant plenty of work for fintech bankers. But one big question that’s emerged is how exactly these bankers are classified. Fintech has traditionally required skill sets that include both traditional tech banking and experience with financial institutions.
Some firms have elected to make fintech an outgrowth of one sector or another, whereas others have bifurcated the division entirely, turning fintech into a stand-alone coverage group. Still, there are plenty of banks making waves in the fintech space.
The leaders and rainmakers behind some of the top fintech deals walked us through how their practices are structured and what they’re seeing in the space.
Here are observations from some of the top bankers brokering deals in fintech, and what trends excite them most.
Rick Diamond, Citigroup
Role: Global head of financial technology and information services investment banking
Deals worked on: Flywire IPO; dLocal IPO; Clearent on its announced tie-up with Transaction Services Group
Rick Diamond sits atop a fintech practice at Citigroup formed through a joint venture with the bank’s financial institutions and technology, media, and telecommunications teams. The group comprises about 50 professionals worldwide, sitting in the US, Europe, Latin America, India, and Asia.
One important consideration that bankers across industry sectors are making more frequently is the prominence of environmental, social, and corporate governance considerations in dealmaking, and it’s no different in fintech.
The vast, nebulous space touches an array of important aspects of corporate behavior, from informing decisions that corporations make pertaining to areas such as environmental sustainability and diversity in the workplace.
But the role ESG plays in financial technology has become more pronounced in recent months.
Asset managers and institutional investors, for instance, are taking a closer look at the impact their investing strategies have on the world around them.
Many are facing difficult choices around the growing demand for cryptocurrency offerings, trying to reconcile investors’ increasing interest in the sector with its reputation for consuming vast amounts of energy.
For its part, Citigroup, too, has pledged to reach net-zero emissions by the year 2050.
“We are at a point in time where consumers are focused on doing business with ESG-focused companies,” Diamond told Insider. “It is top of mind for most of the companies we talk about.”
Some fintechs, he added, are trying to do their part by reducing their carbon footprints.
“You will see fintechs emerge who are actually tackling this problem and helping solve this problem, both through innovative financial-service products to consumers as well as corporates,” he added.
Jonathan Dubroff, BMO Capital Markets
Role: Managing director, head of fintech investment banking
Deals worked on: Delta Card Services Inc.’s sale of assets to Paysafe; Finastra’s sale of its collateral management corporation business to Teranet
Working on behalf of financial-services companies is in Jonathan Dubroff’s blood.
Growing up, his dad was an executive at First Data Corporation, a financial-services firm in Atlanta that handles massive volumes of payments transactions.
Dubroff himself initially spent time at Deloitte as an auditor before becoming an equity research associate at SG Cowen in 2003. He joined BMO Capital Markets in 2005.
He spent two years at the Canadian bank. In 2007, he left to do a stint at Barclays, but returned as a VP in 2009. Dubroff’s stuck with the middle-market advisory shop ever since. He’s now a managing director and the head of its fintech investment-banking business.
One of his favorite parts of
the business, he told Insider, is seeing companies through their life cycles.
Recently, one company Dubroff has counseled for years, which he did not name, raised its first-ever debt facility with BMO Capital Markets’ help after financing a series of large acquisitions that pulled it out of the middle-market sector and into the big leagues.
Dubroff has witnessed the advent of another crucial trend over the past year: SPACs as a mainstream vehicle by which fintechs are doing deals and going public.
“Without a doubt, the end of 2020 and beginning of 2021 is some version of the year or years of the SPAC,” he said.
“Like anything in the markets, success will tend to beget success, and that’s one of the reasons we’re seeing so much interest from SPACs into fintech,” he added.
Overall, Dubroff is bullish about the road ahead in financial technology.
“I have been amazed at the amount of activity that we’ve had over the last few years,” he said. “I see a lot of open road ahead.”
Kelly Galanis, Goldman Sachs
Role: Head of financial technology investment banking, Americas
Deals worked on: Shift4 Payments IPO; Duck Creek IPO; Lemonade IPO
When one thinks of Goldman Sachs, megadeals might come to mind.
But for Kelly Galanis, who leads the firm’s fintech banking practice in the Americas, a great deal of what’s piquing her curiosity at the moment stems from clients that fall in the realm traditionally considered the middle market.
In an interview with Insider, Galanis proffered a few examples of the kinds of middle-market fintech businesses catching her eye right now: companies focusing on “upgrading the office of the CFO” by improving accounts payable and accounts receivable technology, and those serving the digital storefront for small- and midsize businesses.
These might not be flashy, household-name tech companies, but they’re keeping the engines of the fintech evolution firing.
Looking forward, Galanis also feels bullish about the sector’s growth prospects globally, and she highlighted the effect the pandemic has had on consumer adoption of tech.
“COVID really did accelerate a lot of the trends in the space,” she said. “Today, you see so much more trust and engagement online, on your phone, mobile device — whatever it might be.”
Kegan Greene, Houlihan Lokey
Role: Director of financial technology investment banking
Deals worked on: Advisen’s sale to Zywave/Clearlake; Thomas H. Lee’s acquisition of Insurance Technologies
Fintech has become such a massive industry that some investment bankers are building entire practices based solely on smaller subsectors with big potential.
Kegan Greene, who joined Houlihan Lokey two years ago as a director to help build its North American fintech efforts, focuses on startups in the insurance space, also known as insurtech.
“I’ve focused on this sector for over 10 years, long before it was cool or called insurtech,” Greene told Insider. “The firm just has a lot of momentum in the space, and insurance is the last bastion of financial services to become tech-enabled, so the first wave of innovation here is continuing.”
Since insurtech is early in its innovation cycle, recent tech advancements in the space mimic innovation that’s already happened in other areas of fintech. Reducing costs, helping firms automate workflows, and laying the groundwork for future tech advancements have all been key focus points of startups in the space initially.
But insurtechs are shifting to be more disruptive and in competition with traditional financial services, rather than just enabling them.
For example, companies such as Root and Lemonade are digital insurance carriers that are actually underwriting risk, instead of just providing technology to help traditional insurance carriers provide better services.
Going deep on insurtech is in line with Houlihan Lokey’s strategy of tackling the massive fintech industry piece by piece, Greene said.
“Houlihan Lokey does a great job of going really deep in the swim lane, if you will, which makes it easier to go out to market and win mandates,” Greene said. He added that he has nine insurtech deals and mandates in the works, and that he closed six insurtech deals last year.
Jason Gurandiano, RBC Capital Markets
Role: Global head of financial technology
Deals worked on: Foley Trasimene Acquisition Corp.’s SPAC purchase of Paysafe; Joff Fintech SPAC IPO
The past 18 months have been a slingshot to propel financial technology to new heights, RBC Capital Markets’ Jason Gurandiano told Insider.
“While no one wants to profit from a pandemic, I think COVID has served as the ultimate use case for the application of fintech,” he said.
“It just provided a catalyst for the adoption and behavior that was likely to happen over a longer period of time, but pulled all that behavior forward,” Gurandiano added.
The prospects for the sector are looking bright, as fintech is in its “golden era,” he said.
Gurandiano is eyeing areas bursting with innovation, namely the payments space. At the heart of that momentum, he said, is the market’s constant search to improve the experience for ordinary users and consumers.
“How do you change the consumer experience and dynamic as it relates to how people consume, understand, transact, as it relates to financial services?” Gurandiano said.
That is a central question that breeds ingenuity at fintechs, he added.
Gurandiano also knows firsthand what it’s like running a fintech business as he helped found one. He started VersaPay, a Canadian fintech, where he chaired the board of directors from 2008 to 2014. He is no longer associated with the company.
Before RBC Capital Markets, which he joined in 2015, Gurandiano was a managing director at Deutsche Bank, from 2006 to 2015. Previously, he was a vice president at Citigroup and Credit Suisse.
Brennin Kroog, Lazard
Role: Managing director
Deals worked on: Visa on its attempted acquisition of Plaid; M&T Bank on its recent acquisition of People’s United
For Lazard’s Brennin Kroog, there are lures that draw him to banking, particularly fintech banking.
One is simply the opportunity to have meaningful conversatiosn with the people in charge.
“It provides you an accelerated path to have the ear and dialogue with very key and senior decision-makers,” he told Insider. “A lot of clients that I have the benefit of knowing or having relationships with, if I were to work at that company, it may take me 20 years to be in a position of confidence to have those relationship.”
But banking can part the velvet rope for hardworking advisors to gain the attention and respect of corporate leaders. Many of those leaders, Kroog added, are people that younger bankers may better relate to, given their age.
Fintech, he said, is “a space where younger bankers can be successful in pursuing the business, and in some ways, being a career banker with 30 years of experience can sometimes be perceived as less helpful in building relationships.”
“A lot of peers from business school or other contemporaries are the ones that are leading these companies,” Kroog added. “The ability to connect with them, I think, is necessarily easier at a peer level.”
Another draw is the way that fintech is increasingly intersecting with other industries, generating enhanced collaboration among different kinds of coverage bankers.
“In the last month, I’ve been in live client situations probably with every single one of our industry groups,” he said. “It’s been a very active 2021.”
Kroog joined Lazard in 2013, after spending time as an associate at Keefe, Bruyette & Woods.
Keith Meyers, Keefe, Bruyette & Woods
Role: Head of fintech and financial services investment banking
Deals worked on: Megalith Financial Acquisition Corp.’s SPAC acquisition of BankMobile; York Capital’s investment in F1 Payments; Black Knight’s acquisition of eMBS
When Keith Meyers started out in the space more than 20 years ago, fintech was just known as “transactions processing” and focused mostly on simple payments innovations, such as diverting checks into a digital format.
“It was a different mindset back then, but over the years, it’s continued to evolve and morph into fintech,” Meyers told Insider. “You’ve made it when the business becomes an abbreviated word everyone can actually understand.”
Meyers has spent time as a VP and managing director at Raymond James, and an MD and the head of financial services and transaction processing for investment banking at Morgan Keegan & Company. He joined Keefe, Bruyette & Woods in 2016 as a managing director and the head of fintech financial services investment banking.
KBW merged with Stifel in 2012, and Meyers and his team work closely with Ben Tompkins and Stifel’s global technology group.
On the KBW side, Meyers manages 30 bankers in the US and another 20 in London who cover financial services that aren’t regulated. That basically includes any company that isn’t a bank or insurer, he said. The team typically does around 80 deals a year.
It’s a big sector to keep track of, but right now Meyers is most interested in real estate and mortgage tech, payments, blockchain and cryptocurrency, and neobanks.
“My role is really a facilitator of information between teammates, so I run deals, but more importantly, I connect the dots between our bankers within KBW and Stifel, but also our depository team and tech practice,” he said.
The heart of his practice is the convergence between banks and fintechs, spending most of his time working with companies who make the underlying financial services more efficient.
“If you can understand the underlying companies — banks, asset managers, etc. — you’re better equipped to understand the tech needs of those companies and how they apply to clients. Then, you can get disruptive startups in front of those banks and services,” he said.
Jigar Patel, Morgan Stanley
Role: Head of fintech and digital finance investment banking
Deals worked on: Affirm IPO; Capital One’s purchase of ING Direct USA
To Jigar Patel, the energy coursing through fintech represents a “coming of age” for companies such as Square and Uber, which sit at the crossroads of tech and finance.
“It’s a decade-plus in the making, so it’s exciting to see it all come to fruition at this moment in time,” Patel told Insider.
Patel, who has been a managing director and head of Morgan Stanley’s fintech business since 2018, first joined the firm in 2015. He came from Barclays, where he had been a vice president.
During his time at Morgan Stanley, Patel has helped financial-services firms raise more than $100 billion in capital.
As he looks at the rapidly evolving space, part of his pitch to juniors about what makes fintech banking so compelling as an industry subset is the pace of change.
In order to keep up, bankers don’t need to have an encyclopedic knowledge of all the nuances of how fintech works. Instead, it’s about being able to break companies down into their core parts, such as software, payments, or e-commerce.
That’s how young bankers can thrive in an industry subset that’s segmented into even more niche categories that are becoming more complex all the time.
“Five years ago, everyone might have said, ‘You need to understand payments,'” Patel said. “Now, everyone is going to say, ‘You need to understand software.’ Five years from now, everyone may say, ‘You need to understand decentralized finance.’ It’s being able to identify these things within a company early on.”
Matthew Sharnoff, Bank of America
Role: Global head of fintech
Deals worked on: Intercontinental Exchange’s purchase of Interactive Data; TransFirst’s sale to Vista Equity Partners; PayPal’s acquisition of Bill Me Later
Matthew Sharnoff leads a global team of bankers who specialize in fintech advisory.
Sharnoff joined Merrill Lynch in 2005, and has since become the global head of fintech at Bank of America.
The deals that his team handles are worldwide in scope, and Sharnoff has boots on the ground in multiple locations, including New York, London, the Asia-Pacific region, and increasingly Latin America.
He’s enthused by the evolution of the fintech marketplace from what he called the “Fintech 1.0 crowd” — the first generation of companies operating in spaces such as payments, market structure, and financial software — to a more sophisticated and nuanced space.
Now, he told Insider, it’s not just traditional fintech firms leaning into the power of tech. Other financial-services companies, running the gamut from insurance to wealth management, are getting into the game.
“Valuations continue to trade at premiums relative to many other technology companies and financial institutions,” he said. “As a result, we see many traditional financial institutions leveraging the fintech halo, and are transitioning themselves to a more tech-enabled or digital-enabled platform.”
Nate Stulman, PJ Solomon
Role: Managing director and head of fintech
Deals worked on: The transferal of Walmart’s credit-card business from Synchrony to Capital One; Aeroplan’s renegotiation of its credit-card partnerships among TD Bank, Visa, American Express, and CIBC; TD Bank’s purchase of credit-card assets tied to Nordstrom and Target
Nate Stulman believes that financial technology can be a force for betterment in an increasingly complicated world.
“A lot of it is around improving everyday Americans’ financial lives and experiences,” said the banker, who leads the fintech practice at one of Wall Street’s oldest independent boutique banks. “It can be a force for good in terms of democratizing finance and giving people tools and information to make better financial decisions.”
Stulman is a relatively new recruit at PJ Solomon, having joined the firm in 2020. He brings a depth of experience accumulated at Moelis & Co. and Greenhill & Co., his former employers.
Although the industry has recognized the positive role fintech can play for consumers, the space still has some introspection to do around how fintechs and traditional banks will coexist.
“A lot of fintechs are appropriately realizing that partnering with banks — which, in a lot of cases, have installed user bases and specialized knowledge of credit and other fundamental elements of banking — makes a lot of sense, and can be a win-win,” Stulman told Insider.
The trend comes as many consumer banks face a do-or-die moment coming out of the pandemic, as they recognize the need to reevaluate their fintech strategies.
“The fact that regional and community banks appreciate that they need to transform themselves in order to survive, and that fintech partnerships are an attractive way to begin that transformation, is a tailwind for the space,” Stulman added.
Ben Tompkins, Stifel
Role: Managing director for the global technology group
Deals worked on: PensionBee IPO
Ben Tompkins brings years of experience in venture-capital and investment banking to his role as a managing director in Stifel’s global technology group.
Tompkins got his start in investment banking about two decades ago, spending nearly 15 years as a vice president at Henry Ansbacher & Co. and a managing director at the M&A tech advisor Broadview International, which Jefferies bought in 2003.
He jumped to the VC world in 2006, first at Eden Ventures. He joined Draper Esprit in 2017.
Stifel lured Tompkins back into investment banking in November 2020 to join its global technology group, which works with multiple tech verticals, including software, electronics and industrial tech, internet and digital media, and tech-enabled services. Tompkins and his team work closely with Keith Meyers and his team at KBW.
“I’ve been in technology for all of my career, but from two different directions,” Tompkins told Insider. “When I was an investment banker in the 1990s, there was a huge change of pace in tech that affected many industries. And as a public venture and growth investor, I did a lot of investing in and around fintech.”
The tech boom in Europe over the past 10 years was a big reason Tompkins, who lives in London, decided to return to the IB side of fintech.
“When I was originally an investment banker, all of the good tech stuff came out of the US,” he said. “Europe had always been a very poor cousin in the ecosystem, but in the last 10 years, there’s been a massive maturing of the ecosystem. People are now trying to build great tech out of Europe to compete on a global scale with America — and with a fifth of the capital.”
Tompkins said he’s especially excited about open banking, blockchain and cryptocurrency technology, and behind-the-scenes tools and features that are key to financial-services offerings, including cloud tech and better identification and security tools.
Tommaso Zanobini, Moelis & Co.
Role: Managing director for fintech
Deals worked on: Wirecard’s sale to Banco Santander S.A. and Syncapay; Trebia Acquisition Corp.’s SPAC IPO; Second Measure’s sale to Bloomberg
Tommaso Zanobini has been in investment banking for almost 25 years, focusing on the tech sector for nearly the entire time.
After stints at Lehman Brothers, Jefferies, and Deutsche Bank — where he was the bank’s global head of fintech — Zanobini, who lives in New York, joined Moelis & Co. as the managing director for fintech in November 2019. At Moelis, the fintech team sits within the M&A group.
“I got to know a lot of the initial companies that were founded at the beginning of the fintech boom, and as the industry has matured, they’ve become a growing force within the overall market,” Zanobini told Insider.
Even after more than two decades of watching the fintech space, innovation is “nowhere near where it should be” — and that is creating opportunities for disrupters to step in, he added.
“There’s an enormous demand for more efficiency in daily life,” Zanobini said. “Everything you do — from payments to financial activity, to loans, to insurance, to trading, to transferring money — are all activities that are still in need of a better system to operate more efficiently.”
Payments will serve as a key building block in the space, in addition to other trends, such as neobanks, machine learning for underwriting, and improved onboarding of new customers, Zanobini said.
These innovations all have something in common: finding better ways to link financial institutions and the customers they serve.
“On one side you have financial institutions and insurance companies, and on the other side are merchants and consumers,” Zanobini said. “How you connect the two is the entire core of the fintech function.”
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