What Causes Profitability?

August 12, 2014
/   Spotlight

Digital Insight proves that digital bankers actually drive increase engagement and profitability with their financial institution.

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Cause and Effect: If you build it, will they come?

/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Platform Shift in the Making

February 13, 2013
/   Insights

What does the banking industry as a whole have to do with Amazon, Microsoft and Apple? Just about nothing—and down the road, it may turn into a major problem (if it isn’t already). Consider...

Infographic: How to Spot a Fake Check

March 8, 2013
/   Insights

The team over at TROY pulled together an infographic on how to spot a fraudulent check. With more consumers using remote deposit capture to upload and deposit checks through their smartphones, it’s important to...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

Reserve Banking: The New Radical Idea

June 5, 2014
/   Insights

Banking is by nature a very conservative industry. That’s why the current buzz over ‘reserve banking’ is so interesting. Even the term seems innocuous, but the scenario it proposes is nothing short of revolutionary....

Financial Literacy Month: How are you celebrating?

March 22, 2013
/   Insights

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance...

If it takes gangsta rap to spark fresh interest in the intersection of investment banking and technology, then so be it.

The ongoing fascination with Apple’s $3 billion purchase of Beats Electronics is entirely understandable, because it’s a cool story.  However, it also says a lot about what’s going on between finance and tech.

128px-Beats_by_Dr._Dre_-_logo.svg (2)On the one hand, there’s Apple, a company that’s become synonymous with innovation and raging success. It wasn’t always this way: the technology pioneer went through some serious lows, especially compared to archrival Microsoft, before reemerging as a consumer electronics giant that now has $160 billion cash on hand, nearly to be precise. And then there’s Beats, which makes audio products and offers a listening service. The company’s had some diverse owners: One is the Carlyle Group, the asset management powerhouse, whose executives have included the first President Bush, his Secretary of State James Baker, the former Prime Minister of Thailand, and a raft of financial services, business and media luminaries. But overshadowing them all is co-founder Dr. Dre, who earned early fame with gangsta rap, which of course drew the wrath of the Bush administration.

But putting aside the strange bedfellows, the high-profile deal offers a good reason to take a fresh look at the moribund investment market. To be sure, it turns the spotlight on many key elements in this market—the consumerization of IT, evolving drivers for content adoption, changing tastes expectations in key demographics and the premium placed on innovation and marketing (not always in that order).

However, as PC World points out, this is not the only silver lining in the cloud. In fact, to stretch the metaphor, cloud technology—along with software-as-a-service (SaaS) and mobile offerings—is fueling a strong drive in tech mergers and acquisitions.

The Global Technology M&A Update from EY (previously known as Ernst & Young) reveals that a curious blend of opportunity and disruption—two cornerstone elements of the tech market—came together to boost global technology M&A aggregate value by a staggering 65% in 2013. The number shot up to, $188.2 billion, which clearly hearkens back to the glory days of the dotcom bubble.

To be sure, global technology M&A volume actually declined for the year, but cloud and SaaS registered a spike—a hint as to where the future is headed. Big Data remained almost as big, with advertising and marketing technologies—packaging analytics and social networking—nudging deal volume. Security and health care IT (which often seem to go together) moved along as well. The folks in our line of work had good times too—financial services technology drove value to the tune of some 100 deals.

And while all this represents a look back, the look forward is nice too. The Apple-Beats combo aside, the first quarter of 2014 saw considerable activity in M&A circles, which is unusual for this period. The most recent report from PriceWaterhouseCoopers points to 57 deals closed in the first quarter, up by more than a third over same-period 2013. More specifically, many technology companies have not yet adapted their offerings to mobile, cloud and SaaS models, at least to the extent possible. As these pressures continue to mount, look for more wide-ranging deals to fuel technology M&As.

Any comparison to the raging market of 20 years ago—when dot-coms with no profits or even revenue received massive valuations from otherwise perceptive investment bankers—are not only premature but grossly unfair. But just as technology and finance have always boosted each other’s fortunes, it’s good to keep a wary eye on this market, even as it offers reason for optimism.

 

Image courtesy of Monster Cable Products, Inc., via Wikimedia Commons

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Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.