The first major index devoted solely to U.S. publicly traded financial technology companies is here. According to recent articles by BusinessWire and the Wall Street Journal, investment bank Keefe, Bruyette & Woods (KBW), together with Nasdaq Inc. are now offering the “KBW Nasdaq Financial Technology Index”.
According to the WSJ article, KBW and Nasdaq Inc. define “fintech” using 3 criteria:
- the companies primarily sell financial services;
- the companies are not predominantly brick-and-mortar oriented; and
- the key income generator for these companies is fees, not interest on loans or deposits.
The 49 companies currently in the KBW index include a significant number of more established financial technology businesses, including major credit card companies, ratings agencies and credit bureaus, data services and other financial technology heavyweights. The criteria applied by KBW may exclude some technology service providers and certain online lenders that are thought of as “fintech”, while capturing more financial technology incumbents that are sometimes overlooked in current discussions of “fintech” as a new phenomenon.
Publicly traded fintech companies are more common in the US than Canada. We expect to see an increase in the number of fintech IPOs on both sides of the border in the next several years, given the rapid growth of many earlier stage fintech companies.
If you’re thinking of buying or selling a fintech target, check out our recent blog post on due diligence issues unique to fintech M&A.