TDB: From a business perspective for Parabellum Investments, what potential value and synergies are you looking to unlock through the acquisition of Connect FSS by ieDigital?
Rami: This acquisition is the latest and most significant step we’ve taken towards building the world’s largest provider of fintech software to mid-tier banks and Credit Unions in the US, UK, and around the world. The deal also provides operational and strategic benefits that position us for long-term growth.
Both companies provide us with a more extensive geographical reach to continue expanding. ieDigital and Connect FSS’s (Connect) expertise and experience across the European and US markets give us a unique opportunity to drive further growth in these two leading financial services markets.
Connect brings to the ieDigital Group proven expertise in developing and launching digital banking services for US Credit Unions. Both companies offer complementary products and services, meaning our customers can access a fantastic range of products as they look to digitalize their banking services.
The acquisition will also further boost innovation in both businesses, bringing together two teams that are always looking to develop and launch brand-new products and services.
TDB: How are you looking to facilitate mid-tier financial institutions in elevating digital CX for their clients and navigating competing digital investment priorities?
Rami: It’s a challenging operating environment for financial institutions of all sizes, with high-interest rates leading to tighter lending conditions. But it’s challenging for mid-tier institutions, which compete with larger banks with more significant budgets and resources. But there’s widespread recognition in the mid-tier market that to compete, they must invest in digitalization. The competitive landscape in financial services has become inextricably linked to the quality of the digital experience being offered, and the Group is at the forefront of this battle.
In the US alone, banks’ total annual IT and technology expenses are expected to increase to $93 billion in 2023 from $85.5 billion last year. I expect that trend to continue over the coming years. As banks continue to invest more in digital transformation, the Connect acquisition ensures we’re well-placed to drive innovation in the sector and establish ourselves as the leader in the market.
Premium digitized offerings give institutions the edge to build stronger and more immediate customer relationships and automate decision-making and back-end services.
This facilitates rapid customer onboarding and improves customer experiences through mobile apps and other digital products. It also enables more self-service banking, where customers manage more services directly from their devices, reducing the load on customer services and physical bank branches. From a revenue perspective, digitalization can help boost deposits, lending origination, and extend geographic and demographic reach.
TDB: Why is this acquisition so important in light of the evolving digital banking landscape and how customers choose to interact with their primary banking provider?
Rami: The banking sector has led the transition to digital-first consumers. 78% of adults in the US prefer to bank via a mobile app or website, while statistics show that more than 90% of the population in the UK used online banking in 2022. These trends are set to continue, with the young, tech-savvy generation joining banks for the first coming with even more advanced expectations than older generations.
The popularity of digital-first products is best demonstrated by the boom of fintech neobanks in recent years. The most popular digital-first financial services providers, such as Revolut and Wise, built their entire infrastructure on digital technology, and people are increasingly trusting neobanks with wages and larger deposits. Incumbent banks are playing catch-up regarding digital offerings, and the largest banks are the slowest to innovate. This gives mid-tier financial institutions a slight edge when it comes to digitalization. Our acquisition of Connect extends our capability to provide value to mid-tier customers looking to digitalize their offerings and infrastructure. We continue to invest heavily to grow a product offering that enables our clients to meet the demands of ever more digitally aware consumers.
TDB: In terms of potential future acquisitions, what other potential sectors or verticals are you looking to target within the fintech universe? Where do you see the most opportunity for growth and why?
Rami: As a growth investor, my primary priority is making acquisitions that position us for long-term growth and global expansion. Parabellum Investments’ strategy is acquiring and integrating leading mid-market b2b businesses that operate within specialist and high-demand niches to provide their clients with global end-to-end solutions.
For ieDigital, our onward acquisition strategy focuses on building an independent fintech company that can support banks, credit unions, and many other financial institutions with products and services to improve their customer engagement.
I see three main avenues for future acquisitions by the ieDigital Group. We can add on businesses that offer new, additional products and services to the Group’s existing customers. For example, we may look to integrate an AI component into the Group to advance our banking decision-making products further.
We’re also exploring acquisitions that bolt new verticals onto the Group. For example, we could look at companies that expose us to new types of financial institutions and customers where we can sell our existing products and services, such as insurance and mortgage providers.
Another major priority for the Group is to expand our geographical footprint. The immediate focus is to scale further in the US and North America, but expanding into markets such as the Middle East and India is also a strong possibility.
