The adventures of the Big Five in #fintech land
In January, Microsoft announced that it will acquire Activision Blizzard in an all-cash transaction valued at USD 68.7 billion. Even for Microsoft, who’s cash coffers are over the USD 130 billion mark, this is a significant acquisition. It is by far their largest acquisition ever (see graph), and also more than anyone has ever paid for a video game company. It is also 3x the size of Microsoft’s annual R&D budget.
Let’s set aside the pros and cons of Microsoft becoming the world’s third-largest gaming company by revenue (behind China’s Tencent and Microsoft’s old adversary Sony), and putting their fingers in pie of global eSports activities through Major League Gaming. The transaction is one of many that have prompted the Big Five of Alphabet, Amazon, Apple, Meta and Microsoft (now known collectively as MAMAA, which really does not have the flair of the previous FAAMG) to venture into “innovative” landscapes – anything from AI to space & robotics, with fintech and crypto in the middle.
In 2021, the Big Five spent USD 149 billion in R&D, and make 110 acquisitions; of those, roughly 40 came with publicly announced price tags, adding up to roughly USD 50 billion. Of the five, Microsoft is the biggest cash-splasher – Activision Blizzard deal now dwarfs their USD 19.7 billion acquisition of health-care focused cloud and software provider Nuance Communications last year.
The Big Five are also spending a lot of time in #fintech land. Alphabet (Google) has been in investing fintech firms such as Botkeeper, an automated book-keeping service. Accompanying Google’s debit card and checking account, Google announced in May 2020 the release of AI-powered Paycheck Protection Program (PPP) for loan processing. Finally, in March 2020, Google Cloud formed a five-year deal with Lloyds Banking Group to facilitate their transition into the FinTech era. If this rings a bell, Google made a similar deal with HSBC in 2018. In 2020 Google said it planned to invest $10bn in Indian tech firms over the next five-to-seven years.
Other tech firms are making similar moves. Apple acquired Mobeewave, a payments startup, in 2020 to turn iPhones into mobile contactless payment terminals. Last year Amazon bought Perpule, an Indian fintech firm, and is working with Goldman Sachs to expand the company’s loan offering. Apple is introducing a new feature that will allow businesses to accept credit card and digital payments with just a tap on their iPhones, bypassing hardware systems. The feature, to be launched later this year, will use near field communications (NFC) technology for making all kinds of payments, including between iPhones.
A final thought - according to the Economist, a 2020 report by an antitrust subcommittee in America’s Congress argued that the dominance of big tech had “materially weakened innovation”. The giants, it said, accrue big benefits from the network effects which make having the most users the best way to add new users; they add to the protection such moats provide by pre-emptively acquiring potential rivals. Stamping out such “killer acquisitions” was one of the aims of President Joe Biden’s executive order on increasing competition last year.
This may be a hard thing to swallow for many fintech founders, many of whom have been attracted to the idea of disrupting existing largescale providers and live and die for innovation.
Sources:
- The Economist / Jan 22, 2022 / “Big tech’s private passions”
- The Economist / Jan 22, 2022 / “High score”
- Microsoft Corporation annual reports
Comments