Although Nasdaq is a household name for operating national and global market exchanges, in recent years the company has been branching out. In it’s latest side-step into becoming a technology and data vendor, Nasdaq is eyeing a large purchase. Nasdaq revealed Thursday plans to purchase anti-financial crime firm Verafin, a Canadian company, for $2.75 billion.
Nasdaq Branching Out
With a number of acquisitions over the years, Nasdaq Inc. has been focusing on becoming a leader among tech and data vendor businesses. Per CNBC, “[Nasdaq] has a strong foothold in the trade surveillance software market, as well as in the trading technology systems sector. It made its first move in the anti-money laundering software market in September when it launched artificial intelligence technology to help retail and commercial banks automate investigations.
‘The problem of detecting money laundering and fraud hasn’t been solved very well yet,’ Valerie Bannert-Thurner, senior vice president and head of sell-side and buy-side solutions, market technology at Nasdaq, said in an interview. ‘With our acquisition, we are doubling down on our belief this as an area that is being disrupted and where we can have a big impact.’
Nasdaq’s push comes as banks and other financial firms look to automate many of their more expensive and complex back-office processes to reduce costs and increase efficiency.”
Verafin Offers Software to Help Keep Businesses and Banks Safe
Verafin specializes in offering software to over 2,000 financial institutions and market operators in North America that helps them detect and protect against fraud and money-laundering. Verafin uses a cloud-based platform to protect in real-time. Based in St. John’s, Canada, Verafin has been growing in success since it’s founding in 2003.
Nasdaq’s planned acquisition of Verafin is just the latest in the company’s efforts to capitalize on the ever-increasingly automated systems being used to protect against fraud and money laundering. The Wall Street Journal reports, “Nasdaq already offers software used by market operators around the world to detect market manipulation, and it recently launched a product to help banks investigate possible money laundering. By acquiring Verafin, Nasdaq is hoping to bring the firm’s technology to larger banks and a global client base.” Nasdaq will be offering the Verafin tech to it’s 250 banks, exchanges, broker-dealers, buy-side organizations, and regulatory authorities that currently rely on the company for trade surveillance.
Money Laundering is a Massive Problem Nasdaq Hopes to Capitalize On the Solution For
According to CNBC, “…up to $2 trillion is laundered globally each year, representing up to 5% of global GDP, according to the United Nations. The acquisition marks another milestone in Nasdaq’s effort to diversify its revenue stream away from trading, where fees have been declining, into areas such as technology and data.
Nasdaq’s revenues from its market technology and investment intelligence businesses have grown 54% since 2016, and non-trading revenues represent 73% of the group’s overall revenues. The deal is Nasdaq’s largest since its $3.8 billion purchase of Nordic exchange OMX in 2008. Nasdaq will finance the transaction, which will add to its earnings per share beginning in 2022, with a combination of $2.5 billion of debt and cash on hand.”
MarketWatch shares, “‘In addition to Verafin’s significant contribution to Nasdaq’s strategic ambitions, the acquisition also furthers our goal to be a premier provider of cloud-based SaaS solutions to the global capital markets and beyond,’ said Nasdaq Chief Executive Adena Friedman.”
If the sale goes forward as planned, Nasdaq will be taking a huge step towards it’s re-branding and pivot away from profit on trade fees, which have become unreliable in recent years due to increased regulations.