2021 FinTech M&A Roundup: From Crisis to Consolidation
2021 has been a high octane year for mergers and acquisitions (M&As) in the FinTech world. The FinTech industry, which initially came to the fore on the promise of competitive disruption, has come through the ranks and has matured towards collaboration and consolidation. 2020 was a real testing time for FinTech when the pandemic put strenuous questions on the new-age business models. The industry as a whole has emerged from the crisis stronger and is aiming to reach new heights in this decade by joining forces with fellow disruptors, as well as the incumbents.
2021 was a breakout year for M&As, where we witnessed massive consolidation across key FinTech sectors such as Digital Banking, Payments, Buy Now Pay Later (BNPL), Lending, Wealth Management, Insurance, FinTech Infrastructure, and Decentralized Finance (DeFi). Continuing with the tradition to analyze the most impactful fintech M&As that we started in 2020, we look at the consolidation trend in 2021.
(Note: All non-USD deal values have been converted to USD for ease of analysis.)
The Mega M&A Deals of 2021
In 2021, we witnessed over 10 billion-dollar deals within the FinTech industry. Square’s acquisition of Afterpay topped the charts with a whopping $29 billion deal. BNPL, being the sector of 2021, also witnessed acquisitions of GreenSky by Goldman Sachs and that of Paidy by PayPal. Payments, as usual, was frequently mentioned on the acquisition list with PayU’s acquisition of BillDesk, and Mastercard completing its acquisition of Nets in 2021.
Mastercard’s acquisition of Nets this year was significant, as it was initiated in 2019, and took almost 18 months to get all the necessary approvals and reach a completion stage. Visa’s acquisition of Tink finally came through to propel its ambition to embrace open banking and evolve from its predominant positioning as a payment rails company towards becoming a data rails behemoth. Befittingly, 2021 signed off with another billion-dollar acquisition by real estate, mortgage, and financial services platform Rocket Companies acquiring personal finance app Truebill in December ’21.
Digital-first Banking Deals
MoneyLion aided its organic route to become a financial superstore by acquiring Even, an embedded-finance market and infrastructure company. The acquisition will help MoneyLion expand its distribution networks and further enhance consumers’ access to real-time personalized financial product recommendations from banks, insurance, and FinTech companies.
Scale-up neobanks like bunq, Lunar, and Starling Bank acquired lending FinTechs in a bid to diversify their offerings and open up monetization opportunities. Open Financial Technologies, an SME-focused neobank in India, acquired Finin, a retail-focused neobank to expand its target market. Nubank acquired Spin Pay to boost its e-commerce payment solution. In a bid to evolve as a super-app, in November 2021, Nubank teamed up with a roster of retailers to add an e-commerce section to its app.
Incumbent banks also doubled down on neobanking purchases, and the sector saw some interesting acquisitions such as – Bank Norwegian by Nordax Bank; Australian neobank 86 400 by National Australia Bank; and Roostermoney by NatWest. FinTechs also returned the favor by acquiring banks in order to get hold of banking licenses to establish digital banking propositions with BharatPe, an India-based FinTech unicorn, acquiring PMC Bank; and WeLab, a Hong Kong-based FinTech unicorn, acquiring Bank Jasa Jakarta to expand to Indonesia.
In the payments space, PayU acquired Indian payment gateway service provider BillDesk for $4.7 billion. This was the most expensive deal for PayU and marked the second-largest exit by an Indian startup through acquisition after Flipkart’s acquisition by Walmart.
Bill.com bought Invoice2go, an accounts receivable software provider for small businesses, for $625 million. Global Payments leader SumUp acquired Fivestars, which provides loyalty, marketing, payments, and other services to small merchants to diversify its portfolio offerings for small and medium businesses (SMBs). Singapore super-app Grab was involved in some gigantic deals in 2021, which involved raising its stake in Indonesian e-payment service OVO to 90% ownership after acquiring stakes from Tokopedia and Lippo Group. Mastercard obtained all the required approvals to complete its acquisition of Nets, an account-to-account payments company, whereas Visa bought Currencycloud to make a bid in the cross-border payments segment.
Buy Now Pay Later has surfaced as one of the biggest FinTech megatrends in the COVID world. Its newfangled meteoric rise in popularity has of late resulted in an ever-increasing number of financial institutions trying to hop onto the BNPL bandwagon.
In August, Jack Dorsey’s brainchild Square (now known as Block Inc.) acquired the Australian BNPL service Afterpay, in a massive $29 billion buyout. September witnessed a flurry of deals – with PayPal announcing its acquisition of Paidy, a Japanese BNPL platform for approximately $2.7 billion; Goldman Sachs’ announcing the acquisition of GreenSky in a $2.24 billion mega-deal with aspirations to make Marcus the consumer banking platform of the future; BNPL behemoth Klarna acquiring mobile wallet app Stocard for $133 million; and Australian FinTech Zip’s acquisition of Twisto for $140 million, with the ambitions to expand into Europe. In Asia, ShopBack, the Rakuten and Temasek-backed e-commerce loyalty platform, announced the acquisition of Singapore-based BNPL startup Hoolah.
FinTech Infrastructure Deals
Open Banking was a breakout sub-segment in the FinTech Infrastructure deals and witnessed the acquisition of European open banking technology providers Tink and Aiia by Visa and Mastercard, respectively. This was the second open banking purchase by Mastercard after it acquired Finicity in 2020.
In the FinTech software-as-a-service (SaaS) segment, Bill.com—a cloud-based billing, accounting, and payments platform—acquired Divvy, a spend management platform in a $2.5 billion deal to further its vision to transform SMB financial operations. Cloud-native core banking provider nCino acquired digital mortgage platform SimpleNexus for $1.2 billion.
In 2021, several banks made definitive bids to become technology companies. This involved some notable buyouts – Flinks, a data aggregation platform, by National Bank of Canada; ESG investing platform OpenInvest by JPMorgan Chase; Betterfin, a comprehensive financing management tool for business owners, by Cross River Bank; and cash flow forecasting app Fluidly by OakNorth Bank.
Honorable Mentions: LendingTech, WealthTech, InsurTech, and DeFi
Lending was another key category that saw significant consolidation in 2021. Rocket Companies, which owns Rocket Mortgage, added Truebill to its portfolio with a $1.3 billion deal. Ally Financial acquired credit card platform Fair Square Financial, which operates under the Ollo brand to take another crack at entering the credit card business. Online lender Oportun made a bid to acquire Digit, a digital bank, for $213 million which is expected to unlock significant cross-sell and up-sell opportunities to the combined entity.
WealthTech, InsurTech, and DeFi also witnessed significant interest from incumbent banks, established crypto exchanges, and scale-up FinTechs placing their bets on emerging DeFi propositions.
Consolidation and Collaboration: The Future of FinTech
As the FinTech industry emerges from the shadows of the pandemic and picks up steam, we see a wave of consolidation on the horizon. 2022 is expected to take this consolidation trend even further as FinTech giants and incumbent banks are expected to indulge in the M&A tug-of-war to leverage emerging themes such as open banking and embedded finance as they take decisive steps towards becoming super-apps.