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2022 FinTech M&A Roundup: Economic Climate Driving Industry Consolidation

Updated: Jan 9

2022 has been a year of two contrasting halves in the FinTech world. The first quarter of 2022, carrying the momentum from 2021, started with a bang with several Digital Banking and Digital Payments firms raising 100M+ funding rounds with eye-popping valuations. Since Q1 2022, FinTech valuations in both private and public markets have suffered a swift and massive correction over the last three quarters of 2022.


The current economic climate, characterised by a slowdown and forecasts of a looming recession, has led the FinTech sector to a period of consolidation in 2022, and this may very well accelerate even further in 2023. Continuing with the tradition of analysing the most impactful FinTech M&As that we started in 2020 and continued in 2021, we look at the consolidation trends in 2022.

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Some of the critical drivers and undercurrents for the FinTech consolidation are:

  1. Search for Financial Stability: One factor driving consolidation is the need for financial stability. As the prospect of a recession becomes more likely and VC funding slows, fintechs are scampering to merge or acquire other firms to weather the economic storm by unlocking economies of scale and scope. This is particularly true for smaller, less established companies that may not have the resources to withstand a downturn on their own. By joining forces with a larger, more established firm, these companies can gain access to additional capital and other resources that will help them ride out the recession.

  2. Massive Competition: As the industry has grown, more and more companies have entered the market, leading to fierce competition for customers and market share. More often than not, this quest for growth is at the expense of business profitability and free cash flow. In this environment, it will be difficult for non-profitable firms to survive, and many may choose to consolidate with a larger and more established competitor in order to stay afloat.

  3. Access to Technology and Innovation: Consolidation is also being driven by the need to innovate and stay ahead of the curve. As the FinTech industry matures, incumbents have realised the need to constantly develop new products and services in order to remain competitive and thwart disruptive undercurrents to their business models. This can be a costly and time-consuming process, particularly for incumbents who rely on legacy technology and traditional business models. By acquiring innovative FinTechs, incumbent financial institutions can access the tech capabilities and business expertise they need to continue innovating, access new customer segments, and launch new products.


In 2022, we witnessed 8+ billion-dollar M&A transaction deals in the FinTech sector, with several deals involving private equity firms scooping up mature FinTechs at massive valuations. Several incumbent financial institutions – such as Visa, Barclays, Equitable Bank, JPMorgan and Goldman Sachs – got involved in M&A to propel their strategies for open banking, mortgage lending, digital banking, digital payments, and wealth management. Several sub-segments in the FinTech infrastructure category witnessed massive interest from technology giants and industry leaders such as Apple, Fiserv, Nasdaq, Experian, and SAP.


Massive consolidation was observed in three FinTech sectors – Digital Banking, Digital Payments, and FinTech Infrastructure.


Digital Banking M&A Trends

In Digital Banking, we witnessed the M&A initiatives primarily driven by three objectives - product expansion, geographic expansion, and customer segment expansion. Several digital banks acquired competitors in local and foreign markets to expand their footprint and market share.

Digital Banks such as Lunar, Qonto, and GoHenry expanded their geographic footprint through targeted acquisitions. The SME banking segment specifically witnessed M&As to facilitate access to new products and services such as lending, digital payments, accounting, and expense management. In the Retail Banking segment, the M&A was driven by enabling access to customer segments and products such as teen banking, payroll, mortgage lending, and BNPL.


Digital Payments M&A Trends

In the Digital Payments segment, the M&As were driven by business objectives to expand the product portfolio through add-ons such as online payments, A2A payments, BNPL, billing and reconciliation services, and rewards.

Several digital payment firms, such as Global Payments, Razorpay, Razer Fintech, Northmill, etc., made acquisitions to expand their geographic footprints. The cross-border payments segment witnessed a surge in M&As, with firms looking to acquire retail and business remittance capabilities, forex services, and cross-border payroll.


FinTech Infrastructure M&A Trends

FinTech infrastructure segments such as Open Banking, Banking-as-a-Service, ESGTech, and WealthTech witnessed a number of significant acquisitions.

Open Banking had several high-value deals with participation from Apple, Visa, and Plaid. Several mid-market consolidations happened with involvement from data aggregation platforms like Yapily, Nordigen and Fintech Galaxy.


Green FinTech and ESG platforms enjoyed significant interest from bigger firms such as Nasdaq and BMO Capital markets. Banking-as-a-Service (BaaS) emerged as an important business trend, with banks – both traditional and new-age – acquiring core banking and BaaS tech firms to strengthen their BaaS propositions.


2023: FinTech Awaits An Unusual Future

Overall, it is likely that we will see a period of consolidation in the FinTech industry in the coming years as companies look to bolster their financial stability, stay competitive, and continue innovating in the face of economic uncertainty. While this may lead to some short-term disruption, it should ultimately lead to a stronger, more resilient industry that is better equipped to weather future economic storms.

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