A combination of factors has decreased the threat that banks face from fintechs: Tighter conditions have squeezed digital upstarts while incumbents have been rigorous in making their own investments. 

Big banks can sleep a little easier, according to a new report from Moody’s.  

Sluggish funding and a slower growth environment have kneecapped many startups while big banks are seeing the fruits of their digital transformation efforts start to pay off. 

“The fintech threat has faded amid reduced funding and tighter regulations, while incumbent banks have stepped up to the challenge,” the ratings agency said. After all, incumbents have “been aggressively defending against [fintech] risks, either through increasing their spending in technology or through partnerships.” 

The current climate presents refreshed opportunities for partnership instead of competition, and the report points to the possibilities of acquisitions, too, as experts predict that 2023 will likely be a big year for bank M&A.  

Remember, however, that careful due diligence and a specialized approach to retaining talent are crucial to making a purchase successful instead of a flop, according to Bain analysts.