Fintechs are hurting, making it a good time for banks to hunt for deals.
While banks and fintechs have primarily been either rivals or behind-the-scenes partners, recent valuation slashes – which show no signs of letting up – could allow banks to beef up their own offerings at a discount through acquisitions.
Big banks could be primed for some Black Friday deals of their own: Fintech valuations have plunged 70% in 2022, according to a new analysis from Jefferies – and incumbents would be wise to swoop in.
Areas such as payments, wealth management, financial education, or travel are all potentially attractive technology segments. With M&A, banks stand to gain historical data and new customer and merchant relationships, as well as fresh talent with expertise in areas like machine learning and open banking.
It’s an “opportune moment” for banks to “spread the net as wide as possible,” according to McKinsey analysts, who point out that even setting up “get-acquainted” meetings with interesting fintech firms can have an impact: “Not only are doors open much more in these times, but even if this cultivation does not end in an M&A transaction, it often can lead to partnerships that enhance the bank’s understanding of growth sectors and put stakes in the ground.”