The fintech industry is filled with promising startups, established companies, and everything in between. There’s one thing all these enterprises have in common; their desire to grow. One way that companies grow is to acquire competitors or companies offering complementary services to their own. Recently, there has been a slew of notable mergers and acquisitions (M&A) within the industry that we think are noteworthy. Read on to see the most talked about recent mergers in the fintech industry:
But before we look at individual M&A deals, let’s take a moment to understand why companies do these deals in the first place.
Why would a major financial or technology firm acquire a fintech startup instead of growing the technology themselves? And on the flip side, why would a startup agree to be acquired if they are growing fast, and are on the path to even more future growth?
The reality is, an M&A makes sense from both sides of the table.
Let’s look at it from the acquiring company first:
As a large company, it can be difficult and costly to pivot and/or develop new products and solutions, even if those new products would fit in well with the existing company’s business. Therefore, it can be cheaper and easier for a big company to shell out millions of dollars to acquire a startup and absorb their existing technology immediately. This also helps them to implement new technology much faster than developing it on their own.
Now for the startup’s perspective:
Nothing is guaranteed. While a growing fintech startup could have the potential for major future growth and even an IPO down the road, this is still a major risk. In an acquisition, the startup is (most of the time) guaranteed a great return on their initial investment. It also makes employees extremely happy—especially if they have equity in the company. Also, even after the acquisition, the startup is provided with more resources and support to continue their work, oftentimes using the same branding as they were already using.
Now, let’s get to the recent noteworthy acquisitions…
JPMorgan Chase buys OpenInvest
The financial behemoth JPMorgan understands it needs to keep up with the times. Investors today not only care about making money, but doing so in an ethical manner. So, the company purchased OpenInvest, a platform offering values-based investing.
Mary Callahan Erdoes, CEO, J.P. Morgan Asset & Wealth Management, noted why the acquisition makes sense for the firm.
“Clients are increasingly focused on understanding the environmental, social, and governance (ESG) impact of their portfolios and using that information to make investment decisions that better align with their goals.”
Banco BS2 acquires WEEL
The South American fintech landscape is about to change thanks to this recent deal. Online lender WEEL was recently acquired by BS2 Bank as it looks to expand its reach in the region. BS2 CEO Marcos Magalhães highlighted how WEEL will help aid in his company’s new goals for growing its business:
“We have ambitious growth plans. WEEL has the best products and the best digital credit expertise. It perfectly complements our offering and positions us as the leading digital financial services provider for small and medium-sized companies. The SME segment has often been ignored. Banking product development generally focuses only on individuals and large corporations. We’re going to change this logic.”.
Gojek and Tokopedia merger
While you may never have heard of either of these companies, this merger has now created the largest digital services company in Indonesia. Ride-hailing app Gojek is coming together with Tokopedia, a digital marketplace, to form the GoTo Group, a conglomerate that will serve a combined 100 million monthly active users.
But why is this considered a fintech deal? It’s because the new company will have an arm specifically for financial services called GoTo Financial, which will process millions of payments from South Asian customers. In a statement, Andre Soelistyo, CEO of GoTo Group, said:
“Today is a truly historic day as we mark the beginning of GoTo and the next phase of growth for Gojek, Tokopedia, and GoTo Financial. Gojek drivers will deliver even more Tokopedia packages, merchant partners of all sizes will benefit from strengthened business solutions, and we will use our combined scale to increase financial inclusion in an emerging region with untapped growth potential.”
Google goes fintech in Japan with Pring
The tech giant made its move into the Japanese market after purchasing financial services company Pring for $270 million. The Tokyo-based company provides cashless payments and settlements to its users in the country. Pring already has partnerships with 50 banks and retail chains, like 7-11, which will provide Google with immediate penetration into the Japanese market. This expands on Google’s fintech offerings in the US and India, where its users are offered financial payments and transfer services.
Fiserv acquires Pineapple Payments
The global financial services company Fiserv is adding Pineapple Payments to its repertoire. Pineapple Payments is a payment processing company for more than 25,000 small and medium-sized businesses, and the company previously had a working relationship with Fiserv making the transition that much easier.
Frank Bisignano, President and Chief Executive Officer of Fiserv noted, “With Pineapple Payments already operating as a key distribution partner of Fiserv, we expect to accelerate the delivery of new and innovative capabilities to a host of new merchant clients.”
Leveraging technology for growth
Looking at this list of acquiring companies — Google, JPMorgan, Fiserv, etc. — it’s clear that well-established companies are opting to grow their fintech offerings by gobbling up smaller firms. Whether it be for local partnerships and easy integration, or for diversifying into different business segments, the fintech M&A market has never been hotter, and it shows no signs of slowing down anytime soon.