Look Back on Noteworthy Fintech M&As 2021
Fintech is experiencing a stratospheric surge among emerging tech investors, accounting for the second-highest area of investment in 2021, suggesting a robust market for their products and services in the global financial ecosystem. Fazzaco has been dedicated to covering financial M&As, fintech M&As in particular over the years.
Today, we will take a look into some of the most influential and well-known M&As that have taken place in the fintech business in the past two years.
What are mergers and acquisitions?
Mergers and acquisitions are financial transactions by which two separate companies can become a single entity. They are categorized by type (horizontal, vertical, conglomerate) and form (statutory, subsidiary, consolidation).
Mergers involve the combination of two equal companies and result in a new entity formed under one corporate name. In an acquisition, a smaller company is purchased by a larger company.
Noteworthy Fintech M&As
The deal unites two fast-growing FinTechs to become an online payments behemoth. The acquisition, announced in August 2021, came at a time when numerous online payment companies and FinTechs are trying to establish their own Buy Now, Pay Later programs.
Months into the acquisition, Square marked another key milestone in its integration of Afterpay in May 2022, extending BNPL functionality to its millions of in-person sellers in the United States and Australia.
Just three months after first bringing Afterpay into the Square ecosystem with e-commerce integration, Square and Afterpay moved swiftly to unlock the ability for sellers using any Square point of sale software to now offer Afterpay across online and in-person commerce.
In September 2021, PayPal acquired Japanese BNPL provider Paidy for $2.7 billion in cash as it moved to strengthen its footing in the country, which purportedly has the world's third largest e-commerce industry.
Paidy's payment services enable Japanese consumers to make online purchases and pay for them monthly in a consolidated bill at a convenience store or via bank transfer. The company scores creditworthiness, underwrites transactions, and guarantees payment to merchants using proprietary technologies.
Earlier in 2021, the payment giant also agreed to acquire Curv, a cloud-based infrastructure provider for digital asset protection, in order to expand its support for cryptocurrencies and digital assets.
In August 2021, Visa reached an agreement to buy Tink for $2 billion. Tink enables financial institutions, fintechs, and merchants to create customized financial management tools, products, and services for European individuals and enterprises using their financial data.
In March 2022, Visa announced the acquisition of the Swedish fintech was officially completed.
In September 2021, payment giant Mastercard bought Aiia, an open banking platform with a number of APIs to help businesses make better use of data. Mastercard wanted to strengthen its open banking initiatives by adding Aiia's technology, which would allow fintechs and financial institutions continue to innovate and improve their offerings.
Mastercard announced that it has completed the acquisition of Aiia two months later.
- Bill.com acquires Divvy
In May 2021, cloud-based financial operations management platform Bill.com acquired spend management upstart Divvy in a stock-and-cash deal.
Businesses will be able to manage accounts payable, accounts receivable, and corporate card expenditure all in one place with the unified solution. Clients will be able to spend smarter, manage budgets and cash flow, and streamline back-office operations with real-time information into their B2B spending and access to different payment methods.
Trends Worldwide and Thoughts
Fintech M&As with UK banks were particularly common in 2021, and financial service businesses are increasingly exploring fintech acquisitions and collaborations to gain access to future technology.
The FCA is eager to promote innovation, and its pro-competition mandate has helped to create a more welcoming regulatory environment for emerging fintech companies. As a result, the UK government should publish its response to its consultation on bringing stablecoins under regulation soon, and the UK's financial promotion system will be extended to cryptoassets as well.
In EU, M&A activities remain exceptionally busy, and against this backdrop, a digital finance package was adopted, which includes proposed regulations in cryptoassets, pilot regime for market infrastructures based on distributed ledger technology (DLT), and a digital operational resilience framework for financial services, in addition to issuing a directive clarifying and amending existing EU financial services legislation.
Regulation continues to have an impact on the industry in the United States. Partnerships between new and existing fintech businesses will continue to increase. Fintechs are attempting to establish legitimacy by getting regulatory charters and licenses to operate within the regulated banking system, particularly in the cryptocurrency space.
The market for large transactions and initial public offerings (IPOs) is expected to stay strong.
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