The recent findings from GrowthPal, a data-driven deal sourcing platform, have unveiled that lending fintechs comprised 30% of all fintech acquisitions in 2023. Additionally, the report highlighted Payments and Wealthtech as sub-sectors that experienced high M&A frequency. This trend signifies a notable shift in the fintech landscape, with lending taking the lead in M&A activities.
Furthermore, the report noted that while Wealthtech and Payments have consistently recorded high M&A volumes over the past two years, the surge in lending sub-sector acquisitions is a recent phenomenon. This is likely due to the increased regulatory scrutiny in the lending space, as mentioned in the report.
The analysis also revealed that there were approximately 30 acquisition deals in the Indian Fintech space in 2023, compared to 37 and 29 deals in 2022 and 2021 respectively. Notable M&A deals in the lending sector included Bridge2Capital acquired by IIFL Finance, FinFort acquired by Yubi, and ORO Wealth acquired by InCred Capital, among others.
Furthermore, the report highlighted a decline in the establishment of new fintech startups in recent years. It disclosed that only around 20 fintech startups were incorporated in India in 2023, significantly lower than the 45 and 73 new startups in 2022 and 2021, respectively. This decline is attributed to the challenging regulatory environment for launching new fintech ventures, as mentioned by Maneesh Bhandari, the founder and CEO of GrowthPal.
The report also indicated that out of the 30 acquisitions in 2023, 20 buyers were large acquirers (>1000 employees or funding > $50 Mn), 6 were mid-sized acquirers (>500 employees or funding >$20 Mn), and 5 were small acquirers (<500 employees or funding <$20 Mn). This insight offers valuable information about the dynamics of the M&A landscape within the fintech sector. Looking to the future, the report emphasised the reliance of the fintech ecosystem on venture capital (VC) backing to support its operations, citing the challenges of monetization in the fintech space. It also highlighted the trends that are expected to dominate the fintech sector in 2024, including the disruption by AI in financial services, the rise of digital lending marketplaces through open banking and APIs, and the increasing significance of sustainable solutions for fintech to address industry challenges and remain competitive. Additionally, RegTechs are expected to play a crucial role in reshaping the fintech landscape, leveraging AI and data analytics to simplify compliance and reduce costs. In conclusion, the report by GrowthPal provides valuable insights into the evolving landscape of fintech M&As, shedding light on the dominance of lending fintechs in 2023 and forecasting the future trends that will shape the fintech sector in the coming year. As the fintech industry continues to undergo substantial shifts, it is crucial for stakeholders to stay informed about the latest developments and adapt to the changing dynamics of the market.
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