Can Fintech Retain its Spirit of Innovation as Consolidation Spreads Through the Market?


M&A activity in Fintech hit record levels last year with companies around the world raising an eye-watering $132 billion, according to CB Insights’ 2021 State of Venture Report.

We saw big deals, lots of firms going public, mergers left, right & centre, and Fintech experts think 2022 will be even bigger. I believe that when fintech does well, society does too – whether you’re talking about a company that helps catch financial criminals, like ComplyAdvantage, or our role in moving money more easily around the world. I’m not neutral on this topic – in fact, I’m incredibly biased in favour of Fintech and seeing it succeed and grow, but I won’t ever hold back on that. The positive, transformational impact fintech can have is why I got into the industry in the first place.

It’s important we don’t approach this blindly, though – there are consequences for this activity that have to be thought about and dealt with. Unprecedented levels of consolidation might make some worry that space for innovation will be reduced. As an industry, we have a responsibility to ensure fintech retains its spirit of innovation and continues to do well for the benefit of all.

The perks of M&A 

Fintech emerged as a distinct industry around two decades ago, in this time many of its highest-profile stars and success stories have been start-ups where bold ideas flourish and innovation is an integral part of how they operate.  

These young and revolutionary companies brought speed and cutting-edge technology to almost every part of the global financial system – from payments and settlements to investments and insurance. Both consumers and businesses have seen myriad benefits like ease of use, lower costs, and greater flexibility. 

At the same time – and in large part inspired by the success of new challenger brands – the big incumbent firms recognized the need to offer more innovative digital services to keep customers and protect business. Even today, many banks find it difficult to deploy new systems and processes across their entire service offering and, even when they do, it doesn’t always happen quickly or easily. An extreme case is Western Union: at one time its ubiquitous high street presence was a significant strength and competitive advantage; today, it looks increasingly like a stone weighing the company down.   

If you want to develop an entirely new capability, or enter a new market, but can’t do it quickly enough to beat competitors – acquisition is the only viable option. Nowadays, some of the biggest Fintech stars are tapping into this, just look at Square’s $29bn acquisition of Afterpay. 

A threat to innovation? 

With any business strategy comes risk, it’s no different when it comes to M&A – in Fintech, culture clashes can cause some of the biggest risks. 

In fact, failed or poorly performing mergers and acquisitions often stem from cultural incompatibility. Some leading thinkers in business psychology have argued the key to success and failure comes down to tight and loose corporate cultures. While tight cultures value consistency, routine and strict values – loose cultures favour new ideas, creativity, and openness over rules and processes. So, it should come as no surprise that mixing these fundamentally different cultures can end badly. 

Though it might seem easy to group financial institutions together as tight compared with looser Fintech upstarts. The answer is not that simple. Not every financial mainstay is tight, and not every Fintech is loose – the key is for both companies to make an honest assessment of where they sit on the scale and decide what they remain firm on and what they’re willing to negotiate. 

Well-balanced, sensible integration that prioritizes adding value for both sides (for instance by giving the smaller parties access to more resources, new markets, and experienced corporate talent) but fences off innovation and corporate identity can mean you get the best of both worlds – with this, big finance can be in unison with Fintech. 

When searching for answers, look no further than Fintech

Mergers and acquisitions are part of a very natural business cycle.  They don’t pose a serious risk to reducing competitiveness and innovation, as there are still so many challenges yet to be met.

Several subsectors are prime candidates when it comes to this. Insurance has remained virtually unchanged for many decades – and now is ripe for a shake-up by Insurtech companies. Wealthtech, is another example of this – with its rapid growth beginning to disrupt a stagnant wealth management industry. 

Not to mention the rise in cryptocurrencies and the broader realm of decentralized finance. Early Fintechs were able to thrive when the internet broke down the door to conventional finance. Today, DeFi has the potential to go beyond this and build something new – representing a true paradigm shift, one the world is yet to fully get on board with. 

There’s no denying that decentralized finance has a long way to go in bridging the gap and making the leap from being early adopters and evangelists to being something baby boomers understand. And given how revolutionary it is, it’s likely it will take far longer to bridge that gap than Fintech. That aside, chances are that many of the most exciting companies of tomorrow will emerge from DeFi, or at least be adjacent to it, and some of them may even end up being acquired by the now well-established fintech stars of today.

The evolving market 

M&A’s have the potential for making the Fintech industry more successful, without reinventing the wheel. The market can help the industry reach its full potential by evaluating culture and funneling resources to the most innovative minds. 

And that’s before we have even touched on how we can transform the yet-to-mature subsectors and segments across the fintech ecosystem. It’s obvious there will always be challenges to overcome, efficiencies to find, costs to reduce, and ways to make things generally easier. Despite this, and most importantly, there will always be people willing to take a risk and put the latest technology up to the task.


Stephen Lemon, is co-founder, VP Strategic Partnerships & Corporate Development at CurrencyCloud. Steve saw the first wave of the unbundling of financial services at the start of his career. As a founding member of HiFX he led the global retail business, with a remit to help private individuals understand the new way of making overseas payments away from their bank. As an early advocate of what we now recognize as embedded finance, Steve went on to co-found Currencycloud. Having held leadership roles in many parts of the sales organisation his deep understanding of the broader payments ecosystem and Fintech in general, has enabled him to play a significant part in developing the business and driving growth – most notably acquiring and developing key enterprise relationships with organizations such as Visa. Outside of Currencycloud Steve is a keen contributor to the Fintech ecosystem and is an occasional advisor to early-stage companies and mentor through Techstars.

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