The financial technology (fintech) landscape is evolving, especially in the United Kingdom and Europe, where new trends are emerging. Many financial services companies are pivoting, with a concentration on mergers and acquisitions (M&A) to fuel growth as the third ‘fintech epoch’ emerges.
Many European fintech start-ups have faced challenges in securing funding rounds at previous high valuation levels. That’s not to say these start-ups are struggling to thrive. The focus, however, is shifting from raising capital to pursuing strategic acquisitions and partnerships. The trend is likely to carry on in the medium term, particularly as initial public offer (IPO) markets remain unsettled and as businesses experiment with new growth strategies.
This trend was detailed in a report from White & Case LLP that analysed sector trends for the second half of 2022 and first half of 2023. The report suggested these third-phase fintech companies, those that have already weathered the storm of the start-up phase, are searching for new methods of expansion amidst a tightening of financial restraints.
This development can be seen as the third ‘fintech epoch’, following the initial establishment of fintech companies and their subsequent expansion. Now, as more mature fintech firms face uncertain circumstances, strategic acquisitions, partnerships and M&A activity have become dominant strategies to ensure survival and growth.
It isn’t just survival on the line, however; these strategies are also geared towards gaining a competitive edge. With these operational shifts, companies may be more diversified, resilient, and able to offer a wider array of financial services.
This new trend for mature fintechs to pivot towards M&A and strategic partnerships signal changes in how fintechs operate on a grand scale. This is a shift that could impact the global fintech sector and influence the strategies of both emerging start-ups and established corporations.
For further reading, consult the full report by White & Case LLP.