Lending Dominated Fintech M&As In 2023: Report
The other two sub-sectors with high M&A frequency were Payments and Wealthtech, according to the report by GrowthPal
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Lending fintechs made 30% of the total fintech acquisitions recorded in 2023 amid increased regulatory scrutiny around the sub-sector, according to an analysis by GrowthPal, a data-driven deal sourcing platform.
The other two sub-sectors with high acquisition frequency were Payments and Wealthtech. While Wealthtech and Payments have recorded high M&A volumes for the past two years, the spurt in lending sub-sector acquisitions is a recent trend. This could be an aftermath of the growing regulatory scrutiny in the lending space, says the report.
According to the GrowthPal database, there have been around 30 acquisition deals in the Indian Fintech space in 2023 as compared to 37 and 29 deals in 2022 and 2021 respectively. Some of the notable M&A deals in lending were Bridge2Capital acquired by IIFL Finance, FinFort acquired by Yubi, and ORO Wealth acquired by InCred Capital among others.
There has also been a decline in the establishment of new fintech startups over the years. In 2023, around 20 Fintech startups were incorporated in India, as compared to 45 and 73 new startups in 2022 and 2021 respectively. This is about 70% less than the new fintech startups incorporated in 2021.
“During 2020 and 2021, both regulators and founders gained insights into the capabilities and limitations of emerging fintech products. However, the subsequent introduction of new regulations and compliance measures across industries has created a challenging environment for launching new fintech ventures,” said Maneesh Bhandari, founder and CEO of GrowthPal.
The report added that while these protective measures are essential for industry integrity, they have inadvertently impeded the establishment and growth of innovative fintech startups, contributing to the observed reduction in new company formations in the fintech sector.
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).
The present and future of fintech ecosystem
According to the report, the fintech ecosystem relies heavily on venture capital (VC) backing to ensure the viability of its operations, as monetization has been a challenge in the fintech space. “As a result, startups operating in the fintech sector have found themselves relying extensively on VC funding to support and propel their growth initiatives, encompassing strategies like mergers and acquisitions (M&A) and expansion into new markets,” said Bhandari,
Lending fintechs made 30% of the total fintech acquisitions recorded in 2023 amid increased regulatory scrutiny around the sub-sector, according to an analysis by GrowthPal, a data-driven deal sourcing platform.
The other two sub-sectors with high acquisition frequency were Payments and Wealthtech. While Wealthtech and Payments have recorded high M&A volumes for the past two years, the spurt in lending sub-sector acquisitions is a recent trend. This could be an aftermath of the growing regulatory scrutiny in the lending space, says the report.
According to the GrowthPal database, there have been around 30 acquisition deals in the Indian Fintech space in 2023 as compared to 37 and 29 deals in 2022 and 2021 respectively. Some of the notable M&A deals in lending were Bridge2Capital acquired by IIFL Finance, FinFort acquired by Yubi, and ORO Wealth acquired by InCred Capital among others.
