Higher Borrowings Could Boost Lender and Fintech Merger Interest
An increase in consumer borrowing is fueling fintech efforts to expand the reach of their lending operations. Credit card spending rose at least 20% in the first quarter at each of the big four banks, and the origination of personal loans is also up. The increasingly attractive market is likely to draw more bidder interest to a financial services market awash with acquisition interest from incumbents and newcomers alike.
The recent activity plays into a broader phenomenon that has seen incumbents in the industry look to tech companies, even those specializing in datasets outside of their target markets, to grow. insurance in the bank and back, incumbents in the industry are acquiring and being acquired by technology companies.
Take the bank. The client-client relationship between lenders and fintech has cooled interest in cross-domain mergers until recently, when competition to create rival platforms turned into large-scale acquisition interest.
Not only are banks diving into technology, but you’re seeing technology funds looking to buy traditional banks, Grant Thorton partner Jean Cristiano told me.
Indeed, the technology platform SoFi earlier this year received conditional approval to become a full bank, coinciding with its acquisition of the bank charter holder Golden Pacific Bank.
Elsewhere, traditional finance players have expanded their businesses to include tech players with access to growing loan portfolios. This week’s announcement that Intercontinental Exchange Plans to acquire a mortgage technology company Black Knight is illustrative. The exchange is doubling down on an earlier acquisition of Ellie Mae to buy the mortgage software provider in a bet that mortgage services will continue to grow.
The windfall of fintech mergers seems to still have legs.