Global Fintech M&A started to increase significantly in the first half of 2022. At the beginning of 2023, fintech businesses began actively acquiring customers and merging key operations. This trend seems to be paying off for businesses that want to improve efficiency, streamline access to the market and strengthen their position in it.
January 31, 2022. After decade-long Fintech investment prospects and expansion, the number of new Fintech companies has decreased by 85% since 2020. In parallel, Fintech M&A activity has been on an upward trajectory, increasing 46% compared to 2021, and a 70% increase when compared to the pre-pandemic (2019) figures.
According to analysts, M&A peaks will not be short-lived, especially considering current supply chain difficulties and global recession concerns. The current economic crisis forces companies to lower risks and make budget cuts, resulting in significant layoffs. These variables will accelerate the importance of considering M&A opportunities. However, it is a massive prospect for companies that tend to increase their market share faster while limiting competition and strengthening their position in the market.
One of the examples is the collaborating Fintech companies Inventi and Kernolab which announced the acquisition of key services and customers from Paysolut — a core banking system provider. This move represents a new trend within the Fintech Industry as recent investment grants Inventi and Kernolab an opportunity to expand their reach, offer more comprehensive solutions to their clients, and solidify their presence in the European market further.
"The acquisition of Paysolut's customer portfolio strengthens our strategic position in SEPA payments, as leaders of local Regulatory Connector integration into the client's banking engine. We are working closely with the Bank of Lithuania to ensure that the transition is as smooth as possible as we are currently in the process of coordinating individual migration plans for our new clients," said Asta Meškerevičiūtė, CBDO of Inventi.
After the acquisition, Inventi became the largest service provider of SEPA gateway through the Bank of Lithuania, which provides connectivity to the international payment network. At the same time, Kernolab took over Paysolut Core Banking System delivery services. According to Kernolab co-founder and CEO Vachtangas Babunasvili, this takeover is a strategic move to reinforce its position as a leading supplier of Core technology to Electronic Money Institutions (EMIs) as well as strengthen its embedded finance offering.
"Together with Paysolut we have developed a tailor-made solution to facilitate the customer handover process. After the acquisition, we will be able to focus on developing innovative solutions that enable financial and fintech institutions to process payments smoothly and efficiently," said Mr. Babunasvili.
According to Andrius Minkevičius, CEO of Paysolut, it took careful consideration to whom the company could pass on their clients.
“Our concern for the continuity of the client service operations helped us find a solution with Inventi and Kernolab. I am delighted to know we are leaving our customers in the very capable hands of our strongest competitors. We are now working closely together to ensure a smooth transition,” Minkevičius commented.
Other major M&A deals, such as Microsoft's acquisition of Activision Blizzard, can also be expected in 2023. The fintech sector is changing as the macro climate tightens and investors focus more on efficiency and less on growth. Changes, on the other hand, are likely to strengthen, focus, and stabilize the sector.
"Inventi" is an industry-leading software development, systems design, and SaaS solution provider, delivering top-scale integrations for Financial institutions and FinTechs. Over the years they have developed cutting-edge, complex and groundbreaking software solutions to some of the largest enterprises in the Baltics/Nordics region. For more info visit inventi.io
About “Kernolab”"Kernolab" is building a platform to shape the future of financial services.The startup provides businesses with any number of modular, out-of-the-box solutions that allow them to integrate fintech services including payments, accounts, cards, lending, and soon, insurance products into their set of capabilities. For more info visit kernolab.com