Financial technology companies (better known as fintechs) are disrupting the banking industry, notably in the areas of payments and other digital services. Banks have long recognized the considerable value that fintechs offer—via cutting-edge technologies, lower operating costs, faster speed to market, top-quality talent and entrepreneurial mindset—and continue to aggressively acquire or partner with them.
Despite banks’ enthusiasm for fintechs, however, acquisitions and partnerships frequently don’t meet expectations. Banks, then, must strive to avoid the kinds of pitfalls that have limited the success of so many deals. A series of proactive steps will help to boost the bank’s odds of success:
- Identify fintech deal candidates that align with the bank’s strategic ambitions and pass a strict set of qualitative and quantitative criteria
- Focus the due diligence process on determining whether candidate companies are a good match for the bank
- Make sure during the pre-acquisition period that fintech targets understand how the integration process should work and assured that the bank will be the right partner
- Choose the right integration model post-acquisition
Banks can get the most out of their fintech transactions by adopting a laser-like focus on results and making the tough decisions that often are needed to capture value. Fintech buyers must know what the problems can be and conduct their diligence with these problems in mind. Careful planning—and avoiding the common traps—can go a long way toward realizing full value.