Scope of the study
The study carried out by PACE concerns acquisitions (i.e. majority investments) of fintechs and banking services launched from the 2000s, by traditional banks and especially retail banking entities, over the period 2014-2024, in Europe.
Since 2010, you have witnessed the emergence of a new wave of fintechs. Can you explain why?
Rémy Poulet: From 2010 onwards we started to reach a pivotal moment in the wake of the financial crises of 2008 and 2010, conducive to the emergence of financial start-ups known as fintechs. The context is favourable for a number of reasons:
- The digitalization of the economy is accelerating, driven by the spread of major technological advances: growth of broadband and mobile internet, development of cloud services and APIs.
- Customer needs and practices are evolving, new experience standards are emerging and promoting immediacy and “selfcare” (making the customer autonomous when it comes to managing their banking operations, for example).
Why are traditional banks acquiring fintechs?
Rémy Poulet: I see three main reasons why traditional European banks have made these moves. Firstly, as a defensive measure to protect their core business and prevent the risk of disintermediation of the customer relationship.
Secondly, to accelerate their digital transformation, or even for some, to close the innovation gap or to compensate for a lack of capacity to execute internally.
Finally, acquiring a fintech can be an opportunity to strengthen a bank’s value proposition and/or access a market or customer segment more quickly.
But as I just said, with 70 fintech acquisitions by 39 banks, the volume of acquisitions between 2014 and 2024 remained limited. Note that France, Italy and the United Kingdom are in the top three “acquiring” countries.
What’s behind these volumes?
Rémy Poulet: There are several possible explanations for these figures. I’d say that traditional banks have a limited sense of urgency. In fact, fintechs are eroding traditional banks’ market share but are not yet threatening to replace them. And then the barriers to entry remain considerable: retail banking is an highly regulated, fiercely competitive sector with high levels of customer inertia. It’s worth recalling that each year in France, less than 5% of customers change banks. And banks are by nature somewhat risk-averse. The level of fintech valuations remains high and out of line with banking sector standards. Finally, the complexity of IT infrastructures is also a barrier to the integration of a fintech.
Can you name some of the decade’s standout acquisitions?
Rémy Poulet: Among the decade’s noteworthy operations, I’d pick out four “success stories”, including three BNP Paribas acquisitions.
First of all, one of the most emblematic deals of the decade is certainly the acquisition of NiCKEL. In July 2017, BNP Paribas completed the acquisition of Compte-Nickel. Simple and accessible to all, Compte-Nickel is based on the network of French tobacconists. Its positioning allows BNP Paribas to complement its offering. In 2018, Compte-Nickel reached the symbolic milestone of one million accounts and became NiCKEL. The neo bank with an innovative model stretched its European wings via Spain, Belgium, Portugal and Germany. In 2024, NiCKEL, still faithful to its original value proposition of being accessible to as many people as possible regardless of income, celebrates its tenth anniversary with a diversified offer and new services.
After an initial majority stake in 2017, BNP Paribas Asset Management (IPS) took full ownership of the fintech Gambit Financial Solutions in 2021. Gambit develops innovative technological solutions based on data and AI for BNP Paribas and other external financial institutions, which enable the optimization of savings and investment advice and allocation processes.
"Fintechs have been a catalyst for innovation and transformation in the banking industry in recent years. Banks have made highly targeted acquisitions in this area, taking advantage of this emulation to develop their ability to digitise organically."
More recently, it’s worth mentioning BNP Paribas and Kantox, a great example of synergy and extension of the value proposition of a bank in partnership with a fintech. Following an initial strategic partnership launched in September 2019, CIB’s Global Markets business and Commercial Personal Banking & Services integrated Kantox, the leading fintech in automating foreign exchange risk management, in October 2022.
Beyond BNP Paribas, we can also mention the start-up Ebury which joined the Banco Santander stable in 2019. This British international payments and foreign exchange services platform for VSEs/SMEs is aiming for an IPO on the London Stock Exchange in 2025. And the fintech Payplug specializing in e-commerce payment solutions for VSEs/SMEs, purchased by the BPCE group in 2017. Payplug is now the BPCE group’s single brand for omnichannel payment solutions. However, there has also been no shortage of failures, with 40% of fintechs acquired between 2014 and 2020 either closing down or being sold.
How do you explain theses failures?
Rémy Poulet: Our study shows 3 main reasons, sometimes in combination:
- A change in the bank’s management and therefore a loss of sponsoring
- A strategic change at group level, in the event of quitting a market for example
- When a fintech has been acquired with an unproven model and failed integration
The integration of a fintech by a large group presents several challenges. Which ones in your view?
Rémy Poulet: The challenges to be overcome for a successful acquisition are numerous but clearly identified and they have to be anticipated to carry out a project of this type.
On the cultural and human side, a fintech is often a small, agile structure with short decision-making circuits, which will therefore find itself confronted with the inertia of large organizations. Part of the value of a start-up lies in the quality of its managers and employees, so they have to be kept onboard for a successful integration.
On the regulatory and IT infrastructure side, the regulatory upgrade will potentially generate additional costs, which could initially create a lack of synergies and therefore weigh on the functioning of the start-up. The coexistence between several IT ecosystems also impacts the post-acquisition phase. Finally, let’s just say that acquisition is often a bet on the future! Strategic alignment is therefore essential even if it requires long-term investments.
"A successful marriage between a bank and a fintech starts with a robust model that brings essential innovation to customers, with the bank adding the complementary ingredients to scale that model."
create targeted synergies, be aligned on the post-acquisition growth trajectory
