India’s Banking, Financial Services, and Insurance (BFSI) sector has witnessed a notable surge in mergers and acquisitions (M&A) activity. This trend is set against a global backdrop where financial services M&A is also on the rise, particularly involving fintech companies, reflecting a broader shift in the financial industry’s landscape.

In FY22, India’s M&A activity in the BFSI sector reached a three-year high with deals amounting to $90.4 billion in the first nine months of 2021, according to Refinitiv1. The global financial services M&A landscape remained robust in 2022, with announcements totalling $15.47 billion by February, reflecting a significant 43.7% year-on-year increase. The US (58 deals) led the pack, followed by the UK (14 deals), and India (9 deals), underlining the country’s prominence in the global financial services M&A arena2.

Deal activity by value increased ~2.5x in the Financial services sector attributable primarily to deals driven by portfolio restructuring by leveraging cross-selling opportunities and expansion of offerings through investment in fintech and digital capabilities.

The ongoing adoption of digital tools and the need for transformation is expected to continue driving M&A activity3. With India marking its presence prominently in this arena, it becomes imperative to understand the dynamics and potential outcomes of such mergers and acquisitions, especially in the context of fintech firms.

Success Factors in Bank-Fintech Mergers: Insights from a Comprehensive Study

The paper titled “When do M&As with Fintech Firms Benefit Traditional Banks?” published in the British Journal of Management in 20234 aims to explore the factors that determine whether mergers and acquisitions (M&As) with fintech companies are advantageous for traditional banks. Using Refinitiv Eikon database, authors analysed 5856 deals worldwide from 2010 to March 2020, focusing on 60 Fintech M&As. The study focuses on the sustainability of the acquiring bank, the extent of minority ownership in the fintech company, and the institutional differences between the fintech’s home country and the bank’s home country.

Key findings and insights from the study:

  1. Acquirer Sustainability: The sustainability of the acquiring bank has a U-shaped effect on the bank’s expected performance. Banks that prioritize environmental, social, and governance (ESG) factors tend to perform well in fintech mergers. However, the costs associated with sustainability initiatives can also negatively impact performance. Overall, a balance is needed.
  2. Minority Acquisition: Acquiring a minority stake (less than 25%) in a fintech company tends to positively affect the acquiring bank’s stock prices. Gradual integration of knowledge through open innovation is a key benefit of minority acquisitions.
  3. Institutional Distance: When banks merge with fintech firms from different regulatory and institutional backgrounds (institutional distance), their stock prices tend to increase. Cross-border mergers offer opportunities for innovation and knowledge diversity.

Implication of the Study

Based on the insights of the research paper, Indian banks considering M&As with fintech firms should develop a strategic approach that incorporates the following elements:

Balanced Sustainability Approach: For Indian banks, this implies a strategic approach to sustainability. Banks need to integrate ESG principles into their core operations and investment decisions, aligning them with long-term profitability and shareholder value. This could involve investing in green technologies, developing sustainable lending practices, or engaging in community development projects. However, it is critical that these initiatives are cost-effective and contribute to the bank’s overall strategic goals.

Selective Minority Investments: The study highlights the positive impact of acquiring minority stakes in fintech companies. For Indian banks, this finding offers a strategic path to innovation and digital transformation. By acquiring minority stakes, typically less than 25%, in emerging fintech firms, banks can gain access to new technologies and innovative business models without the complexities and risks associated with full ownership.

This approach allows Indian banks to tap into the agile and innovative culture of fintech start-ups. It enables a gradual integration of new technologies and business models into the traditional banking framework. This open innovation strategy can be particularly beneficial in the rapidly evolving Indian financial market, where there is a constant need for innovation to meet changing consumer demands and regulatory challenges.

Cross-Border M&A Opportunities: Cross-border fintech M&As can offer Indian banks access to advanced technologies and practices that may not yet be prevalent in India. This can provide a competitive edge in the domestic market. Additionally, these mergers can facilitate the entry of Indian banks into new geographic markets, expanding their customer base and diversifying their revenue streams.

The data on recent M&A deals in India’s BFSI sector provides a practical context to the implications of the study (Table 1).

Table 1: Recent M&A Deals in India’s BFSI sector

Ranking Target Acquirer Valued Deal Type
First largest PayU BillDesk $4,700.0 million Acquisition with 100 % stack
Second largest Sumitomo Mitsui Financial Group Inc Fullerton India Credit Company Limited $2,000.0 million Acquisition with 25 % minority stack
Third largest HDFC Life Insurance Co Ltd Exide Life Insurance Company Ltd $915.5 million Acquisition with 100 % stack
Fourth largest Alphabet Inc Bharti Airtel Ltd $700.0 million Acquisition with 25 % minority stack
Fifth largest HSBC Asset Management (India) Private Limited L&T Investment Management Limited $425.0 million Acquisition with 100 % stack

Source: Globaldata.com5

The acquisition of BillDesk by PayU and HDFC Life Insurance’s acquisition of Exide Life Insurance, both involving 100% stakes, illustrate the confidence and commitment of acquirers to fully integrate the target companies into their operations. This aligns with the strategic objective of acquiring complete technological and operational capabilities, market share, and customer base.

In contrast, the Sumitomo Mitsui Financial Group’s acquisition of a 25% stake in Fullerton India and Alphabet Inc’s acquisition of a minority stake in Bharti Airtel represent the strategic benefit of minority acquisitions as outlined in the study. These deals allow the acquirers to benefit from innovative capabilities and market presence without the complexities of full integration, as well as gradual knowledge integration and shared innovation.


There is significant potential for growth and innovation through strategic M&As with fintech firms. However, this requires a balanced approach to sustainability, a strategic focus on minority acquisitions, and an openness to cross-border opportunities. By carefully considering these factors, Indian banks can leverage fintech M&As to enhance their competitiveness, drive innovation, and ensure long-term profitability in an increasingly digital financial landscape.


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