Considering a fintech takeover? Five steps towards a successful merger

July 2022

Peter Pollini
Banking and Capital Markets Consulting Leader, PwC US


  • A fintech’s technology team is among the most valuable assets in a merger. Structuring financial incentives correctly will help buyers achieve a deal’s multi-year ROI targets.
  • Creating a productive, merged technology team requires communication, clear lines of responsibility and a well-thought-out timetable for deliverables.
  • Unplanned compliance costs can hurt a deal’s financial metrics—it’s best to have an open dialogue about what’s needed to upgrade a fintech’s compliance posture.

A recession, should one occur, has a way of separating the weak from the strong in any industry. And many fintechs may be at risk of failure in an economic contraction. Among neobanks, just 5% of 400 firms worldwide are profitable as a slowdown looms, reports American Banker.1

Additionally, many fintechs are dealing with more regulatory questions about their products. And they’re trying to convince employees to stay as a rout in stock prices dashes dreams of a rich, stock-option payday. We've seen ETFs that track the value of global fintech stocks lose as much as half of their value since last year's all-time highs.

The disruption could prove advantageous to incumbent banks and other financial industry players. Buying a fintech’s intellectual assets, executive experience and cloud expertise could help them transform their use of the cloud to mine data and get closer to the customer. And incumbents’ regulatory expertise, along with their stable balance sheet, could make a difference between success and failure in a tough economy.

All told, the conditions might be ripe for more mergers. And plunging fintech valuations might be the spark that makes it easier to structure a deal that’s accretive to both firms’ earnings.

That’s easier said than done, of course. PwC’s work for top tier financial services companies has revealed some valuable fintech integration lessons. Below, my colleagues Joshua Carter, Chelsea Hamilton and Jacob Sciandra share their five steps towards a successful fintech merger.

1Crosman, Penny. “Warning signs emerge for neobanks: ‘Doomed to not survive,’” American Banker, June 22, 2022, accessed on Factiva on June 22, 2022

Five leading steps for integrating fintechs:
1. Governance and accountability

“Quite often, no one within a company is clearly accountable for delivering on the business thesis driving a deal,” says PwC principal Joshua Carter. 

  • Measuring progress against the thesis can be particularly hard in a fintech deal as it likely rests on either a significant expansion of the business by leveraging the bank’s broader range of customers, or integrating the acquired technology into the bank’s operations.
  • Selling the acquired solution to the bank’s customers may require cannibalizing or displacing existing businesses. Integrating the solution is likely to require reprioritizing the tech agenda. Both require the support of powerful stakeholders within the bank.
  • The solution is to assign a senior executive to be involved with, and ultimately accountable for, delivering on a deal’s thesis.
  • Accountability has to extend well beyond the honeymoon period after a deal closes. In our experience, it can take five years for a deal’s return on investment to be fully realized.

2. Retaining talent 

Deal terms should be structured to both reward top talent for their past success and keep them motivated to deliver on their part of the merger strategy.

  • “An earn-out is usually effective,” says PwC principal Chelsea Hamilton. “It holds the individual accountable, though it can be unpopular with founders during the sales negotiation process. If the seller is not willing to accept an earnout, then the questions buyers have to ask are, ‘Can I live without this talent who is likely going to leave? Do I have internal talent that can take their place?’”
  • The important metric concerning talent is revenue generation, not cost savings or synergies.

3. Taming technology competition

There are two potential points of failure related to technology competition that require executive leadership before and during integration.

  • The buy-rather-than-build strategy relies on leaders being able to short-circuit destructive internal competition. The key is getting the incumbent's tech team to buy into the strategy and keep them accountable for the success of the platform by assigning responsibility for deliverables on a fixed timeline. “If I have a fintech enabling agility, then I need to decide a product rollout schedule and all the internal steps that support it,” says Carter. The lack of a process can create chaos for the fintech’s team, increasing the risk of a talent exodus.
  • The second issue concerns a fintech team’s ability to navigate internal governance and compliance tests for new products; it’s likely the acquired company has never experienced the robust governance processes most banks have. Additionally, fintech workers may not be familiar with change request forms, software vulnerability analysis or elaborate architectural reviews. A bank’s team may use any of those issues as a reason not to deliver. The key to success is to selectively ramp up the maturity and governance of the technology delivery model.

4. Easing culture shock

For fintech employees who are used to informal ways of working, it can be bewildering to navigate a large company.

  • “For example, if I’m at a fintech and I want to buy software, I go over to the CEO and talk it through and it's informal. But when you join a large organization, you have governance on top of governance. From a fintech’s perspective, easy things can become inconvenient,” says Carter. A potential solution is to assign the executive responsible for delivering on the deal’s thesis to also be the fintech’s internal partner, perhaps the COO or head of product. That person can ensure the fintech has a seat at the executive table and access to the financial, software and IT resources that are needed to deliver on its part of the merger strategy.
  • But there’s another culture shock to be aware of, one that’s personal for fintech workers. “Startups have ways of working, say around chat software rather than email, and they see that as an integral part of their success,” says Hamilton. For incumbents, chat software can raise regulatory red flags. Leaders have to weigh the cost of securing communications against the risk of potentially alienating a fintech’s workers and putting the integration timeline at risk. Chat software can be upgraded to meet compliance standards. Leaders need to decide if that’s a price worth paying to meet the big picture goals.

5. No compliance compromise

Deal terms should make clear that there are items on which there can be no compromise, such as consumer marketing rules, money laundering and cybersecurity. 

  • While this may seem draconian, setting expectations early can help make sure there are no unexpected or unplanned compliance costs later on that can hurt a deal’s ROI. “Even if you plan for the fintech to be a standalone operation, you don’t get a pass from the obligation to make sure the fintech adheres to laws and regulations, including in most cases the Consumer Financial Protection Bureau,” says PwC director Jacob Sciandra.
  • Buyers can succeed by doing two things from a compliance perspective: Firstly, engage with your regulators early in the process, as buyers will benefit from an informed regulator. Secondly, have a candid conversation with the target to set compliance expectations and arrive at a mutual understanding of its impact on operations, culture and risk governance.


Negotiating a merger with a fintech might be more challenging than other kinds of deals, but in this time of accelerating technological change, it can be well worth the effort if the tie-up strengthens your institution and its digital transformation.

We believe that banks and financial services firms that can honestly address issues of fintech leadership, culture shock and compliance early in the process have a higher probability of successfully integrating a fintech than those that don’t.

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