Impending fintech consolidation could yield unprecedented exit values
Acquisitions have already become the norm in the payments space, with the wider sector now set to follow suit
The fintech sector is sustaining its rapid expansion, with the market expected to grow to over $500bn by 2028 – an annual growth rate of over 25%. As the sector has increased in size, startups have transitioned into the growth stage and the marketplace has become extremely crowded, with competition at an all-time high.
This is expected to lead to an M&A uptick, evidenced in the payments sector with Elite’s acquisition of Tranch and Neonomics’ purchase of Ordo already having closed this year.
According to Victor Basta, managing partner at Artis Partners, the sell-side M&A and growth financing specialists for technology companies, significant consolidation should be expected in the fintech space, with founders on course for record exit values.
Basta said: “An M&A spike is a certainty in the fintech industry in 2025, with firms reaching the ideal size for larger competitors to consider moving for an acquisition. We’re already seeing this trend take hold in the payments space, where scale is absolutely critical, necessitating additional support for mid-size companies from big players. The Tranch and Ordo acquisitions are likely to trigger a ripple effect through the wider market.
“The key drivers here are competition and the time and cost required to gain new customers or clients. Inevitably, as fintechs scale the sheer number of new paying customers, or in the case of B2B larger and larger enterprise accounts, requires significantly greater resources. As the fintech market grows in concentration, firms will need the support of larger acquirers – sometimes direct rivals – in order to maintain operationality and achieve expansion.
“Many of the companies either pursuing exits or proving attractive to buyers will already be able to demonstrate strong financial performance, due to their development relative to less mature companies in the market. Each segment of fintech is already separating the core group of future winners from companies less and less able to compete, creating scarcity value for those few future winners in each category.
“As a result, this will drive up values, with perhaps 25-50 European fintechs now worth several times the valuation of only a few years ago, who are attracting strategic interest from buyers at M&A prices too attractive to pass up in the next 12 months. If founders aren’t considering a strategic exit, they could miss out on a prime opportunity to capitalise on a thriving market, and risk losing ground to rivals who stand to benefit from a larger pool of resources through acquisition.”
Basta concluded: “Pursuing the funding route will only dilute ownership stakes and reduce overall profitability when the time eventually comes to sell; even more so today since the fundraising market has not come back nearly as strongly as M&A. It’s time for fintechs to begin the exit planning phase to ensure they remain competitive and take advantage of the industry’s significant momentum.”