M&A activity in the FinTech sector remained healthy in 2023, with robust demand from both strategic and financial buyers. The pivot away from cash and towards card and digital payment options continues in developing and emerging economies while regulatory requirements across the globe are getting stricter and more complex to navigate.
Buyers are sitting on trillions in cash and are eager to scoop up FinTech companies. In 2024, the six trends that will drive M&A activity in the sector are anti-money laundering tools, AI, Wallet-as-Service, compliance, digital identity authorization and mobile banking services.
Let's start with our first trend, anti-money laundering tools. Financial institutions must ensure that funds from illicit activities aren’t being moved on their platforms. Illustrating this trend, Giant Oak, a developer of AI-based monitoring software that includes anti-money laundering features, was scooped up by Saifr in February 2024 to address the changing needs of the financial services industry.
Moving on to our second trend, AI. By automating daily tasks, companies can improve efficiency while reducing the risk of human error. Highlighting this trend, SoftCo Group, a provider of AI-based procure-to-pay and compliance software, was acquired by Keensight Capital in March 2024 to contribute to the company’s strategic vision and growth.
Our third trend is Wallet-as-a-Service. Alternative assets such as cryptocurrencies are stored in digital wallets. A deal that highlights this trend is the purchase of Qredo, a seller of blockchain-based digital asset custody and wallet software, by Fusion Laboratories in February 2024 to launch a new platform called Fusionchain built on multi-party computation node technology.
Pivoting to our fourth trend, compliance. The financial services industry is heavily regulated and enterprises need to stay on top of those rules. Highlighting this trend, Compliance.ai, a provider of AI-based regulatory change management software for the financial services industry, was pocketed by Archer Technologies in February 2024 to enable clients to support their compliance initiatives with AI technology to drive automation.
Shifting to our fifth trend, digital identity authorization. Companies must ensure that only authorized users access their financial accounts. A transaction that illustrates this trend includes the purchase of Cloudentity, a developer of identity and authorization management software that enables open banking and financial data exchange, by SecureAuth to enhance its product suite.
Finally, our sixth trend is mobile banking services. Financial institutions are providing a greater array of services through their mobile apps to improve the customer experience. A deal that highlights this trend includes the sale of Nerve Tech, a a banking platform provider serving the needs of creators and entrepreneurs, to Manifest Financial in February 2024 to better meet the needs of entrepreneurs and micro-businesses.
Dealmaking activity in the FinTech sector remains strong as enterprises continue to adapt to changing consumer trends while maintaining compliance with strict regulatory regimes.
