It’s a time of reflection and anticipation at The Fintech Times throughout December, as we look back at key developments over the past 12 months and explore what lies ahead for 2025.
After several years of suppressed activity, the fintech sector is preparing for a resurgence in dealmaking, with consolidation, strategic growth and innovation driving the momentum.
Our experts predict that stabilising valuations, improving market conditions and increased investor confidence will create fertile ground for M&A activity across financial services.
From niche fintech segments to larger platforms, industry leaders weigh in on the trends, challenges and opportunities that will define 2025.
A year of renewed activity
Marius Silvasan, CEO of eCapital
M&A activity in fintech is set to pick up after years of stagnation, says Marius Silvasan, CEO of eCapital, an alternative finance provider for SMBs.
“In 2025, the fintech industry will heat up once again on the M&A front and start to see more consolidation and acquisitions. A recent Dykema survey found that 70 per cent of respondents believe that the US M&A market will strengthen in the next 12 months, and financial services is one of the top three sectors for this anticipated activity.”
Silvasan attributes this shift to cash-rich companies looking to deploy capital strategically.
“M&A has been suppressed for several years now, with a lot of cash on the sidelines and private company valuations not regaining their peak. In other words, it’s a good time to buy, and 2025 will be the year that cash-rich bigger companies open their wallets. I predict that fintech firms and specialty lenders in particular will experience consolidation next year,” he added.
Strategic acquisitions to drive growth
Eric Kaplan (top), Charles Birnbaum (bottom), Bessemer
The focus on strategic acquisitions is echoed by Charles Birnbaum, partner, and Eric Kaplan, VP at venture capital financing company Bessemer, who highlight the appeal of niche fintech segments to larger players.
“In 2025, we’ll see an increase in the level of fintech M&A. There are many early to growth stage fintechs who have strong product-market fit and have rationalised their businesses to breakeven, or profitability,” they suggest.
“However, these companies might operate in fragmented segments of a larger market with niche moats (e.g. segments of fraud prevention) or in a highly strategic category for larger buyers (e.g. stablecoins for payments service providers (PSPs)) and therefore have a better home in a larger platform.”
Macroeconomic factors influencing deals
Sam Fuller, managing director, Houlihan Lokey
Broader economic trends are also shaping the M&A outlook, says Sam Fuller, managing director at global investment bank Houlihan Lokey, who notes a cautious but optimistic shift in sentiment.
“The third quarter of 2024 saw decreased levels of M&A activity in the UK, with a total of 435 combined domestic and cross-border mergers and acquisitions, down from 479 in Q2 2024.
“This decrease reflects the continued challenges facing the market, including elevated interest rates and broader macroeconomic uncertainty, which are continuing to weigh on investor sentiment and deal flow.
“The data also points to increased caution ahead of key political events, such as the UK Budget and US election, with deal volumes dropping significantly from 179 in July to 130 in August and 127 in September, suggesting many businesses and investors have been adopting a more cautious wait and see approach in the last few months.”
Fuller highlights smaller, buy-and-build strategies as a trend among sponsors and corporates, with a focus on acquiring top-quality assets.
“Looking ahead to Q4 and into 2025, we do expect dealmaking to tick up, driven by improving conditions but also buoyed by newfound clarity following seismic political events on both sides of the pond. The resolution of the US election, in particular, has sparked a noticeable shift in market sentiment, restoring investor confidence and enabling businesses to proceed with greater strategic certainty.”
Consolidation amid economic and regulatory challenges
Stéphane Dehaies, CEO of Spendesk Financial Services
Stéphane Dehaies, CEO of Spendesk Financial Services, a licensed payments institution, builds on this view.
“This year, the economy was marked by volatility, resulting from geopolitical risks and political changes across the globe,” says Stéphane Dehaies, CEO of Spendesk Financial Services, a licensed payments institution. “We witnessed more than 50 elections that I expect will shape the economy in 2025.”
Dehaies anticipates that 2025 will see investors scrutinising fintechs more intensely for sustainable and profitable growth targets. “The financial services and fintech industries will remain cautious in 2025; continuing to focus on retention, diversifying revenue, and controlling costs,” he adds.
Amid these challenges, Dehaies is optimistic about the quality of M&A deals. “Despite the funding slowdown, the quality of M&A deals has improved as have quarterly results as companies report strong growth, and will continue to do so into the new year. I expect this to go hand-in-hand with investment into generative AI to drive operational excellence, a critical aspect for scale and profitability.”
A changing landscape for venture and IPOs
Nik Talreja, co-founder and CEO of Sydecar
The improving environment is also having an impact on venture funding and IPOs, says Nik Talreja, co-founder and CEO of Sydecar, a venture capital deal execution platform, who anticipates a gradual easing of the factors limiting liquidity and returns in fintech.
“We expect the IPO market to open up and regulatory easing to make M&A easier,” he comments.
“For emerging managers, this means there may be a slightly more favourable landscape, but perhaps only incrementally – we’re likely never going to see the same level of emerging manager activity (the number of Fund 1s launched) as we did in 2021 to 2022.
“This will be a healthy correction, as fundraising as a venture manager should be hard, but not impossible.”
Regulatory clarity encourages dealmaking
James Stevens, partner and co-leader of the financial services group, Troutman Pepper
As opportunities in venture funding and IPOs gain momentum, James Stevens, partner and co-leader of the financial services group at law firm Troutman Pepper, touches on how a more stable regulatory landscape will further unlock fintech M&A activity in 2025.
“The fintech industry is going to boom in 2025. From a bank partnership standpoint, we expect fewer enforcement actions and a more reasonable and predictable level of regulatory scrutiny which will lead to increased deal making,” he says.
Stevens highlights the benefits of a less aggressive stance from regulators like the CFPB. “That same environment – and improving valuations – will also encourage increased capital-raising and M&A in the fintech space. Innovation and activity will thrive in this environment.”
Compliance challenges in banking mergers
Seth Ruden, director, BioCatch
Extending the discussion on regulation, Seth Ruden, director at behavioural biometrics company BioCatch, explores how compliance scrutiny is shaping banking-related M&A.
“The regulators who look at potential M&As will be digging deeper into information that reflect risks of money laundering and the potential for compliance sanctions that may impact the ultimate decision whether the M&A should go ahead,” Ruden explains.
He highlights the importance of financial crime detection models, particularly as AI-driven scams become more prevalent. “Using advanced biometric indicators and behavioural analytics can swiftly distinguish between legitimate users and bad actors who may be acting as money mules,” he says.
Evolving consumer demands
Alana Levine, chief revenue officer, Fintel Connect
While regulatory pressures shape banking mergers, shifting consumer preferences are also influencing fintech mergers and acquisitions.
“2024 left some important lessons for fintech. We saw companies shift from chasing growth at any cost to focusing on what really matters: building sustainable, profitable businesses,” says Alana Levine, chief revenue officer at partner marketing platform Fintel Connect. “Consumers don’t want a dozen different apps for their finances; they want simplicity.
“That push for integration is driving more mergers and acquisitions, as fintechs work to become all-in-one platforms. In 2024 the market sent a clear message: being just another lookalike product isn’t enough anymore. To stand out, fintechs need to bring something fresh to the table.”
Levine expects embedded finance and banking-as-a-service (BaaS) to gain traction in 2025 but with fewer players and stronger partnerships. “2025 is shaping up to be a year of opportunity for fintechs that focus on what sets them apart, build meaningful partnerships, and use technology to make a real difference for their customers,” she concludes.
The rise of embedded payments
Christina Hamilton, CEO, ClearCourse
With integration taking centre stage in fintech strategies, Christina Hamilton, CEO of software and payments company ClearCourse, also points to embedded payments as a core factor driving innovation and M&A activity.
“Now more than ever, small and medium-sized businesses are turning to their vertical software providers to solve the complexities of payment integration and acceptance,” she explains. “This is emerging as an important business expectation, one that is reshaping the industry standard, pushing many software providers to innovate faster and deliver more value in this area.”
Hamilton expects a more active deal-making environment in 2025. “While 2024 was another muted year for mergers and acquisitions, we’re observing an increasing number of software business owners seeking the right partners to secure the longevity and growth of their companies.
“We expect 2025 to be busier, with an uptick in activity supported by favourable macrofactors such as capital markets and interest rates. While we of course keep a watchful eye on global geopolitical dynamics, we hope next year will bring a more active deal making environment with the renewed optimism establishing strategic acquisitions that drive expansion across the sector.”
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