Rise of acquisitions in Indian fintech

This post explores the recent flurry of acquisitions in the Indian fintech industry. It cites examples of major fintech acquisitions and explains the legal and economic rationale behind them.

Investments in the financial services space are picking up pace. Cred, a company known for enabling credit card payments (and quirky ads) entered the prepaid payment instruments (PPI) business (last year) through an acquisition. The Tatas are also keen to enter the payments space via an acquisition. Interestingly, even existing license holders are favouring acquisitions to bolster their offerings. PayU acquired BillDesk in 2021 and Pine Labs acquired Qwikcilver in 2019. PayU has also acquired Paysense — a digital lending platform, and Wibmo — a back-end tech provider to banks. Acquisitions can also be tools to strengthen existing tech capabilities. Neobank Open acquired Finin (a neobank), to improve its tech-stack for digital banking solutions. Some fintech players are using acquisitions to enter international markets. IPO bound Pinelabs acquired Malaysian fintech start-up Fave to expand its reach in the South-east Asia.

Why jump on the bandwagon?

If you are an unregulated entity and want to enter regulated walled gardens — the financial services space — you can do one of two things. One — build, fulfil the eligibility criteria, submit all declarations and forms, and wait for the RBI to approve your application. Or two — buy out an existing licensed player, get the license instantly and go on with your business. Afterall, buying is easier than navigating bureaucratic red tape. Applying for a license with the RBI is a long and cumbersome process. And given how fast the fintech market in India is moving, a delayed license may not be worth the wait.

What else does the acquisition route offer?

Beyond licensing hurdles, there are also compelling business use-cases of the acquisition route. For instance, in the payments space, an acquisition can help a company expand its reach. Like companies can move from offline payments to online payments or vice-versa; and from merchant side to customer side or vice-versa. And it can do all this without re-inventing the wheel. As regulations become stricter, compliance costs increase. Which can make survival of smaller players difficult and lead to consolidation. Getting hands on an existing tested product and a loyal user base make investments an even sweeter deal. Acquisition of a payments company also means acquisition of payments data. Which can act as flywheel for launch of other products.

(This post has been authored by the fintech team at Ikigai Law.)

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Ikigai Law

An award-winning law firm helping innovation-led companies find efficient solutions to their legal and business challenges