Prediction: The Next Big Bank Acquisition Is a Fintech, Not Another Bank
Banks increasingly need technology and customers more than they need branches.
Overview
Capital One (NYSE: COF) may have already shown the rest of the banking industry where the next big acquisition opportunity lies. In January, Capital One agreed to pay $5.15 billion for Brex, a fintech company that combines corporate credit cards with expense-management software, payments, and artificial intelligence (AI)-powered financial tools. Capital One Chief Executive Officer Richard Fairbank said the deal would accelerate the bank's push into business payments. I don't think Brex will be the last.
Analysts have spent decades watching banks buy other banks. The logic was easy to understand. Buy another bank, pick up its deposits, loans, customers, and branches, eliminate overlapping costs, and hopefully increase earnings.
Details
That still works. Fifth Third Bancorp (NYSE: FITB), for instance, completed its acquisition of Comerica earlier this year, creating a bank with roughly $294 billion in assets. But banks don't need more branches nearly as much as they need better technology, younger customers, faster payments, and digital platforms capable of competing with fintech companies that were built from scratch for smartphones. That's where the next wave of bank acquisitions is headed.
Source
Originally published at www.fool.com.