As last year’s turbulent economic occurrences demonstrated, the days of unfettered fintech innovation and entrepreneurship are behind us. Between looming inflation, tightening regulation, and a cooling of popular enthusiasm for fintech, voices across the industry are forecasting a season of consolidation and acquisitions.
Understandably for such a diverse industry, the signs of consolidation can be ambiguous. Taken individually, the recent beating taken by Affirm (which declined by 70% over the last year) and the ongoing change-up in leadership at firms like Pipe may be isolated incidents. Looked at collectively, however, they point to a pattern that bodes ill for small firms working in the SMB, BNPL, neobanking, and especially Banking-as-a-Service (BaaS) sectors.
“The entire ecosystem of venture-backed fintechs that were the customers for the BaaS vendors are all sort of shrinking, retrenching, pulling back,” said an anonymous partner from a California-based venture capital firm in a recent interview. “So pretty much every name in [the Baas] category, I think, is an M&A target.”
