Bradley Elliott | CEO | RelyComply | mail me |
Just a few years ago, neobanks and fintechs were regarded as disruptive competitive threats to incumbent Financial Institutions (FIs). Now, the script has changed. These startups and innovators are viewed as potential merger and acquisition (M&A) opportunities or as partners for larger banks.
At the same time, many new-age players now look to established institutions for access to capital, regulatory support or customer bases.
For banks, partnering with fintechs provides access to specialised technology and capabilities from nimble, digital-native companies. These companies lead the way in personalisation, Artificial Intelligence (AI), product innovation, financial inclusion and accessibility.
Fintechs, meanwhile, gain the advantage of using a larger bank’s resources and credibility with customers and regulators. This collaboration helps them scale their businesses more effectively.
The rise of fintech-bank deals
There are now more than 1,500 fintech unicorns worldwide. As a result, deal-making is heating up as FIs and fintechs partner to complement each other’s strengths. These collaborations have become the cornerstone of fintech-bank deals that shape the modern financial landscape.
Recently, Nedbank acquired digital payment solution iKhokha, our partner. This transaction deepens Nedbank’s ability to provide inclusive solutions to small and medium-sized enterprises (SMEs) through access to iKhokha’s technology. This development reflects the growing importance of fintech-bank deals in fostering innovation and expanding inclusion.
The compliance architecture remains one of the most important factors in these transactions. Robust anti-money laundering (AML) and know-your-customer (KYC) protocols are now table stakes for any fintech that hopes to partner with a larger institution. To thrive in the market, fintechs must have sturdy AML compliance systems that prevent exposure to money laundering or terrorist financing vulnerabilities.
M&A compliance risks
It is easy to make mistakes given the complexity of regulations across different jurisdictions. The challenges of limited talent, scarce resources, outdated operational systems and immature risk assessment frameworks also make compliance difficult. Both established FIs and startups remain vulnerable to negligent AML or KYC checks.
Examples include the unprecedented fine imposed on TD Bank in 2024 and faulty sanctions screening that affected Starling Bank. These incidents show the real dangers of compliance lapses during fintech-bank deals.
M&As can also increase compliance risks, leading to fines or reputational harm. Gaps between two businesses’ cultures, AML systems and internal IT structures often cause compliance failures. Integrating two businesses is difficult even before accounting for AML weaknesses within the merged entity. In the worst case, the post-acquisition months may involve crisis management rather than maximising collaborative opportunities.
Because baseline compliance already sets a high bar, investment decisions by FIs now favour fintechs that are acquisition-ready. These fintechs must have AML systems strong enough to scale across larger businesses, cross-border operations and expanded transaction networks. For smaller fintechs, this can feel like a tough requirement. However, for those that show flexibility and innovation in AML, there is a strong opportunity for growth through fintech-bank deals.
RegTech as a partner for compliance
Partnering with a regulatory technology (RegTech) platform remains the best way for fintechs to affordably access advanced AML and KYC capabilities.
A RegTech platform provides AI-driven screening and monitoring, backed by continuous post-deployment support. It acts as the silent partner that elevates a startup’s AML capabilities to the standards expected by larger banks. This collaboration also strengthens the trust and reliability required in fintech-bank deals.
Getting fit for investment with RegTech
A fintech company that runs integrated compliance systems and maintains expertise in KYC and AML demonstrates readiness for expansion. Such a company can customise risk strategies and adapt to new operational models.
The RegTech partner manages integrations that connect AML systems and jurisdictional customer data, enabling a smoother acquisition process. When fintechs adopt cloud-based AML, they strengthen risk management and make knowledge sharing easier during mergers.
Mergers are complex, but open dialogue can highlight areas where a fintech’s RegTech solutions outperform a larger partner’s compliance systems. If a fintech with proven income detection and fraud prevention joins a parent company, the merger can enhance compliance and improve user experience for a wider customer base.
Strengthening the future of compliance
No financial service can operate today without robust AML systems. As peer-to-peer platforms, lenders, neobanks and banks combine to meet customer needs, RegTech delivers scalable compliance support. This capability makes fintechs more attractive to investors and acquirers.
With M&A activity rising rapidly, this competitive edge can determine whether a fintech secures new growth opportunities. Strong compliance positions startups to win the partnerships and investments they need to scale. In this evolving landscape, fintech-bank deals continue to redefine collaboration, innovation and regulatory alignment in global finance.
