Today, it is common for businesses in the financial tech (fintech) industry to engage in co-op agreements. Financial technology has so much potential and so many opportunities for growth that this should come as no surprise. Although recently, one of the most significant changes in the industry has been the desire for companies to come together.

A high-profile example of a merger and acquisition within the industry comes from Patriot National Bancorp buying out American Challenger Development Corp for around $119M. this is just one example of the number of mergers taking place at this moment in time. Why are mergers in the fintech industry so popular, though? What is driving these agreements?

More expertise in the one place

A major reason for the number of M&As within the industry comes from the need for more expertise. Many fintech firms start with one great idea and then realize they might need more expertise to make the idea work. This might involve bringing in another business in the first place to make it all work. Well, many companies are choosing to go down the route of merging and acquisitions to help bring more expertise together.

Extensive market competition

Another reason is the large number of competitors in the fintech marketplace. As a result, many companies are looking to maximize their potential by ensuring ideas are not lost amongst the others.

With so much competition, forming and merging allow one idea to blossom instead of having two ideas compete. When two similar fintech ideas come up against one another, a merger can make more sense than one would assume.

Greater opportunity for advice

Fintech companies are often involved in a lot of dangerous grey areas when it comes to legal matters. To help out with everything from shareholder agreements to developing legal support, merging makes sense. This can make it easier for one more prominent firm to work with an expert in employment law, for example, and make sure that the company’s foundations are in the right place.

Empowered marketing

Instead of competing against one another, fintech firms that join forces can focus on better marketing their product. In addition, the extended marketing budget and the ability to focus on one clear idea allow for a more powerful marketing message.

This is why many people choose to go down the route of M&As within the fintech field. Being able to market one product in combination with one another is more manageable than marketing smaller, competing products in the same niche.

Whether it is bringing ideas together or combining competing companies for greater success, mergers and acquisitions are very popular today. Fintech companies can find that their ideas are well-received, but getting space to be seen in a competitive marketplace can be challenging. For that reason, there are many benefits to joining forces with a previous competitor.

Fintech companies are built on the premise that the most logical solution is the best one. So when it comes to merging two companies, it is easy to see why logic wins out so often.