The news: With the US Treasury’s approval of banking and fintech partnerships, banks are in a prime position to scoop up fintechs at bargain prices.
Approvals, but with warnings: The US Treasury issued a report this week assessing the impact of non-bank entrants on competition in the consumer financial markets. The report reached a number of positive conclusions about the massive growth of fintech firms over the past few years, but also cited some complexities and risks.
The Treasury report ultimately advocated for fintechs and banks to work together in responsibly conducted partnerships for the benefit of consumers. Its conclusion supports the Office of the Comptroller of the Currency’s (OCC) vow earlier this year to step up scrutiny of bank-fintech partnerships.
Recommendations for regulators: The report also called for regulatory authorities to work together to improve oversight over bank-fintech relationships, and provided some recommendations.
Bargain buys: Regulators have reached a consensus that fintechs increase competition and provide more diverse options for consumers. Banks have a green light to capitalize on current economic conditions by continuing to partner with fintechs—or better yet, outright purchasing them.
What’s in favor, and what’s not: Not all fintechs, however, are takeover targets. Banks are favoring some over others.
Our take: Banks that were previously unable to snag a fintech in 2021 due to their rich valuations now have an opportunity to pounce, with some assistance from boosted revenues. Banks should take stock of which of their current tech capabilities and product offerings could benefit from supplementing and help them better weather the economic downturn.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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