Bank–fintech acquisitions: Evidence on lending, deposit growth, and risk-taking

We study the effects of fintech acquisitions by traditional banks, a strategic response to rising digital competition in financial services. Using a panel of 69 banks in advanced economies that acquired at least one fintech firm between 2013 and 2021, we examine, in a DiD framework, how these transactions affect deposit growth, credit growth, asset allocation, and the risk profiles of acquiring banks relative to non-acquiring banks. Following a fintech acquisition, deposit growth accelerates and lending expands, although lending grows less than deposits; securities and other interest-earning assets also increase. Non-performing loans rise relative to total lending: the NPL ratio increases, while the Z-score decreases, indicating higher risk. Crucially, analogous M&As with non-fintech financial firms do not increase NPLs or reduce Z-scores, showing that these risk effects are specific to fintech acquisitions. Our findings highlight both the benefits and the unintended consequences of fintech integration. They suggest that, while these acquisitions may enhance digital capabilities and market reach, they can also amplify risk exposure.