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 how these transactions affect deposits growth, credit supply, asset allocation, and risk of the acquiring bank compared to non-acquiring ones. Following the acquisition, banks experience a significant increase in deposits and a moderate expansion in lending. However, a large share of the incremental funding is allocated to securities and other interest-earning assets rather than loans. We also find that loan quality deteriorates post-acquisition: non-performing loans rise disproportionately relative to total lending, and bank-level default risk increases. These effects appear driven by the integration of fintech lending practices-specifically, looser credit standards and weaker monitoring. Our findings highlight both the benefits and unintended consequences of fintech integration. They suggest that while acquisitions may enhance digital capabilities and market reach, they can also amplify risk exposures, with implications for bank supervision and financial stability.