Fintech Firms' Wave of Acquisitions of Small Banks: What's the Advantage?

Amartha Mikro Fintek is reportedly about to acquire PT Bank Victoria Syariah, a subsidiary of PT Bank Victoria Tbk (BVIC). If this acquisition happens, it will add to the growing list of small banks acquired by financial technology (fintech) platform companies.

According to a Dealstreetasia report on Monday, March 28, 2022, Amartha, a peer-to-peer (P2P) lending fintech focusing on financing women micro-entrepreneurs, is in talks to acquire a 70% stake in PT Bank Victoria Syariah.

It is noteworthy that two small banks previously acquired by fintech companies have seen their assets surge. PT Bank Jago Tbk (ARTO)'s assets jumped 464.8% to Rp12.31 trillion in 2021 compared to December 2020.

Similarly, PT Bank Neo Commerce Tbk (BBYB)'s assets increased by 49.16% to Rp8.06 trillion in September 2021 compared to December 2020. Meanwhile, PT Bank Bisnis's assets only grew by 10% to Rp1.59 trillion as of September 2021 compared to December 2020.

Here are three small banks that have been taken over by fintech companies:

1. 22.16% of PT Bank Jago Tbk (ARTO) shares were acquired by PT Dompet Karya Anak Bangsa, the Gopay payment fintech company.
2. 24.9% of PT Bank Neo Commerce Tbk (BBYB) shares were acquired by PT Akulaku Silvrr Indonesia, the Akulaku fintech company.
3. 24% of PT Bank Bisnis shares were acquired by PT Finaccel Teknologi Indonesia, the Kredivo fintech company. This acquisition increased Kredivo's ownership to 75% of PT Bank Bisnis shares.

The surge in acquisitions of small banks by fintech companies is not without reason. From the fintech perspective, taking over small banks can help improve the performance of their developed digital platforms. From the banks' perspective, new investors can increase their core capital as mandated by the Financial Services Authority (OJK).

OJK Regulation No. 12/POJK.03/2020 concerning the Consolidation of Commercial Banks mandates that banks must meet a minimum core capital of Rp3 trillion by December 31, 2022.

Currently, more than 70 small banks have not yet met the minimum core capital requirement and are seeking partners or investors to increase their core capital.

(read: OJK: Fintech Lending Disbursement Reaches Rp 13.78 Trillion as of January 2022)