Financial technology companies, long seen as a threat by the likes of JPMorgan Chase & Co., are increasingly becoming acquisition targets for traditional U.S. banks as rising interest rates and falling valuations crimp their expansion, Reuters reported. The valuations of listed financial technology firms have plunged 70% in 2022, analysts at Jefferies Group said last week. In the same period, the valuations of banks in the S&P 500 are down 33%, while valuations for the S&P 500 are down 23%, according to data from Refinitiv IBES. The decline presents an opportunity for Main Street banks to buy companies and beef up their technology for digital banking, online payments and other financial services and diversify beyond lending. Huntington Bancshares Inc. is one such bank. The Columbus, Ohio, regional bank is scouring for more targets after it bought Torana, a payments fintech, in May. Investors have dumped fintech stocks this year alongside other technology shares, which perform better when economic growth is strong. With the U.S. tipping toward a potential recession and interest rates rising, the outlook for fintechs has eroded. The high-profile blowup of crypto exchange FTX last week has also shaken confidence.
