In last month’s edition, we briefly described the acquisition of Sentenial by EML Payments in the context of Open Banking, so we ought to apologise that we are sticking with the same theme this month again. However, it reflects the growing relevance of Open Banking solutions and applications that makes our review of Tink’s acquisition trail over the last 12-18 months so interesting. Tink is a Swedish based technology company that set out to improve financial services provision through a platform that provides easy connectivity to all stakeholders. But back to Tink’s M&A activities. Last month, Tink announced the acquisition of FinTecSystems, one of the leading German Open Banking infrastructure providers, for an undisclosed amount. This deal in itself might not be that remarkable; however, when looking at Tink’s deal history over the last two years, a clear strategy emerges that is aiming for network effects and the ability to support multiple Open Banking use cases. Let’s take a step back and look at Tink’s recent acquisitions:

• Starting in March 2020, Tink bought Eurobits Technologies, a Madrid-based provider of account aggregation technology, for €15.5 million. It provides these account aggregation services to leading Spanish banks but also to a number of fintech players. Based on data from their website, it processes 50m transactions every month in Spain as well as Latin America.
• In July 2020, Tink acquired Instantor, another Stockholm-headquartered fintech business that plays in the credit-decision making space. It specialises in data analytics and provides the underlying data to financial institutions to make the right decision on loan applications for example. At the time of the acquisition, Instantor supported 5m credit decisions annually.
• In September 2020, Tink made its third acquisition within 6 months by completing the take-over of OpenWrks, a UK-based fintech that built a bank account aggregation platform. OpenWrks, which is alleged to process 1/3 of all UK account aggregation traffic, will also enable Tink to get connectivity to UK business accounts.
• And most recently, Tink acquired FinTecSystems, an open banking and data analytics platform that was founded in 2014 and provides services to more than 150 banks and fintechs across Germany, Switzerland and Austria. The platform specialises in data analytics and digital account checks, account integration and open banking payments. Some of its customers include Santander, N26, Solarisbank and Check24. According to reports, an estimated three in every four online credit decisions in Germany involves FinTechSystems.

It is worth mentioning that PayPal has supported two recent funding rounds in Tink so undoubtedly some of those funds were used for these acquisitions. But why is this trail of acquisitions so important? There is obviously an element of geographic expansion. But the more intriguing aspect is around network effects in Open Banking. In Open Banking, network effects are feasible if the same entity has access to customer data on one side and providing products and services on the other side - all through one platform. In the case of Tink, strengthened through the acquisitions, it has increased connectivity to banks and therefore access to customer data. Based on the customer data and applied analytics, it can improve its product and services propositions that already range from money management & budgeting tools, payment initiation as well as account check and account aggregation services. The more products and services there are, the more customers are being attracted. The more customers using the platform, the more data becomes available. Tink is creating the perfect circle.Today, Tink is already connected to more than 3,400 financial institutions, over 250m individual customers, processing more than 10bn transactions a year. One can find a lot of academic papers on strong network effects in different industries leading to ‘winner-takes-all’ market dynamics. The Open Banking space is still too dynamic to declare Tink as the winner, but well-positioned to take maximum benefit from it, they surely are.

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