Local banks are becoming the biggest buyers of South Africa's fintech startups

South African banks are playing a bigger role in the country’s startup ecosystem. More lenders are acquiring fintech companies to strengthen their digital offerings. Nedbank’s acquisition of iKhokha, Capitec’s purchase of WalletDoc, TymeBank’s takeover of Retail Capital and Lesaka Technologies’ acquisition of Adumo reflect a growing appetite for established fintech businesses. Instead of building similar products, banks are increasingly buying companies with proven technology. Research by the SA SME Fund, Endeavor South Africa and the Southern African Venture Capital and Private Equity Association (SAVCA) suggests these deals are not isolated. They reflect a broader shift in South Africa’s venture capital market, where local corporates are becoming more active buyers of technology companies.

Local buyers are stepping in

South African startups looking for an exit were more likely to be acquired by international companies than local businesses. According to Endeavor South Africa Managing Director Alison Collier, that began to change in the early 2020s. “Between 2015 and 2020, businesses that exited were all sold to international companies. There was very little M&A activity from our local South African corporates,” Collier said during a briefing on the research. “That changed in the early 2020s. Now we’re seeing many more local corporates looking to acquire, both in fintech and other sectors.” The recent acquisitions show banks are becoming more comfortable buying companies with proven products, experienced teams and established customer bases.

Banks are changing how they innovate

Retail Capital founder Karl Westvig said banks have traditionally preferred to develop products internally. Even when they invested in fintech businesses, it was often to understand how the model worked. “The banks have been very monolithic in the past and decided they can do it all themselves,” Westvig said. “We’re certainly seeing more joint ventures happening and more acquisitions happening.” He pointed to Retail Capital’s partnership with FNB as another sign of changing attitudes. Banks are becoming more willing to work with fintech companies instead of treating them only as competitors. Acquisitions can also help banks launch new services faster. They avoid spending years building products from the ground up.

AI is adding to the pressure

Westvig believes artificial intelligence will make it even harder for banks to rely only on internal development. AI is making it easier for startups to build financial products. That allows smaller companies to compete without the burden of legacy technology. “Incumbents either then have to partner, participate or buy,” he said. Collier said many South African fintech businesses have now reached a meaningful scale. Buying an established company can be quicker than building similar capabilities internally. The challenge is integrating the business successfully.

Venture capital exits are becoming more common

The research also points to a venture capital market that is producing more exits. Researchers analysed 226 realised exits between 2009 and 2026. They found capital weighted returns of between 2.01 and 2.45 times invested capital. Around R16 billion has been invested in more than 1,100 companies over the past decade. Roughly 60% of exited investments generated positive returns. A separate study looked at 18 successful exits. It reported a median gross internal rate of return of 54%, a median return of 3.5 times invested capital and a median exit valuation of about R1.6 billion. Together, those businesses created more than 4,000 direct jobs. The researchers noted that this study covered only successful exits. It does not represent the performance of the venture capital industry as a whole.

Exit options are expanding

Acquisitions remain an important exit route, but they are no longer the only option for founders and investors. The report found that secondary share sales are becoming more common. Public listings and international acquisitions also continue to provide exit opportunities for technology companies. The research argues there is still room for more institutional investment in venture capital. Regulation 28 allows retirement funds to allocate up to 15% of their assets to private capital. Much of that allocation remains unused. The SA SME Fund plans to raise a new R2 billion fund over the next year.As more local banks turn to acquisitions, fintech founders have more options when planning an exit. Increasingly, the next buyer could be a South African bank rather than an overseas technology company.