Licenses and partner banks
Many fintech companies operate under state licenses, such as money transmitter or lending licenses, and a change in ownership often requires advance approval from each licensing state. For targets licensed in New York, the Department of Financial Services must generally approve a change of control of a money transmitter or virtual currency business before it happens. Fintechs that rely on a partner bank to offer accounts or loans depend on that bank's agreement, which typically requires consent for a change of control and may give the bank termination rights. Recent regulatory scrutiny of bank and fintech partnerships means partner banks may ask more questions about a new owner. These approvals often determine the closing timeline.
What diligence should reach
Beyond the usual corporate review, fintech mergers and acquisitions call for a close look at compliance programs, consumer complaints, and any regulatory inquiries or enforcement history. Data rights matter: what customer data the company holds, what its privacy notices and agreements allow, and whether the data can be used by the buyer. Ownership of the code and any open source obligations should be confirmed, along with whether key technology is licensed from third parties. For crypto and payments businesses, sanctions screening and anti-money laundering controls deserve particular attention, since gaps can become the buyer's problem after closing. Key employees who hold licenses or serve as control persons may also need to be approved or replaced.
Structuring the deal
Because approvals can take time and outcomes are uncertain, fintech deals often include provisions for interim operations, conditions tied to specific licenses, and sometimes structures that allow parts of the business to close in stages. Earnouts are common where value depends on future growth, and their definitions frequently become disputes. Founders should look at how their equity, retention arrangements, and restrictive covenants are treated. We help map the licenses and consents involved, plan the sequence of approvals, and draft terms that address what happens if a regulator or partner bank does not cooperate on schedule.
