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Credit bureau Experian — one of the biggest credit data firms globally — has scrapped its proposed acquisition of credit-scoring fintech ClearScore, according to the Financial Times.
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The fintech provides customers with credit scores, allows them to check their credit rating without affecting their official score, and recommends personal finance products best suited to their individual circumstances — all for free. Experian first announced its plans to buy the startup for £275 million ($366 million) last year in March, aiming to capitalize on the startup’s success in luring in consumers with its free membership model.
The move to scrap the acquisition comes as regulators voiced concerns regarding the deal. The UK’s Competition and Markets Authority (CMA) said in November that the acquisition may result in less competition in the market, as it could hamper the development of digital products that help customers understand personal finances, per Reuters.
Given that Experian and ClearScore are the UK’s largest credit-checking businesses, per the FT, this merge might have resulted in an unwanted monopoly; as such, the CMA indicated that it might block the deal. Experian has now said that it doesn’t believe the CMA would approve the acquisition on satisfactory terms, providing this as its reason to abandon the plans.
This instance shows that incumbents can’t always rely on bringing new products and solutions to market by acquiring fintech firms. Incumbents often bet on startups’ tech when overhauling their services, either by partnering with or acquiring fintechs.
Although the regulatory concerns sparked by the Experian-ClearScore deal may be an exception, as both companies have a large market share in the UK, incumbents should still ensure that regulators approve of their acquisition plans. As such, Experian might have been better off looking toward smaller players for an acquisition to not stifle competition and raise regulatory concerns. Experian still aims to launch new products and services in the next year, and we may see the company team up with other startups in the space to bring those new products to market.
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