Technical Due Diligence for Fintech Acquisitions: What to Look For
A framework for evaluating fintech systems during M&A. The critical areas we assess, red flags to watch for, and how to scope a technical review.
Why Technical Due Diligence Matters
In fintech acquisitions, the technology is often the product. A thorough technical review can reveal hidden risks—or confirm that the target is as solid as claimed.
We've conducted due diligence for investors, acquirers, and internal leadership teams. Here's our framework.
The Five Areas We Assess
1. Architecture & Scalability
- How is the system designed?
- What are the scaling limits?
- Where are the single points of failure?
- How does it handle peak load?
2. Security Posture
- Key management practices
- Authentication and authorization
- Data encryption (at rest and in transit)
- Vulnerability history and response
3. Code Quality & Technical Debt
- Test coverage and quality
- Documentation state
- Dependency management
- Known issues and workarounds
4. Compliance & Audit
- Regulatory compliance implementation
- Audit trail completeness
- Data retention and deletion
- Third-party integrations and data sharing
5. Team & Knowledge
- Key person dependencies
- Documentation of tribal knowledge
- Onboarding capability
- Operational runbooks
Red Flags We Watch For
- No test suite: Critical for fintech. If they're not testing, they're gambling.
- Single points of failure: One server, one person who knows the system, one provider.
- Compliance retrofitting: Compliance added after the fact is usually incomplete.
- Excessive technical debt: Some is normal. A lot indicates deeper problems.
- Poor incident history: How they've handled past issues reveals their operational maturity.
Scoping a Review
A typical technical due diligence engagement for us includes:
- Document review (1-2 days): Architecture docs, security policies, compliance certifications
- Code review (2-3 days): Repository access, code quality assessment, dependency audit
- Team interviews (1-2 days): Technical leadership, key engineers, ops team
- Report delivery: Findings, risk assessment, remediation recommendations
The depth depends on the deal size and risk tolerance. For larger acquisitions, we may extend into penetration testing or detailed performance analysis.
The Deliverable
Our report typically includes:
- Executive summary for non-technical stakeholders
- Detailed technical findings
- Risk matrix with severity ratings
- Remediation roadmap with effort estimates
- Go/no-go recommendation with conditions
Considering an acquisition? Let's discuss how we can help.