Five weeks into 2021 and already we have witnessed two classic examples of incumbent banks snapping up digital challengers.

First off National Australia Bank (NAB) agreed a A$220m deal to acquire neobank 86 400.

And then on deadline day for the March issue of RBI, Raiffeisen agrees a deal for digital challenger Equa.

If the first few weeks of the year are anything to go by, it may be that one of the most common 2021 forecasts for the banking sector will be blown away, namely that the pandemic will kill off incumbent banks appetite and ability to make acquisitions.

Yes, the Covid crisis is having a material effect and not in a good way on banks’ earnings outlook. But capital ratio issues are not a concern as they were in the last financial crisis.

Indeed, one can argue that 2020 does not represent a second financial crisis of the 21st century, thanks in part to fiscal and monetary support.

The pandemic does not impact upon banks’ drive to offer better and cheaper services via digital channels.

Much of the memorable 2020 M&A activity focused on the payments sector and the fourth quarter was no exception. Witness the Nexi/Nets deal and Worldline/Ingenico, given regulatory approval towards the end of 2020.

The new year may well witness three recurring M&A themes.

Big techs such as Google and Facebook snapping up small, innovative fintechs is one confident forecast from the analyst community.

Secondly, there is evidence of small banks in Asia Pac being targeted by tech firms. An obvious example of this type og deal is Indonesia’s Gojek raising its stake in Bank Jag.

And thirdly, we are likely to see more deals such as the ones executed by NAB and Raiffeisen to acquire small digital challengers.

One is tempted to suggest that what the market in the UK really needs is a wave of consolidation among the challenger community itself.

Equa grows customer numbers to 480,000

AnaCap, owner of Equa, has made a number of shrewd investments since the last crisis.

Based in the Czech Republic, Equa is a tech-enabled full-service challenger bank that focuses on retail banking and the SME sector. Under AnaCap ownership, it has grown its deposits and lending book twelve-fold, albeit from a low base.

In 2020, Equa grew its customer numbers to just under 480,000, up 13% year-on-year.

Solid if hardly stunning-what does deserve to the called out for praise is its net promoter score of +81.

While the UK could benefit from consolidation among the challenger community, the same cannot be said of Australia.

86 400 losing its independence is regrettable; no doubt NAB will execute the deal efficiently but 86 400 attempted to be genuinely innovative.

For starters, on the IT side it spent time and money investing on its own proprietary technology. Not only did 86 400 seek to build its own infrastructure, it offered a core set of products instead of just a hyped-up app with unnecessary features.

Rather than leading with a loss-making glorified prepaid card, 86 400 took the relatively rare step for a digital start-up of targeting the home loan market. That takes time to scale up. The NAB deal means we will not now know if it would have paid off.

Equa and 86 400 are most likely to be just the start of a number of digital challengers to be snapped up this year by incumbents.