The fintech market has suffered a sharp decline since the turn of the year, as almost half a trillion dollars has been lost according to Financial Times analysis.
Shares in most of the major fintech firms have fallen by an average of 50%, a 21% increase from last year. The market capitalisation has fallen to $156bn and if each stock was to be measured to it’s all time high valuation, $460bn has been lost in 2022.
Many insiders and experts suggest the dramatic fall comes after the aftermath of the COVID-19 pandemic, where fintech players flourished in their abilities to attract customers to new business models and pushed the acceleration of digitisation in key fields such as payments.
Despite this, concerns arose after more and more countries were suffering with the increasing likelihood of a recession. Interest rates have begun to soar, the lack of profits, and untested new business models are contributing factors to the sharp decline in the market.
According to online lender Upstart, the company has accredited the fall in market valuation to the ‘tumultuous economy’. In turn, during the same period in 2020, annual revenue grew more than 1,000% during the pandemic.
Major firms such as Klarna have suffered a valuation fall from $46bn to $7bn after a new round of funding. Stripe has also seen a decline, with its valuation falling 28% since the turn of the year.
The Financial Times spoke to Dan Dolev, analyst at Mizuho, who said fintechs, in particular digital payments firms, were “the first part of the tech sector to benefit greatly from COVID-19, because everyone was stuck at home and buying stuff online”. Now they are overcorrecting to the downside ahead of other sectors too.”
Dolev said he expected to see a rebound for many companies in the second half as year-on-year comparisons become more flattering. Some companies also face additional pressure from regulators.