The fintech industry is subjected to a rude awakening where top-tier firs are concerned. Close to half a trillion US Dollars have been wiped off company valuations in the first half of 2022. That trend has become evident across big fintechs like Klarna and Stripe, although the issue runs much deeper.
Fintechs Face Ongoing Issues
It has not been a good year for most firms, regardless of their industry. Companies across finance, fintech, and cryptocurrency have been forced to fire employees, rescind job offers, or raise more capital at a lower valuation. Unfortunately, it seems as if that trend will not end anytime soon either.
As close to half a trillion in company valuations has been eroded, one must wonder where this trend will end. The COVID-19 pandemic and substantial growth in digital services usage have paved the way for dozens of companies to conduct their IPO in 2020 and 2021. However, the world is returning to normal somewhat and these digital services – primarily BNPL solutions – see far less demand.
It appears society isn’t intent on going all-in on digital solutions yet. Granted, macroeconomic events like inflation and interest rates are not helping either. It creates a very volatile cocktail where anything can happen, but the events are primarily negative for fintechs. Publicly-traded companies saw their share prices drop by roughly 50% on average, outpacing the conventional markets.
The question is where things will go from here. Fintechs and digital payment firms have seen tremendous and explosive growth, but they now pay the price for overextending their reach. A rebound is likely to occur in H2 2022, although it seems possible to avoid some casualties along the way.