FinTechs have been among the hottest trends in the financial industry in recent years, attracting record levels of funding and ushering in game-changing innovations. The global COVID-19 crisis has, however, put a damper on FinTechs rising dominance, as evidenced by total deals with and total investments in FinTechs showing a drastic falloff in recent months. So, what does this mean for FinTechs?
In most simple terms it means that funding sources will be increasingly difficult to find as investors, in times of crisis, tend to liquidate assets to fortify their cash positions. This serves to increase competition, including with better-capitalized and larger companies. As a result, FinTechs will need to tighten their belts and shift their focus from growth and customer acquisition to profitability and positive cash flow. This could prove difficult as a sustained economic slowdown is likely to further reduce consumer and business spending, resulting in less transaction-based revenues for many FinTechs. In the end, the future for many FinTechs will largely rest on how long this crisis will last and, ultimately, what its larger economic impact will be.