What remains for fintech after a modern-day banking crisis
April 1, 2023
Within just the first quarter of this year, the fintech industry has already witnessed what seems to be a never-ending list of doomsday signals.
Most notably, that includes the downfall of four substantial banks—Silicon Valley Bank, Silvergate Capital, Signature Bank, and Credit Suisse. But we've also seen Stripe's valuation drop 47% in a down round, Block shares plunge on fraud accusations, embedded finance darling Railsr reach insolvency, and much more.
It's therefore no surprise that fintech valuations have remained depressed. At the end of Q1, the median EV/NTM Sales multiple for public neobanks, brokers, and crypto companies was 1.8 x, compared to 5.3x for the prior year period. For multiples of high-growth fintech and payment companies, the trend was similar.
Fintech isn't dead, however.
Ample dry powder remains to be deployed from the sidelines, and VC fintech activity isn't far off from pre-2021 levels. VC deal value may have declined 39% YoY in 2022, but it was still up by 43% and 42% compared to 2020 and 2019 levels, respectively.
And there's still a multitude of reasons why fintech funding will stay healthy going forward.
Whether in retail or enterprise, there are several large underserved and underbanked communities. Digital lenders and neobanks around the world have attempted to solve for this in the last several years, but they haven't cracked the code quite yet.
Critical gaps also remain to be filled in capital markets, B2B payments, know-your-customer and anti-money laundering, and infrastructure. Investors are certainly recognizing these opportunities, given B2B fintechs captured 62% of total VC in 2022.
It's most important, however, to remember that some of the greatest fintechs can rise in times of crisis. Looking back, Stripe, Venmo, and Square (now Block) all emerged from the ashes of the global financial crisis.
New opportunities are already presenting themselves following SVB's collapse, including sweep networks and better treasury management solutions. In addition, tough economic conditions can also amplify opportunities in specific segments.
In our Q4 Retail Fintech Report, for example, we highlight how challenged consumer wealth and market returns put the spotlight on loyalty & rewards and alternative asset solutions.
Current market conditions for fintech may be frightening, but it's still an exciting time for fintech. History has shown us that in the wake of financial catastrophes, there will always remain several founders sharing the same thought: "There has to be a better way."
If you're interested in additional fintech analysis, we have several reports coming soon. Our quarterly Fintech & Payments Public Comp Sheet and Valuation Guide comes out next week, with our Q1 2023 Retail and Enterprise Fintech Reports scheduled to be released shortly after.
Most notably, that includes the downfall of four substantial banks—Silicon Valley Bank, Silvergate Capital, Signature Bank, and Credit Suisse. But we've also seen Stripe's valuation drop 47% in a down round, Block shares plunge on fraud accusations, embedded finance darling Railsr reach insolvency, and much more.
It's therefore no surprise that fintech valuations have remained depressed. At the end of Q1, the median EV/NTM Sales multiple for public neobanks, brokers, and crypto companies was 1.8 x, compared to 5.3x for the prior year period. For multiples of high-growth fintech and payment companies, the trend was similar.
Fintech isn't dead, however.
Ample dry powder remains to be deployed from the sidelines, and VC fintech activity isn't far off from pre-2021 levels. VC deal value may have declined 39% YoY in 2022, but it was still up by 43% and 42% compared to 2020 and 2019 levels, respectively.
And there's still a multitude of reasons why fintech funding will stay healthy going forward.
Whether in retail or enterprise, there are several large underserved and underbanked communities. Digital lenders and neobanks around the world have attempted to solve for this in the last several years, but they haven't cracked the code quite yet.
Critical gaps also remain to be filled in capital markets, B2B payments, know-your-customer and anti-money laundering, and infrastructure. Investors are certainly recognizing these opportunities, given B2B fintechs captured 62% of total VC in 2022.
It's most important, however, to remember that some of the greatest fintechs can rise in times of crisis. Looking back, Stripe, Venmo, and Square (now Block) all emerged from the ashes of the global financial crisis.
New opportunities are already presenting themselves following SVB's collapse, including sweep networks and better treasury management solutions. In addition, tough economic conditions can also amplify opportunities in specific segments.
In our Q4 Retail Fintech Report, for example, we highlight how challenged consumer wealth and market returns put the spotlight on loyalty & rewards and alternative asset solutions.
Current market conditions for fintech may be frightening, but it's still an exciting time for fintech. History has shown us that in the wake of financial catastrophes, there will always remain several founders sharing the same thought: "There has to be a better way."
If you're interested in additional fintech analysis, we have several reports coming soon. Our quarterly Fintech & Payments Public Comp Sheet and Valuation Guide comes out next week, with our Q1 2023 Retail and Enterprise Fintech Reports scheduled to be released shortly after.
Rudy Yang
Senior Analyst, Emerging Technology
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