How Fintechs are Responding to Downward Valuations

Facing downward valuation in both public and private markets, how have Fintechs responded?

Besides cost reduction via layoffs, there are several other moves. 👇

🟧 Scale up

Building up the scale quickly is important. This could be done via a strategic partnership.

Example: Affirm

The BNPL land grabs quickly moved from merchant sites to payment companies. Affirm built a partnership with Fiserv to make its service available to millions of merchants.

🟩 Add revenue source

Businesses need to continue to build products/services and find the next new revenue source.

Example: Stripe

Stripe breaks away from its open banking partner Plaid and launched its own solution Financial Connections in the US.

🟪 Becoming a bank

You have to give the oldest business model some credit - because it survives so long.

Why not become a modern version of the bank?

Example: Klarna

Klarna is pivoting from a pure BNPL player to a full-service bank. It aspires to be one of the few last-standing global banks in the future.

🟦 Focus on tech

Applying for a banking license takes time. The lending business is also impacted by the economic downturn.

Thus some companies shift back to what they are good at: the tech stack.

Examples: Brex, Starling

Brex withdrew its industrial bank license last year. Recently it stopped services to unfunded SMBs and focused on software and enterprise solutions.

Starling pulled its Iris bank application, focusing on international expansion via software deals with lenders and acquisitions.