What remains for fintech after a modern banking crisis
Most notably, it includes the demise of four significant banks – Silicon Valley Bank, Silvergate Capital, Signature Bank and Credit Suisse. But we’ve also seen Stripe’s valuation fall 47% in a bear market, blockchain shares plunge on fraud allegations, embedded finance darling Railsr reaches insolvency and much more.
It is therefore no surprise that fintech values have remained low. At the end of Q1, the median EV/NTM sales multiple for public neobanks, brokers and crypto companies was 1.8x, compared to 5.3x for the prior year. For multiples of high-growth fintech and payment companies, the trend was similar.
However, fintech is not dead.
There remains plenty of dry powder from the sideline, and VC fintech activity is not far off pre-2021 levels. VC deal value may have fallen 39% year-on-year in 2022, but it was still up 43% and 42% compared to 2020 and 2019 levels, respectively.
And there are still a number of reasons why fintech funding will remain healthy going forward.
Whether in retail or corporate, there are several large underserved and underbanked communities. Digital lenders and neobanks around the world have been trying to solve this for the past few years, but they haven’t quite cracked the code yet.
Critical gaps in capital markets, B2B payments, know-your-customer and anti-money laundering and infrastructure also remain to be filled. Investors certainly recognize these opportunities, given B2B fintechs took 62% of total VC in 2022.
However, it is most important to remember that some of the biggest 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 already present themselves after SVB’s collapse, including sweep networks and better treasury management solutions. In addition, tough economic conditions can also enhance opportunities in specific segments.
This spring Q4 Retail Fintech Reportfor example, we highlight how challenged consumer wealth and market returns are spotlighting loyalty and rewards and alternative asset solutions.
Current market conditions for fintech may be daunting, but it is still an exciting time for fintech. History has shown us that in the wake of financial disasters, there will always be more founders who share the same thought: “There has to be a better way.”
If you are interested in further fintech analysis, we have more reports coming soon. Our quarterly Fintech & Payments Public Comp Sheet and Valuation Guide is out next week, with our Q1 2023 Retail and Enterprise Fintech Reports scheduled to be released shortly after.
