How different fintech categories are getting hit
The funding crunch is hitting every fintech category, but each one feels the effects differently.
Neobank funding has disappeared. Funding to banking fintechs dropped 57% quarter over quarter (QoQ)—more than any other subsector broken down by CB Insights—and 77% YoY. The pullback from neobanks is partly explained by their inability to produce profits: Fewer than 5% are estimated to break even, per a report from Simon-Kucher & Partners.
Buy now, pay later (BNPL) providers are taking steep valuation cuts. Both public and private BNPL providers are taking hits. Klarna raised its latest round at a $6.7 billion valuation, an 85% drop from last year’s high. Affirm’s stock price had plunged 76% year to date by mid-July.
The crypto winter is putting the freeze on startup growth. The crypto market cap now stands at $1 trillion—compared with a record $3 trillion in November 2021. Plummeting crypto prices will test crypto startups—BlockFi, Crypto.com, Gemini, and Coinbase have all announced cost cuts—and limit investor appetite to back them.
Later-stage fintechs are finding it harder to lure in top investors and close megarounds. Both a16z and Tiger Global have dialed down late-stage investments, per CB Insights, while megaround funding fell 45% QoQ. Mature fintechs can no longer raise large sums without a clear path to profitability.