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Dealing with a recession

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FinTech began in the 2000’s and was fuelled by new technologies – cloud computing and the smartphone in particular – alongside the failing of traditional finance when the financial crisis hit in 2008. Now that we enter a global recession, FinTech has a new challenge: dealing with no investors in a time when they need investment. What will happen?

For most of the past fifteen years, start-up firms have found easy access to capital and investment from venture capital firms and private equity investors. 2022 has suddenly seen this dry up, and most start-ups are struggling with their business model and future. By way of example, Stripe – a firm that provides simple code for merchants to take payments online – was valued at $95 billion a year ago. Today? Well, it’s more like $70 billion. That’s still pretty amazing for a 12-year-old company, but it demonstrates that all firms have seen a strip, rather than a stripe, taken off them.

Even more surprising is what’s happened with some other innovators, such as Klarna. Klarna is the founding firm of what has become the rapidly rising Buy Now, Pay Later (BNPL) market. A year ago, the company had a valuation of almost $50 billion. This year? $6.7 billion. The markets are hard.

For most of these start-up firms – there are over 25,000 in FinTech – they have never experienced a recession before. They have never been through a market downturn. For the last twelve years, the only way is up. So, what to do?

Well, unsurprisingly, we’ve seen a lot of bloodletting. Over 7,000 employees have been laid off since the recession hit the FinTech industry, and that number will grow. A number of firms will disappear because they don’t have the runway to continue funding. A number will be acquired, because they cannot afford to continue funding.

This creates an interesting interregnum.

On the one hand, many fantastic ideas in the start-up community are available to be purchased at bargain basement prices by banks. On the other, many FinTech firms who are still buoyant, can acquire a greater footprint in finance.

On the first point, banks have spent the last decade watching the rise of innovators and wondering how to respond. It may not be the best time to buy them, but there are many ideas out there that can improve banking that banks can learn from. Therefore, it would make sense for a bank to buy some of the smaller firms who are struggling if, for nothing else, to learn from their ideas and internalise them.

Equally, a bank that makes a move on a large FinTech innovator like Klarna, would make a mark on the future of the industry. Having said that, an acquisition is not an easy thing. There’s often a culture clash, a departure lounge of the most visionary and talented staff and an issue with how to get the acquisition to work with the old firm.

Those points would apply to the second point too. A FinTech firm could expand their offering by acquiring a competitor or adjacent ability. Stripe could acquire Klarna. The question is: why would you? In a market where funding is squeezed, companies are struggling, valuations have dived, why would you buy a competitor or additional talent?

Well, the reasons and motivations are obvious: it’s because they are cheap.

The next few years will see a massive amount of consolidation, mergers and acquisitions amongst the FinTech start-up community. I am certain that some big names will be acquired by both banks, competitors, other start-ups and competitors.

This makes this world even more fascinating. After a decade of easy money, easy growth and easy business, the world has become hard. I don’t predict all of these firms falling over a cliff, but I do predict that the predators will find some easy prey.



I'm advising quite a few companies on their tactics and strategies to deal with a recession. If this is of interest, feel free to contact me.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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