Fintech
Fintech sector hits bottom as valuations fall from 2020-21 highs: leaders highlight shift away from ‘crazy ideas’ and excessive funding
The financial technology sector, which has experienced a significant drop in ratings, has now reached “bottom,” according to industry leaders and investors. This change marks a shift from the sector’s previous high valuations in 2020 and 2021.
What happened: At the Money20/20 event in Amsterdam, industry executives and investors expressed their belief that the fintech sector has reached its lowest point, CNBC reported.
Executives and investors at the event noted that the sector has undergone a significant correction from its previous unsustainable highs. This correction comes after a period in which venture capital was heavily invested in startups with ambitious ideas but weak business metrics.
Iana DimitrovaCEO of OpenPayd, a firm specializing in integrated finance, said the market had “recalibrated”. He noted that the market now values companies with strong use cases and business models, a change from the “crazy ideas” and excessive VC funding seen a few years ago.
Despite recent challenges, the event saw banks, payments companies and technology companies showcasing their offerings, signaling a potential revival for the sector.
Because matter: The fintech sector’s recent difficulties are evident in global funding data. After reaching an all-time high of $ 238.9 billion in 2021, second KPMGGlobal fintech funding fell to $164.1 billion in 2022 and further to $113.7 billion in 2023, a five-year low.
Despite this, many companies have continued to experience significant growth. However, the impact of higher interest rates has made it more difficult to secure financing, even for fast-growing operators.
Prajit Nanu, CEO of Nium, a Singapore payments unicorn, believes that current market conditions represent “the bottom end of the fintech cycle.” According to him, this is an opportune time for fintech companies to thrive.
Despite recent challenges, the event has also seen a resurgence of interest Bitcoin BTC/USD and cryptocurrencies. Fintech executives and investors have noticed a real use case for cryptocurrencies, marking a shift from previous years of over-promising.
Although the fintech sector is currently facing a difficult period, the renewed interest in cryptocurrencies and the potential for industry consolidation could signal a new phase of growth for the sector.
However, the industry is not without its success stories. With confidencea Swedish fintech company backed by BlackRock Inc.reported a 51% increase in operating profit for 2023.
Despite this, CEO Johan Tjarnberg said the IPO is at least two years away, stressing the need for additional years time to demonstrate its value of Trustly’s open banking technology to investors.
In the meantime, Visa Inc. has launched a new technology to improve its position in the e-commerce market. The technology will share more detailed information about customers’ preferences with retailers based on their purchasing history.
Read next: Tesla Bear Says Elon Musk ‘Mind Controlled’ EV Giant Long Ago, But Will Stay Behind Because of It
Photo courtesy: Shutterstock
This story was generated using Benzinga Neuro and modified by Kaustubh Bagalkote