Is Fintech recession-proof?

Here’s why the industry could be “recession-proof”.

May 14, 2023
Is Fintech recession-proof?
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Matt Crabtree

Written By

Matt Crabtree


Nicole Valentine, director of fintech at the Milken Institute, has indicated that the industry is prepared to grow even if the UK and US experience a recession.

When Nicole Valentine claims that fintech is recession-proof, she implies that it will continue to grow regardless of the economic climate. At the 2023 Milken Global Conference, Valentine shared this information with popular online news outlets. 

Fintech companies learned to streamline their operations during economic downturns. What matters is that they learned to improve their intellect and the quality of their output. What matters is quality. Size, even for HSBC (review), is not always an advantage.

What SVB taught us

The failure of Silicon Valley Bank, however, did not bode well for the fintech industry this year. Financial technology giants like Affirm (AFRM) have felt the effects of the challenging macroeconomic climate and increasing interest rates.

Affirm CEO Max Levchin said that the cost of financing is shifting as the Fed works out ways to fight inflation. The Fed's extraordinary interest rate cut had a significant effect on our [loan-to-cost ratio].

He elaborated by saying that there is a huge level of interest from both customers and business owners. Capital fluctuations and fluctuations in other regions will cause temporary interruptions. But in the end, it seems like a terrific company that is doing well.

Fintech, however, is in a prime position to keep up with the ever-accelerating spread of technological trends such as the advent of artificial intelligence. Even in a down economy, Valentine saw a chance for fintech because of the development of generative AI.

Valentine further by saying that Fintech is always atop emerging technologies. So when we discuss generative AI and blockchain, we are describing the cyclical nature of the finance industry. Despite this, construction continues.

According to Valentine, the fintech industry may continue to thrive despite a bleak macroeconomic outlook.

There is no problem that fintech can't handle. According to Valentine, a financial technology industry crisis is just another learning opportunity. How will they get in touch with the client? In what ways will they be useful? How, therefore, will they manage to become sticky at this crucial juncture? 

The financial technology industry is cut-throat and dramatic

Very, very, very busy, to say the least. 

The financial industry was no exception to the hectic pace of the previous week in the startup and venture world.

We saw an article on Peter Ackerson's exit from Fin Capital previously this year and his subsequent founding of Audere Capital, another venture capital company.

The reasons for his leaving are unclear, although one source claims that he and Fin co-founding Logan Allin had differences about how things were handled at Pipe, a company that provides alternative finance. There's more information here.

We also learned about Tellus, a firm that is now under investigation by the United States government after receiving $16 million in a seed round of investment headed by Andreessen Horowitz last year.

The company was betting that homeowners would consent to very high interest rates on mortgages in order to finance home improvements (think 9%!). 

Rocky Lee, the business's co-founder, has acknowledged that it is dangerous, but he asserted that Tellus used “rigid underwriting requirements” and are yet to see any defaults “because most borrowers then quickly refinance their loans at more favourable terms”. 

Well, Sherrod Brown, an American Senator, who chairs the Senate Committee on Housing, Banking, and Urban Affairs, recently expressed his worries about Tellus's statements in a letter to Martin Gruenberg, Chairman of FDIC.

Brown requested an investigation of Tellus's business practises from the FDIC in that letter “to make sure customers get protection against financial abuse and fraud”. 

But the overall infrastructure seems to hold up (examples given)

Even in a recession, the infrastructure does not falter. Let’s take a few examples: in addition to the newest client victory for Stripe, there were two major headlines this week regarding two firms for payments networks and infrastructure making moves.

Finix formally entered the payments processing industry, which is a logical step for a business that has been gradually increasing its service offerings. 

To refresh your memory, Finix is a business that Sequoia decided against investing in after hearing concerns from Stripe, a pre-existing portfolio firm. (However, Finix was allowed to retain the $21 million.)

With its new direct connections to Discover, American Express, Visa and Mastercard, Finix claims it can provide companies with “improved economics, instant onboarding, and ways to lower interchange fees”.

Richie Serna, CEO/co-founder, explained how and why Finix's product stands apart from the competition. The Californian business Liquido, which aspires to be “Latin America's Stripe”, was another topic of mine.

In 2021, Mark Fiorentino of Index Ventures oversaw $26 million in investment over two rounds. What's more, between 2015 and 2019, Fiorentino worked for Stripe as the head of business finance and strategy. And Ingrid reported that Stripe had won Uber as a client, which came as somewhat of a surprise given that Lyft had been a prominent customer for a long time.

Finally, Brex, a startup in the field of spend and corporate card administration, announced last week that it would be expanding into new markets around the world in order to better serve its customers.

The new markets include Brazil, Israel, Japan, Canada, South AfricaSingapore, Mexico, the Philippines, and 36 European nations. Henrique Dubugras, co-CEO and co-founder of Brex, told TechCrunch that the expansion “will really open up TAM” for the firm since so many current and potential U.S. customers “have some international operations”.

Opening a bank account in each country where a company could have personnel is a significant hassle for multinational corporations. Setting up your financial infrastructure one nation at a time might be quite challenging. Brex allows you to “act as if” you are a local business with a local card.

To rephrase, Brex allows organisations with international staff to issue corporate credit cards in the home currency of the cardholder and settle up with the cardholder's home country bank in local currency.


Despite Jeremy Hunt's recent declaration that the United Kingdom is the “Unicorn Kingdom”, Jack Davies argues that the success of the country is no longer measured by the number of billion-dollar fintech startups that call it home.

London runs the danger of being left behind by fresh development prospects after a decade in which British fintech startups dominated the industry. Story after story of money leaving the country for abroad has surfaced during the last several months.

Research by SCM Direct found that Britain's top 100 firms would be valued about £500bn more if they listed in New York, putting numbers to the anecdotes that those of us in the industry hear every day. 

London has lost its protective lustre from five years ago when you take into account the digital businesses that are avoiding initial public offerings (IPOs) in the city and the lacklustre performance of fintech stocks in 2023.

Despite our lawmakers' repeated calls for swift regulation in policy debates, we have been unable to duplicate the fintech sector's success in other sectors.

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