Yahoo Finance If recession is brewing, fintech didn't get the message
If economic doom is underway, the fintech market showed little-to-no signs of it at the Money 20/20 conference in Las Vegas last week.
Even as funding has dried up this year with a murky macroeconomic backdrop for capital markets making it harder to raise cash and close deals, startups in the financial technology space pressed on with new ideas and ambitious growth plans at this October’s popular industry confab — and very few attendees mentioned plans to abate activity.
Last year, the fintech sector raised a whopping $121.6 billion, a 153% year-over-year increase on the scale of global venture capital deal value, according to data from Pitchbook.
Although this year saw only a fraction of that figure — about $29.3 billion across 1,233 deals in the first quarter and $21.1 billion across 1,227 deals in the second quarter — the numbers remain historically high. In all of 2020, for instance, fintech companies raised $47.9 billion, roughly $2.5 billion less than the first-half total for 2022.
The slowdown in capital flows across venture capital is the result of the Federal Reserve's interest rate hiking path this year to mitigate inflation, with rising interest rates making speculative, higher-risk asset classes like VC less attractive from a risk-return perspective.
U.S. central bank officials have raised interest rates to a range of 3% to 3.25% this year so far, and another hike of 0.75% is expected on Wednesday. This marks a huge shift for companies that have benefited from the era of easy money in recent years, which propelled a period of tremendous growth and paved the way for lofty investments and prolific dealmaking.
Lead Bank Chief Executive Jackie Reses said on a panel that interest rates were likely to continue their ascent, meaning that the environment of expensive borrowing could be the “new normal” over the next decade.
Still, Reses called the current market "incredibly helpful for companies” that have shown more “constraint in operating their businesses” — something she said companies lacked in 2021.
“When people are throwing money at you, you end up getting really sloppy in the way that you operate,” Reses said. “I think what this market will do for people is drive you to make really brutal decisions where the focus really matters so that you can look forward and get through this environment.”
Although some speakers acknowledged that the flow of cash has retreated, few seemed concerned about an outright slowdown or any potential troubles ahead for the fintech market amid the larger economic decline. Companies were showcasing new ideas, handing out branded swag, and even discussing plans for hiring while much of Corporate America has scaled back on recruiting fresh talent to curb costs.
Among the active fintech firms was Marqeta, a company specializing in payments services, which announced at the conference the launch of a cohort of new banking products to complement its card-issuing business.
“Every company will become a financial services company,” Marqeta Founder and departing CEO Jason Gardner told Yahoo Finance in a sit-down interview, adding that Marqeta has continued hiring to scale its growth plans, even as a rout across the technology market sank its valuation from $16 billion after its IPO last year to under $5 billion. Gardner announced at a conference call earlier this year that he was stepping down as the chief executive but would remain as chairman and also continue to serve in the CEO role until a replacement is found.
Other announcements for expansion at Money 20/20 came from Anchorage, the digital asset platform backed by names including Andreessen Horowitz, Goldman Sachs, and KKR. The platform rolled out an offering that facilitates crypto payment gateways, structured financial products, and crypto investing. Global payments platform Veem also announced the launch of real-time payments in more than 100 countries.
So even as much of Corporate America is focused on adjusting for macroeconomic headwinds by cutting costs, slowing hiring, and dimming investor expectations, none of those themes appeared to be of much concern among the fintechs on Money 20/20's stage.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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