The signs have been unmistakable: over the last several months, FinTech startups have taken a long string of very public hits to their profitability and business models, and they’ve often had to lay off staff and cut planned expansion into new markets. The overall effect has scared off investment capital for the formerly red-hot sector, and investors are frantically wondering whether this is the end for FinTech.
For all the confusion, the matter is clear for industry experts such as financial analyst Jay Metzger: the bubble is officially on its way out. “Investors are becoming more wary about their investments in these small companies as the market wades into risky waters,” he said in a recent interview. “This has led to a decline in cash flows from investors, and now founders are looking for ways to save money, so they’ve begun with layoffs and hiring freezes.”
In other words? The ongoing scramble among FinTechs across the board “is, in fact, a sign that the FinTech bubble could be bursting.”
While it’s difficult to have any confidence in such a large-scale prediction, Metzger’s conclusion has ample evidence to back it up. Quarter-over-quarter VC investment in FinTechs dropped to a three-year low of 33%, and FinTechs have accounted for more than a tenth of all tech startup layoffs this year.