While COVID-19 has wreaked havoc on economies throughout the world, FinTechs who saw share values initially drop are now on the rebound.
During the height of the pandemic, many FinTech companies—ones developing teleconferencing, telehealth and online payment technologies, for example—saw a boost in business as people made the transition to working and spending most of their free time at home. However, not all financial techs were so lucky, as some dealt with stocks that plummeted over 50 percent since the virus outbreak.
Many private FinTechs experienced funding losses, drops in usage, and a slash in valuations. CB Insights reported that in the first quarter, VC-backed FinTech activity dropped to $6.1 billion across 404 deals—the lowest level since the first quarter of 2016 and the worst funding cycle since the first quarter of 2017.
There is some good news on the horizon, though: According to Sifted, large FinTechs such as PayPal, Adyen, and Afterpay have now surged beyond their pre-COVID stock prices to reach all-time highs. In addition, U.S. boutique investment bank Qatalyst Partners revealed that its FinTech index is now outperforming the wider tech sector and the Nasdaq, while UK-based FinTechs Augmentum and Funding Circle have also seen their shares bounce back to pre-pandemic times.
“The business world found a way to keep going during lockdown and therefore financial systems continued and the need for innovation remained unchanged,” said Charles Delingpole, founder of financial compliance company ComplyAdvantage. “The FinTech sector is well insulated here… and is due a strong recovery.”
As countries emerge from lockdown and businesses start opening up, many analysts believe financial tech firms will play a pivotal role in helping small businesses recover and secure the funding needed to survive. Business banking firm Bruc Bond recently pointed to FinTech’s ability to establish businesses' creditworthiness, evaluate risk, and issue loans in as little as 24 hours.
Still, investors might remain cautious as worries about a worldwide recession loom. With that in mind, analysts are pointing to specific FinTech sectors that are most likely to see funding come their way, including insurtechs, digital share brokers, cross border payments, peer-to-peer lending, banking apps, contactless payments, and fraud analysis software.