It has been an eventful year. Fintech is far from reaching the peak of 2021, and while 2022 is largely about resetting the funding environment, 2023 will be a year of recalibration for fintech companies.

The good news is that large and midsize companies are more concerned than ever about the impact on their bottom line. As revenue growth slowed, cost savings and efficiency became essential. Large companies are more likely to reduce internal innovation efforts and unnecessary technology investments for the business. This opens the door for fintech that can bring real improvements to the bottom line by eliminating manual processes and saving their customers money.

Let’s first look at the areas that can be the most challenging:
lenders, neo banks and fintech serving small and medium businesses.

online lenders

Credit will be hit hard. Lenders must navigate three main winds in today’s market:

1. Increase the rate of overdue debt and write off the debt.
2. The cost of capital is higher on the debt they lend.
3. Reduced customer demand due to higher interest rates.

Rising chargeback rates and default customer defaults will be difficult to manage for new fintechs that are less than five years old. These startups don’t have fully designed models to predict which customers are most likely to default.

Managing risk during a recession can be difficult, and lenders feel it most acutely.

Neobanks

Neobanks has transformed the customer experience of traditional banks by providing better digital products at a lower cost. While the big players, such as Chime, which have already raised large amounts of capital, should be fine, expect to see consolidation among the smaller new banks. The reality is that many new banks have customers with small average deposit balances and deposits that are essential to long-term banking business models. Neobanks will also be victims of layoffs – if one of their customers is laid off, banks will see their direct deposit flow drop.

Fintech serving small and medium businesses

Small businesses are more likely to close during a recession. In turn, fintechs serving SMBs rather than large and medium-sized enterprises are more likely to lose SMB customers. That’s why you’ve seen companies like Brex move away from SMEs.