Why fintech valuations are falling?

Most of the fintechs were once highly valued
A representational picture of investment. — Canva/File
A representational picture of investment. — Canva/File

Fintech valuations have undergone a major transformation since the pinnacle of the 2021 venture funding frenzy. Relying on trading in secondary markets, most fintech companies that were once heavily valued have witnessed a substantial fall in their valuations. Stripe, a distinguished payments company, is an evident case of this downturn.

Its valuation for funding purposes hit $95 billion in March 2021, but its valuation in the secondary market soared to close to $200 billion in January 2022, resulting in puzzlement among employees who wondered why the company didn't conduct an initial public offering (IPO) at that time. However, as of the up-to-date statistics, Stripe's valuation in the secondary market has experienced a steep decline of 73% to $52.5 billion.

This change has disrupted the disrupters. As many fintech unicorns, a startup valued at $1 billion or over, were solid companies that were slightly overpriced, some of these tech-based financial service-providing businesses have yet to fully readjust their valuations.

Only a few fintech companies, like HR/payroll companies Rippling, Gusto, and Deel, have witnessed a rise in their secondary valuations since January 2022. Others that are sustaining for now to their high valuations may take longer to hit the bottom, and then start recovering to regain the momentum.

The fintech market has undergone a momentous correction in valuations since the highest of 2021, with most startups going through a fall in their secondary valuations. Some have effectively adjusted, and others are following suit.