The Fintech Unicorn Reimagined: When Disruptors Become Desperate Who Will Survive?

Financial Technology (Fintech) has enjoyed an unprecedented ride these past several years.  And then… COVID-19 happened.

We are living in unsettling times in the United States and around the world. No one knows for sure when our world will return to normalcy, who will survive these times, or how long the recovery process will take. With few exceptions (like Zoom), most companies and industries are reeling from the global impact of COVID-19.

The Fintech industry has been very busy creating new, disruptive technologies and solutions aiming to bring the industry up to the standards created and established by other industries, like internet commerce (such as Amazon). To get here, we’ve spent billions of dollars creating and implementing new solutions and services, like robo-advisors, end to end turnkey asset management services, and “free” stock trading programs.

There are enormous sums of public and private money tied up in Fintech. Much of this money is tied to the next Fintech Unicorn; the next big technology solution aimed at reinventing and recreating how things “have always been done”.

Desperate times call for desperate measures. Many of these Fintech firms were bleeding cash as they ramped up to become a market player. The cash spigot flowed freely until now. Time and time again, cash was infused to keep the operations going. Now, this spigot flow is suddenly down to a few drips, or perhaps it’s completely shut off. What will these firms do?

  1. Hunker down?
  2. Close shop?
  3. Sell out at a deep discount?

Obviously, we don’t have a crystal ball that will show us what our world will look like six months from now, much less two or more years from now, but one thing is for sure – the traditional ‘fintech unicorn’ has become high risk and possible low-reward during what is projected to be a global market downturn.

As we consider the long-term impact the crisis will have on our industry, the Fintech Unicorn is being redefined with a new set of valuable characteristics described in our previous blog.

Being an industry disruptor may no longer be a Fintech Unicorn’s primary or even secondary focus, its top priority will be to continue to profitably serve its customers. Fintechs that are employee controlled, debt-free, and capable of serving a large, diverse client base have track records of being stable during a myriad of unsettling world events with roots that provide a culture for stability, reliability, and creativity.

As many firms consider Fintechs as a partner to outlast a global pandemic and market crash, it’s important to reflect on their history of calculated growth, long-term industry relationships, and self-sustainable business models.

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