Economic Issues Facing the Fintech Industry

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     In recent history there was a tremendous surge in investment towards the fintech industry. Not all of this investment was justified and it contributed to an overallocation of resources and inevitable inflation. The reason that fintech startups could generate so much hype was due to their constant innovation and the importance of finance in general. Especially during the pandemic, fintech became very popular as there was an increase in online shopping and payments. Even though there is a lot of potential for these fintech startups, they often receive too much investment due to their potential. This unjustified demand for fintech firms coincided with an increase in global inflation. In the long run, to balance out, unemployment will rise due to the inverse relationship between inflation and unemployment. We can directly see this happening through things like layoffs and decreased production of fintech firms. Another viewpoint on this issue is the idea that the fintech industry is worth the demand because of its adaptability. Institutional financial firms like banks do not deal with recessions well and we have seen multiple bank collapses in just the past year. I think that the fintech industry has significant potential and will end up being more reliable and successful than classic ways of handling finance. However, the over-investment has caused a lot of volatility in the market and makes it hard to really judge how much these fintech startups are worth. Pre-seed fintech startups are even receiving mass amounts of funding simply due to the potential success being forecasted in the relative industry. 


What Is Fintech? Financial Technology Definition | Built In

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