Elevated Interest Rates Continue to Threaten Fintech Companies

Following the Federal Reserve’s statement that higher rates are not going away soon, fintech share prices took tumbles in the market. The reason higher rates pose such a challenge for fintech’s is that in the wake of elevated rate environment, their own costs to borrow funds are higher leaving them little room to offer more attractive terms for consumers than normal banking institutions.

As rates remain at higher levels, consumer discretionary spending decreases. Over the last few years fintech’s have generated generous returns on the buy-now-pay-later programs; however, these programs are expected to see less adoption as consumers slow down purchasing. Often times these programs are offered at low to no interest to the consumer, but with elevated costs to borrow for fintech companies, these programs may not make sense to continue operating long-term without structural changes.