Covid-19 will reset fintech market valuations; spur M&A

The Covid-19 outbreak may just provide the pin that bursts the fintech bubble, according to a report by Rosenblatt Securities, which forecasts a devaluation of Unicorn businesses and tough times ahead for challenger banks, marketplace lenders and robo-advisory services. The Rosenblatt note points to a likely deterioration in fintech operating performance during a deep downturn, as funding sources evaporate and exit options change significantly. States the report: "These forces may feed off each other, creating a vicious cycle where deteriorating business performance makes funding more difficult and vice versa, should the market downturn last long." A large proportion of private fintech firms are less than ten years old and facing their first market downturn. Many management teams may be inexperienced in responding to difficult business conditions - weak customer demand, working capital squeeze, and a tougher environment to retain employees.