Fintechs that made profits from high interest rates now face key test
The post Fintechs that made profits from high interest rates now face key test appeared on BitcoinEthereumNews.com. The app icons for Revolut and Monzo displayed on a smartphone. Betty Laura Zapata | Bloomberg via Getty Images Financial technology firms were initially the biggest losers of interest rate hikes by global central banks in 2022, which led to tumbling valuations. With time though, this change in the interest rate environment steadily boosted profits for fintechs. This is because higher rates boost what’s called net interest income — or the difference between the rates charged for loans and the interest paid out to savers. In 2024, several fintechs — including Robinhood, Revolut and Monzo — saw a boost to their bottom lines as a result. Robinhood reported $1.4 billion in annual profit, boosted by a 19% jump in net interest income year-over-year, to $1.1 billion. Revolut also saw a 58% jump in net interest income last year, which helped lift profits to £1.1 billion ($1.45 billion). Monzo, meanwhile, reported its first annual profit in the year ending March 31, 2024, buoyed by a 167% increase in net interest income. Now, fintechs — and especially digital banks — face a key test as a broad decline in interest rates raises doubts about the sustainability of relying on this heightened income over the long term. “An environment of falling interest rates may pose challenges for some fintech players with business models anchored to net interest income,” Lindsey Naylor, partner and head of U.K. financial services at Bain & Company, told CNBC via email. Falling benchmark interest rates could be “a test of the resilience of fintech firms’ business models,” Naylor added. “Lower rates may expose vulnerabilities in some fintechs — but they may also highlight the adaptability and durability of others with broader income strategies.” It’s unclear how significant an impact falling interest rates will have on the sector overall. In…
The post Fintechs that made profits from high interest rates now face key test appeared on BitcoinEthereumNews.com.
The app icons for Revolut and Monzo displayed on a smartphone. Betty Laura Zapata | Bloomberg via Getty Images Financial technology firms were initially the biggest losers of interest rate hikes by global central banks in 2022, which led to tumbling valuations. With time though, this change in the interest rate environment steadily boosted profits for fintechs. This is because higher rates boost what’s called net interest income — or the difference between the rates charged for loans and the interest paid out to savers. In 2024, several fintechs — including Robinhood, Revolut and Monzo — saw a boost to their bottom lines as a result. Robinhood reported $1.4 billion in annual profit, boosted by a 19% jump in net interest income year-over-year, to $1.1 billion. Revolut also saw a 58% jump in net interest income last year, which helped lift profits to £1.1 billion ($1.45 billion). Monzo, meanwhile, reported its first annual profit in the year ending March 31, 2024, buoyed by a 167% increase in net interest income. Now, fintechs — and especially digital banks — face a key test as a broad decline in interest rates raises doubts about the sustainability of relying on this heightened income over the long term. “An environment of falling interest rates may pose challenges for some fintech players with business models anchored to net interest income,” Lindsey Naylor, partner and head of U.K. financial services at Bain & Company, told CNBC via email. Falling benchmark interest rates could be “a test of the resilience of fintech firms’ business models,” Naylor added. “Lower rates may expose vulnerabilities in some fintechs — but they may also highlight the adaptability and durability of others with broader income strategies.” It’s unclear how significant an impact falling interest rates will have on the sector overall. In…
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