Fintechs plummet on the stock market because of high interest rates and increased risk of default

Higher interest rates and slower global growth have turned into a fulminating combination for the value of fintechs around the world. This includes the Brazilian Nubank, which has just reached its minimum market value, a few months after starring in one of the most popular IPOs on the planet. With this change in scenario, added to inflation and the even more challenging context of the war between Russia and Ukraine, the risk for credit disbursement has increased, which puts in check the pace of future growth of startups in the financial sector.

On average, the large fintechs listed have already lost about half their value this year. Nubank runs close to its minimum price, with a decrease of about 40% in relation to the starting price of its initial public offering (IPO), in December 2021 – in the year, the devaluation is of 42%. Among other Brazilian companies also listed in the United States, PagSeguro registered a drop of around 45% and Stone, of more than 50%. Foreign fintechs also recorded significant declines.

With this scenario, in recent weeks, financial sector analysts began to write more reticent reports. The main point of caution has been the quality of credit granted by fintechs. The most frequent question is whether the customer who made the loan will have the breath to pay it off. “This increases the risk that Nubank will eventually have to stop origination (granting credit), reducing the pace of monetization and lowering hopes for 2023”, according to a report by Itaú BBA, signed by analysts Pedro Leduc, Mateus Raffaelli and William Barranjard .

Nubank’s action also suffers due to the green light for the sale of the company’s shares, which were blocked since the IPO. Sought after, Nubank said that its “focus is to drive long-term growth and generate value for our shareholders and customers” and that it seeks investors “aligned with our strategic vision for the business”.


The first warning sign about the sector was the result of the acquiring and payments technology company Stone – also listed in New York –, which looked at the problems that fintechs could have under the context of high interest rates and a sluggish economy. . Fintech had a complicated year in 2021, essentially caused by poor credit quality. As a result, in 2021, the company saw its profit drop 79%, totaling R$ 203 million. Your financial expenses also jumped.

Stone points out that the interest rate increase is already a process identified by the company “for quite some time” and that, therefore, it has carried out a gradual repricing that has ensured an increase in the number of customers. “There is no doubt that they design a more challenging scenario, but it has not affected the continuous establishment of more solid foundations to support the company’s growth in the future.”

first crisis

Another point of concern is the fact that this is the first major crisis experienced by many fintechs, recalls Bruno Diniz, a partner at consultancy Spiralem. “The listed players are in a very bad situation, as a reflection of a negative expectation of how they will handle this great crisis”, says Diniz.

In this environment, credit will be another important challenge, points out Carlos Macedo, financial sector analyst at Ohmresearch. “Credit goes hand in hand with growth”, says the specialist.

Macedo also recalls that the macroeconomic context in Brazil is not good, with a negative economic cycle and consumer credit defaults on an upward trajectory. This means that, in order to maintain growth, fintechs will have to grant credit to a higher risk customer profile.

The expert stresses, however, that fintechs are still in a good financial situation – Nubank, for example, is very capitalized to face the new scenario.

A partner at the manager KPTL, specializing in investments in technology companies, Renato Ramalho recalls that the drop in fintech values ​​is also observed in the world of technology companies. In the last two years, these companies have grown, benefiting from great liquidity around the world, which has directed billions of dollars to companies in the sector. The fountain has now, however, run dry.

“The world was euphoric”, defines Ramalho. Now, according to him, these companies will have to go through an accommodation process, but at “a healthy level”, he predicts.

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