Financial-tech companies underperformed both financial equities and tech stocks in 2022 despite being long-hyped for their goal of introducing Silicon Valley-style development to the lending, investing, and payments industries. Many fintech firms fell from prominence as a result of being vulnerable to rising interest rates, the removal of many pandemic-era drivers, and a more general awakening for businesses that followed growth.

Other indexes and funds achieved even worse results with a fintech focus. In 2022, the Global X Fintech ETF dropped 52%. That is significantly worse than the 33% decrease in the Nasdaq Composite Index and the 12% drop in the SPDR Fund, which covers the financial sector of the S&P 500. The ARK Fintech Innovation ETF, managed by Cathie Wood, lost 65% of its value in 2022. Its most significant assets include Shopify Inc., Coinbase Global Inc., and Block Inc. Through late December, the F-Prime

Fintech stock, which tries to “monitor the performance of breakthrough fintech companies,” was down 71%. Affirm Holdings Inc., Doma Holdings Inc., Dave Inc., Opendoor Technologies Inc., Upstart Holdings Inc., and Root Inc. saw a more than 90% decline.

Ever since the Federal Reserve started raising interest rates to combat inflation in 2022, all kinds of tech stocks experienced a drop in value. Investors are less likely to gamble on tech stocks that guarantee growth when interest rates rise since they have more choices on how to invest their money for consistent returns. However, increasing rates presented extra difficulty for fintech companies with large balance sheets. The cost of borrowing money from non-traditional consumer lenders is rising, reducing their profit margins and even driving some smaller companies out of business.

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