Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Examining the Impact of SVB’s Collapse on the Fintech Industry Ecosystem
WhiteSight | Kshitija Kaur & Risav Chakraborty | March 29, 2023
Image: WhiteSight
Over 2600 fintech clients, who regarded the bank as a trusted venture debt financier, commercial payment gateway, and online payment acceptance facilitator.
See: With SVB Now Done. What’s the Impact for Canadian Tech?
- With 71% of all fintech IPOs since 2020 being accounted for by its fintech clients, SVB is undeniably deeply ingrained in the fintech ecosystem. This profound relationship dates back to its very past, with SVB evolving in parallel with the startup industry as it focused on understanding the entire lifecycle of capital within the ecosystem and designed a business to address the diverse needs of the community. This explains why the potential impact of recent tremors within the industry looms large, particularly for smaller fintech firms.
- Beyond Banking: SVB's focus on specific sub-sectors has ensured that it caters to the needs of fintechs of all sizes. While payments, accounting, expense management and lending were the four spheres where partnerships were most commonly forged, it also spread its wings into e-commerce, cryptocurrency and blockchain, wealthtech, insurance, as well as fraud and identity.
- SVB's fallout will undoubtedly trigger a ripple effect, causing distress and concern across these segments to varying degrees. However, the payments industry may feel the brunt of the impact, given SVB's significant involvement in this space. Payment fintechs, big or small, many of whom relied on SVB, now face the daunting task of finding a suitable replacement bank as many of them are cautious of the customers they onboard, placing greater emphasis on proof of revenue.
Read: Superintendent of Financial Institutions took further action on the Silicon Valley Bank Canadian Branch
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Impact: Amidst the tumultuous fallout that has sent shockwaves through the industry, delayed payouts, reduced trust, and implications on the bank's lending business only compound the mounting issues.
- That both systemic and idiosyncratic risks must be identified and mitigated to some extent. The concept of putting all your eggs in one basket may no longer be a viable strategy. Instead, a significant reliance on enabling the broader value chain may be necessary for the future.
- Yet, within the chaos, there are underlying opportunities for neobanks and other players in the cross-border payments space. These opportunities may prove especially beneficial for newly established fintechs seeking to capitalise on the turbulence and establish themselves as viable alternatives.
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