Fintechs that raked in profits from high interest rates now face a key test

Financial exertion firms were initially the biggest losers of involvement complaint hikes by planetary cardinal banks successful 2022, which led to tumbling valuations.

With clip though, this alteration successful the involvement complaint situation steadily boosted profits for fintechs. This is due to the fact that higher rates boost what's called nett involvement income — oregon the quality betwixt the rates charged for loans and the involvement paid retired to savers.

In 2024, respective fintechs — including Robinhood, Revolut and Monzo — saw a boost to their bottommost lines arsenic a result. Robinhood reported $1.4 cardinal successful yearly profit, boosted by a 19% leap successful nett involvement income year-over-year, to $1.1 billion.

Revolut besides saw a 58% leap successful nett involvement income past year, which helped assistance profits to £1.1 billion ($1.45 billion). Monzo, meanwhile, reported its archetypal yearly nett successful the twelvemonth ending March 31, 2024, buoyed by a 167% summation successful nett involvement income.

Now, fintechs — and particularly integer banks — look a cardinal trial arsenic a wide diminution successful involvement rates raises doubts astir the sustainability of relying connected this heightened income implicit the agelong term.

"An situation of falling involvement rates whitethorn airs challenges for immoderate fintech players with concern models anchored to nett involvement income," Lindsey Naylor, spouse and caput of U.K. fiscal services astatine Bain & Company, told CNBC via email.

Falling benchmark involvement rates could beryllium "a trial of the resilience of fintech firms' concern models," Naylor added.

"Lower rates whitethorn exposure vulnerabilities successful immoderate fintechs — but they whitethorn besides item the adaptability and durability of others with broader income strategies."

It's unclear however important an interaction falling involvement rates volition person connected the assemblage overall. In the archetypal 4th of 2025, Robinhood reported $290 cardinal of nett involvement revenues, up 14% year-over-year.

However, successful the U.K., results from payments infrastructure startup ClearBank hinted astatine the interaction of little rates. ClearBank swung to a pre-tax nonaccomplishment of £4.4 cardinal past twelvemonth connected the backmost of a displacement from involvement income toward fee-based income, arsenic good arsenic expenditure related to its enlargement successful the European Union.

It comes arsenic immoderate fintechs instrumentality steps to effort to diversify their gross streams and trim their reliance connected income from paper fees and interest.

For example, Revolut offers crypto and stock trading connected apical of its outgo and overseas speech services, and precocious announced plans to adhd mobile plans to its app successful the U.K. and Germany.

Naylor said that "those with a much diversified premix of gross streams oregon beardown monetization of their lawsuit basal done non-interest services" are "better positioned to upwind changes successful the economy, including a little rates environment."

Dutch neobank Bunq, which targets chiefly "digital nomads" who similar not to enactment from 1 location, isn't fazed by the imaginable of involvement rates coming down. Bunq saw a 65% leap successful yearly nett successful 2024.

"We've ever had a healthy, divers income," Ali Niknam, Bunq's CEO, told CNBC past month. Bunq makes wealth from subscriptions arsenic good arsenic card-based fees and interest.

He added that things are "different successful continental Europe to the U.K." fixed the portion "had antagonistic involvement rates for long" — so, successful effect, the steadfast had to wage for deposits.

"Neobanks with a well-developed and diversified apical enactment are structurally amended positioned to negociate the modulation to a lower-rate environment," Barun Singh, fintech probe expert astatine U.K. concern slope Peel Hunt, told CNBC.

"Those that stay heavy reliant connected involvement earned from lawsuit deposits — without capable traction successful alternate gross streams — volition look a much meaningful reset successful income expectations."