Why Fintech Companies Like Square and Stripe Are Thriving Right Now
Here’s why the economic downturn is actually benefiting payments and lending startups
Conventional thinking suggests there are two types of companies that would be hit hard in a sudden recession: first, the ones with nowhere to hide because they have exposure to every part of the economy, like payment providers, and, second, the ones who lend to borrowers who can’t otherwise get a loan, since those borrowers are likely the first to default.
Both of these businesses are part of the fintech space, which has surged over the last decade as some industries moved online, brick-and-mortar stores shifted to a tech-enabled model, and big banks retreated from making small loans. If fintech companies are at the bleeding edge of finance, we’d expect them to get hit hard by a sudden recession.
But that’s not what we’re seeing. In recent days, payment processors have stepped up big time. Visa committed to no layoffs, SoFi made a splashy, billion-dollar acquisition. Stripe raised an additional $600 million capital, bringing it to a $36 billion valuation, and Robinhood is planning to raise money, too. Square founder Jack Dorsey donated a stunning $1 billion worth of Square stock to his foundation to fight the pandemic and is using Square’s…
