Five Market Trends That Fintech Startups Should Be Wary of

• Just in time for Halloween, we share five market trends that could keep fintech startups up at night over the next year. 
• From the increased consumer reliance on BNPL to the rise of digital products offered by mainstream banks, here’s what fintechs could find “spooky.”
• Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Fintech industry. Learn more about becoming a client.

What we’ve been thinking: With fintech adoption at an all-time high, startups have a lot to be optimistic about. Yet this wider reach also brings greater responsibilities and challenges. With Halloween just around the corner, it’s a good time to reflect on market trends that fintechs may find “spooky.”

The SEC stalks robos and digital brokers.

• Just in time for some light Halloween reading, the SEC recently teased where it will focus regulatory efforts next year.
• Wealthtechs could have their compliance work cut out: Chair Gary Gensler has raised concerns over conflict of interest and data bias risks that may arise when robo advisors use predictive data analytics and other digital engagement practices.
• The regulator also published its meme stock report, which identified four areas of market structure that warrant consideration for changes, including the payment-for-order-flow model.

Tether’s big crash risk haunts the crypto market.

• The largest stablecoin globally was fined $42.5 million this month for lack of transparency over its reserves. Rather than being fully backed by US dollars, Tether is partially backed by other assets, such as debt securities and bonds, which are less liquid than cash.
• What’s troubling is that a large share of crypto trading is done using Tether rather than fiat money—meaning stablecoin holders could crash its value with a mass redemption and bring down the entire crypto market.
• This could significantly impact digital brokers’ revenue, which is increasingly reliant on crypto trading. Robinhood Q3 earnings already have taken a big hit from a crypto trading slowdown.

Small insurtechs look on as established players devour much of the funding.

• Just 15 insurtechs raised $3.3 billion, or two-thirds of total global funding in Q2. This week, Willis Towers Watson (WTS) released Q3 funding volumes in which 11 insurtechs still accounted for 51% of the total.
• With continuous access to deep capital pools, established insurtechs can keep funding their rapid growth, grabbing ever-larger market share and calling into question younger startups’ longevity.
• In 2020, WTS estimated that 184 insurtechs globally were close to or had shut down since 2010. It now puts this number at 456.

Neobanks fear that the worm has turned.

BNPL defaults lurk in the shadows.

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