Why did fintech stumble?
Bad service, bad practice, bad business models: beginning in 2021, many fintech firms proved they weren't ready for prime time. The market reacted with rejection. But the sector can learn from its mistakes and mount a comeback in 2024. Part two of a three-part series.
The early 2020s were defined by extreme fintech spectacles. Before the criminal meltdown of FTX, there was the meme stock explosion. In January 2021, with no warning, stocks for companies long-presumed moribund — such as GameStop and Bed Bath and Beyond — shot into the stratosphere for reasons that no conventional stock analyst could explain.
For millions of onlookers, this “meme stock” moment was time to break out the popcorn, a form of entertainment. But it was also a sign that the entire fintech revolution had reached an awkward peak. The Covid stimulus had put money in the hands of restless investors, some of whom turned to Reddit boards to find unorthodox uses for their cash.
Read part one: Fintech’s Wild Ride: Who Will Dominate the Next Phase?
Thousands of them adopted fintech platforms, mainly the perversely named Robinhood, as their venue of choice. The implosion of the meme stock phenomenon — and the subsequent near-collapse of Robinhood — was not just the story of a consumer mania and a flawed company: It was a cautionary tale that exposed five flaws permeating the fintech ecosystem:
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