The COVID-19 pandemic accelerated consumer and digital adoption, boosting the fintech industry's growth. The accelerated technological transformation allowed fintech companies to deliver secure, seamless, and fully digital financial services to consumers at an attractive cost.
However, investors' concerns over rising inflation and the multiple interest rate hikes planned by the Fed this year have led to significant outflows from the overvalued fintech sector. Fintech stocks are high-growth stocks, and the expected interest rate hikes do not bode well for them because these companies often need to borrow capital to fund their growth. Furthermore, they face increasing competition from traditional banks as they themselves upgrade their digital services.
