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The Changing Landscape for Fintech Profits

After enjoying a period of robust profits fueled by high interest rates, leading fintech companies like Robinhood, Revolut, and Monzo are now bracing for a significant challenge. As global interest rates begin to fall, these firms face an uncertain future, testing the resilience of their business models that have thrived on net interest income.

A Surge in Profits: The Boom Phase

Back in 2022, the fintech sector was hit hard by interest rate hikes imposed by central banks worldwide, causing a sharp drop in valuations. However, as interest rates stabilized and eventually rose further in 2024, fintechs experienced a turnaround. The increase in rates significantly boosted net interest income — the difference between the interest earned on loans and the interest paid to depositors.

During this period, Robinhood reported a substantial $1.4 billion in annual profit, driven by a 19% year-over-year rise in net interest income, amounting to $1.1 billion. Revolut also saw a 58% jump in net interest income, pushing its profits to £1.1 billion ($1.45 billion). Meanwhile, Monzo, for the first time, achieved an annual profit by March 31, 2024, with a remarkable 167% surge in net interest income.

The New Reality: Rates on the Decline

However, the landscape is shifting again. As interest rates start to decline, questions arise about the sustainability of fintechs' recent profit levels. Lindsey Naylor, a partner at Bain & Company, emphasized that dropping benchmark rates could challenge fintech firms reliant on net interest income, saying, “An environment of falling interest rates may pose challenges for some fintech players with business models anchored to net interest income.”

Naylor also pointed out that while some firms might struggle, others with diversified revenue models may demonstrate resilience. “Lower rates may expose vulnerabilities in some fintechs — but they may also highlight the adaptability and durability of others with broader income strategies,” she noted.

Early Signs of Impact

The effects of declining interest rates are already visible. In Q1 2025, Robinhood reported $290 million in net interest revenue, marking a 14% increase from the previous year. Despite the growth, the pace of increase has slowed compared to previous quarters, reflecting the changing rate environment.

In the UK, the payments infrastructure startup ClearBank recorded a pre-tax loss of £4.4 million last year as it shifted from interest income to fee-based revenue amid declining rates. CEO Mark Fairless remarked, “Our interest income will always be an important part of our income, but our strategic focus is on growing the fee income line. We factor in the declining rates in our planning and so we’re expecting those rates to come down.”

Diversification: The Strategic Shift

To mitigate the impact of falling rates, many fintechs are expanding their revenue streams beyond traditional interest-based income. Revolut, for example, now offers crypto and share trading alongside its payment and foreign exchange services. The company recently unveiled plans to include mobile plans in its app for UK and German users.

Bunq, a Dutch neobank popular among digital nomads, has maintained a diverse revenue model, relying on subscriptions and card-based fees alongside interest income. Bunq’s CEO Ali Niknam stated, “We’ve always had a healthy, diverse income. Things are different in continental Europe compared to the UK, as we have been dealing with negative interest rates for a long time.”

Barun Singh, a fintech research analyst at Peel Hunt, explained that fintechs with diverse revenue lines are in a stronger position to navigate the shift to a lower-rate environment. “Neobanks with a well-developed and diversified top line are structurally better positioned to manage the transition to a lower-rate environment,” Singh said. In contrast, those heavily dependent on interest income from customer deposits could face significant income adjustments.

Preparing for the Future

The trajectory of fintech profitability will largely depend on how effectively companies can diversify their revenue streams and reduce reliance on interest income. While some fintechs are proactively adapting their business models, others may face a steeper uphill battle as global interest rates continue to decline.

In the long term, the industry could see a clear divide between adaptable fintechs thriving with diversified income and those struggling to maintain profitability. As fintech leaders seek to future-proof their businesses, a strategic focus on non-interest income sources could determine their sustainability and success in an evolving financial landscape.

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