ARITRA CHAKRAVARTY, founder of London-based online accounts and investments provider Dozens, admits it’s a tough time to be seeking up to 15 million pounds (US$19 million) for a startup.

“It’s definitely a bearish market” said Chakravarty, who is seeking funding for Project Imagine, the company behind his fintech ventures. He is looking to crowd funding and government-backed COVID 19-support schemes for technology firms to make up for any reticence from venture capital investors.

Data suggest his caution is warranted. Fintechs, which have been one of the hottest draws for venture capitalists in recent years, raised US$6.3 billion in the second quarter, down 41 percent on the year, according to data from analysts at Forrester.

Investors and entrepreneurs say that while the COVID-19 pandemic has boosted demand for fintechs in areas such as digital payments and online trading, it has hurt more vulnerable sectors such as online lending. This is likely to hasten the demise of weaker players, lead to more acquisitions and entrench the dominance of older fintechs with deeper pockets.

“I think this crisis will engender some consolidation,” said Matt Harris, a New York-based partner at Bain Capital Ventures.

“The rich will get richer and buy smaller competitors, and some will go out of business.”

Venture capitalists poured US$3.3 billion into “late stage” rounds for established fintechs, accounting for 52 percent of total funding according to Forrester, the first time more mature firms have outstripped younger ones.

Dozens’ Chakravarty, a former HSBC banker, is hopeful the venture can stand out from the pack as Project Imagine is close to turning a profit, as it also sells technology to traditional banks.

The funding his firm needs is “not signed and delivered, but it’s possible,” he adds.

Signs of stress among even relatively well established fintechs are starting to emerge.

In Britain, digital bank Monzo had to accept a 40 percent cut in its valuation in a June fundraising, with the 60 million pound raise valuing it at 1.25 billion pounds, down from 2 billion last year. A spokeswoman for the bank confirmed the investment.

Monzo has attracted more than four million customers with its bright coral card and spend-tracking data since launching in 2015 but remains loss-making. Monzo and U.K.-based rival Revolut cut more than 140 jobs between them early in the pandemic, after a hit to revenues from lower customer spending abroad. (SD-Agencies)