In 2022, financial technology (fintech) firms were among the hardest hit by rising interest rates from global central banks, leading to a decline in their valuations. However, over time, the shift in the interest rate environment started to benefit fintechs, as higher rates increased net interest income. This term refers to the difference between the interest charged on loans and the interest paid to savers. By 2024, several fintech companies, including Robinhood, Revolut, and Monzo, saw a boost to their profitability, primarily driven by net interest income.
Robinhood reported an impressive $1.4 billion in annual profit, largely thanks to a 19% year-over-year increase in net interest income, which reached $1.1 billion. Similarly, Revolut saw a 58% rise in net interest income, which contributed to its profits of £1.1 billion ($1.45 billion). Monzo, which posted its first annual profit in the year ending March 31, 2024, experienced a remarkable 167% increase in net interest income.
As interest rates begin to fall, however, these fintechs and digital banks face a crucial challenge. The sustainability of relying on heightened income from net interest is now in question. Falling interest rates could put pressure on fintechs whose business models are heavily dependent on this income. Experts suggest that this environment will test the resilience of these firms, with some potentially struggling to adapt, while others may demonstrate adaptability and durability through diversified income strategies.
Robinhood’s first-quarter results for 2025 indicated a continued growth in net interest revenues, up 14% year-over-year to $290 million. However, the U.K.-based payments infrastructure startup ClearBank felt the impact of declining interest rates, swinging to a pre-tax loss of £4.4 million last year. ClearBank’s CEO emphasized the company’s focus on growing fee-based income to counterbalance the decline in interest income.
To reduce reliance on interest income and card fees, many fintechs are diversifying their revenue streams. Revolut, for example, has expanded into crypto and share trading, and is planning to offer mobile plans in the U.K. and Germany. Neobank Bunq, which serves “digital nomads,” reported a 65% increase in annual profits in 2024, thanks to its diverse income model that includes subscription fees and card-based income.
In conclusion, fintechs with more diversified revenue sources are better positioned to weather the impact of falling interest rates, while those still reliant on interest income may face significant challenges.
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