Signals Fintech

How SVB Fell to Pieces in 48 Hours, and What’s Next for Fintech

A banking crisis is where Fintech rises to push off and make its start. At least, that’s what we saw in 2008. Recent news of the collapse of Silicon Valley Bank (SVB) has sent shockwaves through the industry, leaving many wondering about the implications of such a catastrophic event. It could be a big reset to get to the next level. But the question is what we will lose during this transition.

In this article, I'll provide a timeline of the collapse of SVB, discuss its global impact, and offer my thoughts on what Fintech leaders should do to protect their businesses from a disaster.

The Collapse of SVB: A Timeline

In Silicon Valley, SVB Bank had a reputation as a prime funding source, offering services to some of the biggest names in the tech industry. The bank was known for its focus on startups and emerging companies, and many tech leaders viewed it as a critical partner in their growth. While it may seem the bank tumbled down in just days, things started to go wrong for Silicon Valley Bank in early 2023.

January 2023: SVB begins to experience financial difficulties due to a combination of factors, including increased competition, rising interest rates, and a slowdown in the tech industry's growth.

February 2023: Concerns about the bank's financial stability start to surface, with reports suggesting that Silicon Valley Bank is struggling to meet its regulatory requirements. Depositors begin withdrawing their funds, and SVB's stock price is significantly hit.

March 2023: SVB officially announces that it has filed for bankruptcy. The news sends shockwaves through the tech industry, with many fearing that the collapse of Silicon Valley Bank could significantly impact the broader economy.

The Collapse of SVB_ A Timeline

Global Impact of the SVB Downfall

The downfall of SVB is not just a local issue for Silicon Valley. While we saw the markets dipping from Chicago to Tokyo, the crash may have more worldwide implications that could affect the Fintech industry as a whole. Below are some key factors to consider.

A Global Financial Crisis

As a result of SVB's collapse, and under the weight of the global recession, many other banks could also fail, leading to a worldwide financial crisis. Fintech companies that rely on these banks for services like payment processing, lending, and investment banking could also suffer, leading to a ripple effect across the entire industry.

The Rise of Alternative Financing

With traditional banking institutions struggling, the Fintech industry could see a surge in alternative financing options - which will be sort of a Fintech 2.0 revolution. Crowdfunding platforms, peer-to-peer lending, and blockchain-based financing are just some of the altfin options that could receive an adoption boost in the wake of Silicon Valley Bank crumpling.

Increased Regulatory Scrutiny

Regulators worldwide will likely tighten their grip (yes, again) on the Fintech industry in the wake of the bank's downfall. The collapse of such a startup go-to banking giant is sure to raise concerns about the overall stability of the industry and the need for all-permeating oversight and regulation.

Tired of boring Fintech digests?
Make a fresh start with our curated insightbox.

→ Receive bi-weekly 

Lessons for Fintech Leaders

I'm sure you are already thinking the situation through. Your action plan should definitely list the points below to help you minimize the risks.

Diversify your banking relationships.

Fintech companies should avoid relying on a single banking institution for their financial services. Instead, spreading the risk by working with multiple banks and financial service providers is essential.

Monitor your bank's financial health.

Keep a close eye on your banking partners' financial health. Regular financial check-ups and risk assessments can help identify potential issues before they become significant problems.

Prepare for the worst.

While no one wants to think about their banking partners collapsing, it's essential to have a contingency plan in place. Fintech companies should develop a plan for how they would continue to operate in the event of a bank's failure, including identifying alternative banking partners and financing options.

Prepare for the best.

Ask yourself how your business can benefit from this situation: what new solutions you can offer to the market, how you can make your partner ecosystem stronger, how your business can take its agility to a new level and respond to the changes in the first ranks, leading the new wave, not being pushed by it.

Looking for a skilled team to build or enhance a Fintech platform?
→ Get a tech partner

Wrapping it up

As we've seen, the collapse of a significant banking institution like Silicon Valley Bank can have a ripple effect across the industry and the global economy. Fintech companies must proactively manage their banking relationships, regularly monitor their financial health, and prepare for the worst-case scenario.

Before we know it, this disaster might signal a new turn in Fintech's evolution, so it's crucial to stay ahead of the curve and be aware of the risks, challenges, and opportunities that come with it.

How to Automate with CI/CD Pipelines for Connected Microservices

How to Automate with CI/CD Pipelines for Connected Microservices

Let’s admit it: software always needs to be delivered faster than before. To survive this race, leave your customer satisfied, and offload tons of work from your team, you need to speed up. CI/CD pipelines for automated delivery are a proven solution.

Among CI/CD adopters, you’ll find tech giants like Google, Amazon, and Netflix. Discover how you...

Let’s admit it: software always needs to be delivered faster than before. To survive this race, leave your customer s...
More

Integration Testing with Java: Best Practices and Frameworks to Use in 2023

Integration Testing with Java: Best Practices and Frameworks to Use in 2023

With release cycles becoming shorter and systems more complex, the need for quicker and more precise testing grows stronger. While there are lots of tutorials for unit testing, integration testing is often overlooked or confused with the former.

That’s why I start this article by explaining what integration testing is and why it’s indispensable....

With release cycles becoming shorter and systems more complex, the need for quicker and more precise testing grows st...
More

Investing, Budgeting, and Banking: Best Fintech Apps of 2023

Investing, Budgeting, and Banking: Best Fintech Apps of 2023

Fintechs face intense competition in the market coupled with macroeconomic pressures. They either evolve or die. The companies I feature in this article dig in their heels during the “crisis as usual” era. By upgrading their apps and offering new unique experiences, these Fintech market players secure their sweet spots in the world of finance.

If...

Fintechs face intense competition in the market coupled with macroeconomic pressures. They either evolve or die. The ...
More

Latest articles

How to optimize data analysis with AI and ML: Interview with Andrei Girenkov, Tech Expert at INSART

In this talk, Andrei Girenkov, Tech Expert at INSART and Principal Technology Strategy Consultant at Mizuho, shares his perspective on leveraging AI and ML to navigate the complexities of big data analysis in the financial sector.

From current trends and challenges in FinTech to the intricacies of AI algorithms and combating bias in models, Andrei speaks from his own experience. Find out what the prospects of AI startups are and where the potential of industry-specific generative AI solutions lies, according to Andrei.

Blog Article

The Dark Potential of AI in FinTech and How to Reduce It

From new threats like vishing to deepfake detection tools, AI is evolving as both a poison and a cure. Let’s explore how both sides of the technology unfold in FinTech.

Learn how AI-spurred threats can put your FinTech business at risk and what new solutions to consider for protecting and boosting your company.

Blog Article

How to navigate dependencies in FinTech software development

They are called dependencies for a reason. The health of your Fintech product and your business success and reputation literally depend on them. In this article, you’ll find out how to take the maximum risk out of software dependencies.

Understand third-party dependencies, their benefits and risks, and explore how to manage them effectively.

Blog Article