Fintechs in a Falling Rate Environment: Which Business Models Will Survive?
27min read The era of falling interest rates is testing the resilience of fintechs like never before. While some firms falter under the strain of shrinking net interest margins, others are thriving by diversifying their revenue streams. The divide between winners and losers hinges on one critical factor: the ability to wean off interest-sensitive income and build sustainable fee-based models. For investors, the choice is clear: prioritize fintechs with low interest dependency, robust cross-selling engines, and geographic exposure to markets with stabilized rates—or risk being left behind.
Ask Aime: Which fintechs will benefit from falling interest rates, as they diversify revenue and adapt to a lower net interest margin era?
The Vulnerability of Net Interest Reliance
Take Robinhood, the poster child of the “democratize finance” movement. Its first-quarter 2025 results show total revenue grew 50% year-over-year to $927 million, fueled by surging crypto and options trading. Yet beneath the surface, its net interest revenue—a legacy of its traditional trading model—grew just 14% to $290 million. This underscores a stark reality: as central banks cut rates, Robinhood’s reliance on interest-sensitive revenue becomes a liability.
While Robinhood’s crypto and options businesses are booming, they remain volatile. CEO Vlad Tenev admitted in April 2025 earnings calls that reducing dependency on crypto is a priority. Yet the firm’s cross-selling metrics—such as its 39% year-over-year rise in ARPU to $145—reveal opportunities. The question remains: Can Robinhood pivot fast enough to offset falling interest income before rates drop further?
Ask Aime: "Will Robinhood's pivot to fee-based models be too slow for investors?"
The Diversification Edge of Bunq and Revolut
In contrast, Bunq and Revolut are engineering resilience through non-interest revenue streams. Bunq’s 2024 profits surged 65% to €85.3 million, with net operating income up 52% to €245.3 million. This growth stems from subscriptions, card-based fees, and cross-border services—areas insulated from rate cuts. By expanding into Southeast Asia and the Middle East, Bunq is also diversifying its geographic risk.
Revolut’s Q2 2025 results highlight similar strengths: 35% revenue growth to £450 million, driven by crypto trading and premium subscriptions. Its foray into Brazil and Saudi Arabia, paired with AI-driven customer service, is boosting retention. CEO Nikolay Kostov emphasized that fee-based revenue now fuels 54% of its top line—a stark contrast to Robinhood’s 25% fee reliance.
ClearBank’s Blueprint for Structural Resilience
Even traditional fintechs like ClearBank are adapting. By shifting 50% of its revenue to fee-based services (up from 30% in 2023), ClearBank reduced exposure to interest rate volatility. Its European expansion—securing ECB approval for 11 new markets—adds geographic diversification. While its 2024 adjusted pre-tax loss of £4.4 million reflects upfront costs, CEO Mark Fairless calls this a “necessary pivot to sustainable growth.”
The Investment Playbook
Investors should focus on three criteria:
1. Low Interest Dependency: Prioritize firms like Bunq and Revolut, where fee-based revenue exceeds 50% of total income.
2. Cross-Selling Power: Firms with strong ARPU growth (e.g., Robinhood’s $145 ARPU) and subscription penetration (e.g., Bunq’s 17 million users) can monetize existing customers.
3. Geographic Diversification: Exposure to markets with stabilized rates, such as Southeast Asia or the EU, reduces reliance on U.S. rate cycles.
Avoid fintechs overly dependent on net interest income, such as those with <30% fee revenue. Their profits will shrink as rates fall further.
Conclusion: The New Rules of Fintech Survival
The era of free money from high interest rates is ending. Fintechs that bet on diversification are the ones that will endure. Bunq’s global footprint, Revolut’s fee-driven model, and ClearBank’s structural pivot all signal a path forward. Robinhood, meanwhile, must prove it can evolve beyond its trading roots.
For investors, the message is clear: reallocate capital toward firms with diversified revenue, geographic reach, and fee-based moats—or risk obsolescence. The next phase of fintech isn’t about chasing the next viral app—it’s about building businesses that thrive in any rate environment.
The clock is ticking. Act now.
