While the banking world watches American lender First Republic publicly convulse after its earnings report detailed a widespread evaporation of its deposit base, the startup world of neobanks is taking blows as well.

Earlier this week, Revolut, a highly-valued, UK-based neobank saw its valuation decline by some 46% in the eyes of one of its backers.

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Given that Revolut last raised $800 million at a $33 billion valuation in mid-2021, it stands to reason that it was likely overvalued at the time — show us a nine-figure startup round from those times that fits neatly against today’s valuation marks and we’ll buy you a smoothie.

But Revolut getting such a sharp valuation cut nearly two years after it was last priced made us sit up and take notice.

There was a time when the neobank-for-x-market was amongst the most popular startup models, after all. Mountains of capital were invested into dozens of global startups looking to reinvent or at least revamp consumer and SMB banking. It even led to some liquidity, including the massive Nubank IPO and its resulting 11-figure valuation.

Revolut’s revaluation raises a few questions: How much trimming is there left to do in the fintech world? And, are we likely to see something similar more generally in the neobanking startup sector?

A Revolut spokesperson said: “We do not engage in speculation on our valuation. Since our last funding round, in which we were valued at $33 billion, Revolut has continued to perform strongly in all its markets, has continued to hire and expand, and reported its first full year of profitability.”

This morning, we’re parsing what happened in venture in Q1 2023 as well as a handful of data points from F-Prime’s fintech index and resulting reports. Then, we’ll cover the most recent neobank financial results we have, and come to a conclusion on how much pain — or how little — neobanks can expect in the months ahead. To work!

Money in, money out

We have fintech funding data from CB Insights for Q1 2023, but it comes with a huge asterisk. Without additional context, funding to fintech startups increased 55% from the fourth quarter of 2022, making for a global tally of $15 billion.

The caveat, though, is that Stripe’s latest $6.5 billion raise alone accounted for more than a third of that sum. If you exclude that round, the tally comes down to $8.5 billion, which represents a 12% quarter-on-quarter decline.

That’s the big picture. Looking at the fintech cohort more closely, we are curious about which categories outperformed others. Data of that kind on private companies is hard to come by, but we have some interesting insights on public companies.