Fintech Stocks Fall as Trump's Tariffs Hit Consumers

Photo: Reuters

Financial technology companies—like stock trading app Robinhood and “buy now, pay later” service Affirm—are losing value fast. The reason? President Donald Trump’s latest decision to add new tariffs (extra taxes) on products from every country has scared investors and shaken markets.

Last week, Trump announced a new 10% tax on goods from all over the world. This move is worrying many people because it could make everyday items more expensive, reduce how much people buy, and possibly lead to a global economic slowdown—or even a recession.

That’s bad news for fintech companies, which depend a lot on how much money regular people have. If prices go up and people stop spending as much, companies like Affirm and Robinhood could lose customers. These companies also make money from fees when users use their debit or credit cards, so if people stop shopping, their income could drop.

Stay informed with the latest news. Follow DXB News Network on WhatsApp Channel  

Traditional banks usually have a variety of clients and services that help them survive during tough times. But fintech companies mostly serve regular consumers who could be hit hard if the economy slows down, say experts.

“Fintech companies often struggle during a recession because the first group to cut back on spending is usually lower-income customers,” said James Ulan, research director at PitchBook.

Since Trump began the trade war on April 2, stock prices of several fintech companies have dropped sharply.

• Affirm is down more than 21%

• Robinhood has fallen over 17%

• SoFi, which gives loans and banking services, has dropped nearly 20%

Despite this, Affirm said it still believes in its mission. “People still want honest and simple financial products like ours, especially when there’s a lot of uncertainty in the market,” a spokesperson said.

Robinhood chose not to comment, and SoFi didn’t respond when asked.

But the concern is growing, especially for companies that give out loans. If people are struggling to afford basic items, they might not be able to pay back their debts.

According to Affirm’s report for the quarter ending December 31, about 2.5% of its monthly loans were overdue by more than 30 days. That’s slightly higher than the previous year, but Affirm says it’s because of a change in pricing.
SoFi said only 0.55% of its personal loans were overdue by more than 90 days during the same period.

In comparison, across all banks, about 2.75% of consumer loans were late by over 30 days, according to data from the U.S. Federal Reserve.

“We know rising prices hurt consumer credit,” said analyst John Hecht from Jeffries. “When prices go up, people have less money left over, making it harder for them to repay loans.”

On Monday, investment bank Goldman Sachs raised its chances of a U.S. recession because of Trump’s tariff plans. Trump has said that while his policies might cause short-term problems, they will help America’s economy and job market in the long run.

But not everyone is convinced. “The government says tariffs are just a one-time price change, not real inflation. But to most families, more expensive prices are still more expensive,” said Ted Rossman, an expert at Bankrate.

Even before these new tariffs, Americans were already worried. In March, a report from the University of Michigan showed consumer confidence dropped to its lowest point in almost two and a half years, with many afraid that higher prices would hurt the economy.

Still, there’s a bit of hope.

If tariffs lead to lower Treasury yields (a measure linked to interest rates), it could become cheaper for fintech companies to borrow money. That would make it easier for them to offer loans, says Dan Dolev, an analyst at Mizuho.

“This whole situation might actually help these companies in the long run,” he said. “I’m more hopeful than what most people in the market think right now.”

Some investors also believe there’s a chance Trump might change his mind or try to work out a deal on tariffs. If that happens, it might calm people down and reduce the fear of a recession.

“The damage so far is more about fear than actual harm,” said Nick Thompson, a researcher at Intro-act. “If we get some good news soon, things could turn around quickly.”