As FinTech firms become increasingly profitable, traditional banks counter with branded digital-only subsidiaries As FinTech firms become increasingly profitable, traditional banks counter with branded digital-only subsidiaries FinTechs are approaching their next maturity milestone – profitability – as they demonstrated resilience during the COVID-19 pandemic with verticals recording double-digit growth despite sector-wide operational and financial challenges. In response to FinTechs’ growing popularity among consumers and close proximity to profits, traditional banks are creating digital-only entities to appeal to specific customer segments, according to the . More than half (51%) of FinTechs expect their capital reserves to be affected as costs related to staffing, onboarding, and data storage surged during pandemic lockdowns. Yet, despite the volatile environment, the FinTech sector reported 11% YoY deal activity growth in Q4 2020, after four consecutive years of decline. FinTechs with a diverse product portfolio are winning investor backing, too. As they’ve matured, FinTechs have proven to be competent competitors and partners; and the report tracked a 9% increase in deal activity in late-stage FinTechs from 2019 to 2020.