The beginning of 2026 has delivered a clear message to the global financial technology sector: the era of “growth at all costs” is officially dead. In its place, a new theme has emerged: “The Big Pruning.”
Across the globe, from Copenhagen to Chicago and Seoul to Singapore, the market is aggressively thinning the herd.
Regulators are no longer just issuing warnings, but exacting heavy financial tolls, and investors are bypassing speculative startups in favour of “AI-native” infrastructure and profitable, IPO-ready heavyweights.
The “great thinning” of weak players
The landscape has been brutal for operators with shaky foundations. In the U.S., the year began with its first bank failure as Illinois regulators closed Metropolitan Capital Bank & Trust, citing “unsafe and unsound conditions” and an impaired capital position.
This failure signals that U.S. state regulators are moving faster to excise rot from the banking system before it spreads.
Simultaneously, in Australia, the challenger bank dream hit a wall with in1bank announcing it would cease operations and surrender its license.
The voluntary exit of a licensed neobank underscores the difficulty of surviving in a saturated market without a distinct, profitable niche.
In the UK, the pruning was involuntary and swift: payment solutions provider Guavapay entered compulsory liquidation following a petition by Mastercard, a stark reminder that major creditors are losing patience with partners who cannot pay their bills.
Regulation with teeth: a global crackdown
If market forces aren’t closing doors, regulators are slamming them shut. The “move fast and break things” ethos has been replaced by “comply or pay up.”
- Denmark: Saxo Bank was fined DKK 313 million (US$50 million) by the Danish FSA. The penalty, tied to anti-money laundering (AML) failures, is one of the largest in the region’s history, signalling a zero-tolerance approach to compliance lapses.
- United States: The California Department of Financial Protection and Innovation (DFPI) fined crypto lender Nexo Capital $500,000 for unlicensed lending, continuing the state’s aggressive enforcement against digital asset platforms.
- South Korea: The crackdown extends to Asia, where the Financial Intelligence Unit fined crypto exchange Korbit roughly $2 million for AML violations. Notably, Korbit chose not to appeal, accepting the penalty – a sign that firms now view strict compliance costs as the price of survival in a maturing market.
Asia’s flight to quality
The “pruning” trend is reshaping investment landscapes in Asia, where capital is fleeing speculation for stability.
In Southeast Asia, fintech funding has seen a structural shift. According to the 2026 Founder’s Guide to Raising Capital in Southeast Asia, the market is undergoing a fundamental change: “This is not a recovery in the traditional sense; it is a reallocation. Investors are concentrating capital into fewer, larger bets on companies with proven business models.” This “flight to quality” leaves weaker players in neighbouring markets starving for capital while mature hubs absorb the lion’s share of funding.
Recent data indicates that while deal volume has slowed, capital is concentrating heavily in “safe haven” markets like Singapore, which accounted for a staggering 84% of regional fintech funding in recent reports.
Conversely, India remains a bright spot for growth, but with a caveat: investors are doubling down on winners. Indian startups raised $930 million in January 2026 alone, but the capital was mainly directed toward late-stage, proven business models rather than early-stage experiments.
The AI “acqui-hire” wave
While weaker firms exit, cash-rich giants are using the downturn to buy the future. The trend of 2026 is not just “using” AI, but owning the infrastructure behind it.
PayPal’s swift move to acquire Israeli startup Cymbio exemplifies this shift. Moving from partnership to acquisition in months suggests that legacy players are racing to become “AI-native” by buying competence rather than building it.
Michelle Gill, PayPal’s EVP of Small Business, stated that the acquisition would “enhance our agentic commerce capabilities” – a move that directly aligns with industry predictions. As Visa’s 2026 outlook forecasted, “Agentic commerce will expand in 2026… making it easier and more secure for businesses to integrate agentic commerce into their transaction flows.”
This aggressive AI acquisition aligns with a broader trend of “agentic AI” investments, highlighted by Fieldguide’s $75 million Series C and Zocks’ $45 million Series B raises, both aimed at automating complex professional workflows.
IPO markets reward maturity
Perhaps the strongest signal that the “adults are back in the room” is the reopening of the IPO window, but only for the best.
BitGo, the digital asset custodian, successfully priced its IPO on the NYSE, coming in above its predicted range with a valuation exceeding $2.5 billion.
Lukas Muehlbauer, a research analyst at IPOX, noted that recent market pressure has “sharpened investor scrutiny across risk assets, prompting a ‘flight to quality’ that favours regulated companies over more speculative crypto ventures.”
A success like BitGo’s listing serves as a bellwether for the industry, proving that public market investors are hungry for crypto infrastructure plays that offer security, custody, and regulatory compliance rather than volatile token speculation.
South Korea reinforced this “institutionalisation” of crypto by finally lifting its ban on corporate crypto investing, allowing public companies to hold top-tier digital assets. This move legitimises the sector and paves the way for further institutional inflows.
Conclusion: survival of the fittest
The events of early 2026 paint a picture of a sector in transition. The “Big Pruning” is painful, resulting in job losses and business closures, but it is ultimately forging a more resilient industry.
The survivors of this phase will not be the companies with the best pitch decks, but those with the strongest balance sheets, the most robust compliance engines, and the most straightforward path to profitability.