It's been an amazing decade of innovation in the financial technology, or fintech, industry but it's also important to realize that the economy has been quite strong for much of this time. There's simply no way to know how many of the biggest fintech disruptors would perform in a severe or prolonged recession -- and because most benefited from the unique circumstances of the COVID-19 pandemic, it didn't tell us much. 

In this Fool Live video clip, recorded on April 12, contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss what JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon recently said about fintechs, and why they could be vulnerable to recessions and other tough times. 

Matt Frankel: Having said that, you mentioned the capital requirements for traditional banks really make them more transparent, safer providers of credit, I guess you'd say from the market standpoint. It's also worth mentioning that in recent times, it's been really easy for hot start-ups to raise money.

Jason Moser: Yeah.

Frankel: Look at SoFi. SoFi is going public through a SPAC merger and raised billions of dollars in the process.

Moser: Yeah.

Frankel: That really helps some of these businesses compete, and really provides them the capital to make loans and things like that. They just acquired a bank, SoFi, and were able to pump $700 million of their own capital into it to boost it up. It's been really easy to raise money. A lot of these fintechs are not profitable. In a downturn, it will not be as easy to raise money. We mentioned last week when we were talking about why the SPAC boom has dried up. That at some point investors' appetite for speculation starts to run out.

Moser: Yeah.

Frankel: That's especially true if the economy takes a turn for the worse. Another thing that Jamie Dimon said, this wasn't one of my big takeaways, but that inflation is very possible, and a series of rapid interest rate increases often leads to a recession. In a recession, the fintech industry wouldn't nearly be a stable as it is right now.

Moser: Yeah.

Frankel: I'm not saying all these companies we're just talking about would fail in a recession or anything to that effect.

Moser: Right. Yeah.

Frankel: But they wouldn't necessarily be as great providers of credit to the system as traditional banks would be.

Moser: Yeah. That stability just isn't there. It's neither right nor wrong, it just is. They live in two different worlds right now, and I think that's what shapes that conversation. That's what makes that conversation I think so enlightening for investors the way you think about how that future may look. Is it one being replaced by the other, or are we ultimately looking at a future of partnerships I wonder?

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.