Fintech Entrepreneur Financing Decision: Does the Pecking Order Theory Still Apply?

Fintechs have transformed the financial industry by promoting inclusion, accelerating innovation, and improving service efficiency. Despite their rapid growth, limited research has explored how these companies finance their early development. This study addresses that gap by investigating the financing decisions of early-stage Fintechs, using the pecking order theory as a framework. Based on 24 in-depth interviews with Fintech entrepreneurs and three industry experts, the research examines the funding sources available, entrepreneurs’ decision-making processes, and the challenges they face. Fintechs, often perceived as risky, struggle to attract traditional financing despite their innovation potential. The findings contribute to the literature on capital structure by focusing on a specific category of innovative SMEs and highlight how their unique characteristics influence financing choices. The study also offers practical insights for investors and policymakers to better support Fintechs, recognizing that adequate funding is critical for their growth, competitiveness, and ability to drive financial sector transformation.