After a decade of record-setting investment, deal-making and VC backing, fintechs find themselves falling back to Earth, fast. After rising year over year to an all-time high of $141 billion in 2021, funding in the sector dropped to $79 billion in 2022 and halved again in 2023 to just $39 billion.
And yet, even if funding has gone from a torrent to a trickle, and even if the wider technology sector is shedding jobs at a record rate — there have been over 250,000 publically announced redundancies over the past 12 months alone — fintechs are still in a position to control not just the speed of their descent, but also where they land.
A controlled descent
However, that control — whether your company hits the ground with a crash or with a bounce — will demand a combination of partnership and parsimony.
The need for financial restraint should be obvious insomuch as in the current environment, investors are prioritizing companies moving towards profitability or demonstrating they can balance burn rate with customer retention and lifetime value, rather than racing after growth at all costs.
But, due to the speed at which technology is driving change within (and beyond) the sector, fintechs can’t simply choose to stand still in order to bring spending under control. There’s a genuine need to keep moving forward and to retain ambition and to do so while retaining your existing customer base.
This point is critical because, even in times of financial abundance, fintechs have been guilty of chasing growth at all costs. It’s okay to move fast and break things, as long as those things aren’t customer relationships or positive brand perception.
Don’t lose your advantage
The inherent advantages of being a digital startup in a world of incumbents can also work against you. Because your brand is developing in real time, there’s no legacy to protect and no legacy systems to slow down the decision-making process. This means an enviable ability to pivot. But changing direction too quickly because a new market or opportunity presents itself can run the risk of alienating existing customers.
Likewise trying to grow market share through attempting to tap into a wider, more diverse customer base can lead to a short-term win and long-term disappointment unless your approach to CX delivery is up to the task of meeting a different type of customer’s needs.
Even if your brand is still in its infancy in your industry’s wider context, delivering and maintaining a positive customer experience is your key point if differentiation. After all, disappointment at service levels delivered by incumbent financial institutions and a perception that those organizations don’t recognize individual needs is typically the reason why you’ve been securing investment and attracting consumer interest.
Customer experience powers growth
This is why refining your CX so that it reflects different expectations — what a Gen Z customer finds intuitive, a Gen X prospect could find frustrating — is key to sustaining growth. And, unless you want to let your burn rate get out of control again, the only way to achieve this level of refinement without breaking the bank or damaging relationships with existing investors (or customers), is through partnership.
If your organization has access to and can partner with the right advisors and experts — especially within the customer experience delivery space — many of these potential pitfalls can be avoided. And, more importantly, considering current economic conditions, costs can be better managed and burn rates reduced, without extinguishing the fire that fueled your organization’s initial success or continued ambition.
A partnership approach
For instance, with the right CX partner, accurate personas can be developed (reflective of new customer types) and aligned with channels of interaction. New customer journeys can be mapped, validated and optimized to perform ahead of any growth campaign. As those campaigns bear fruit and grow the customer base, the right partnership will ensure that you have the capacity to serve each new customer’s needs without pushing up operating costs.
And this is key. As a fintech grows, if every aspect of your business is an in-house operation, then every aspect of the organization has to grow, in terms of resources and budgets at the same time. At best this means investing energy on non-core elements of the business. While at worst it means accelerating burn rate beyond the timeframe of any reasonable return on investment.
Ancillary expertise
This problem can be compounded by the fact that founders — understandably — want to retain control. It’s their ship and they’re steering it. But often, if they can’t delegate or loosen their grip, then that ship will be navigating some very dangerous waters.
In the current environment, fintechs need to recognize which parts of the business are ancillary and which parts are their core competence. They also need to understand that what they consider as ancillary is the right partner’s expertise.
Forging the right partnership, rather than trying to do everything at once, will lower operating costs and boost service levels, particularly in respect to customer experience, and can also increase, rather than reduce, potential for growth — especially if the opportunity for expansion is beyond domestic borders.
The leading organizations in the BPO space are experts in compliance and regulation. At the startup stage, many fintechs are unburdened by regulations. However, as they grow in terms of customer base, asset class, product mix or balance of deposits, they soon arrive at a point where compliance and regulation are as important as innovation.
This is why it’s crucial to partner with experts who understand and are already compliant with all forms of regulation and legislation currently in place in every major and minor financial market. Having access to this level of expertise makes it easy to pivot your business or explore new markets or opportunities in other sectors, or simply know that your business would pass any due diligence conducted before a potential partnership with an established financial services organization.
To learn more about data, automation and GenAI in the sector, read “A date with data: The best practice guide to customer experience in banking and financial services.”