by John Downie, CEO & Founder, SteadyPay
The journey for startups and scaling businesses seeking funding has become more than just a steep uphill climb. What we’re witnessing is a confluence of factors that have created vultures on a carcass; economic uncertainties, market saturation, increased investor scrutiny, and overlapping customer profiles being just a few pressures that have a huge sway on the mood of venture capital. The proof is in the numbers; global VC investment fell from $531.4 billion in 2022 to $344 billion in 2023—the lowest level since 2019.
Geopolitics have a huge sway over market volatility, and we see this directly prompt investors to act cautiously, often favouring established companies over emerging ventures. The surge of startups, particularly in fintech, has resulted in a crowded marketplace where differentiation is tough. Investors are now setting a higher bar, demanding clear paths to profitability and sustainable growth. Add to this an increasing overlap in target customer bases, fuelled by the emergence of startups creating integrated solutions that can be very similar in the solutions they offer, and this complicates the investment scenario, making it crucial for each business to uniquely position itself to attract funding.
How to win friends and generate revenue
Where there is competition, it’s the ability to stay relevant that can generate you revenue. As a fintech, the chances are you have already amassed a decent amount of data from your customers, and it’s time to begin leveraging this.
There are an incredible number of financial products you can begin to offer existing customers. Be holistic. Fintech, and in particular fintech mobile apps – have some of the lowest retention rates of any sector, so you need to offer them something they might jump ship for to get elsewhere. Don’t have the in-house capabilities to do it yourself? Look to collaborate with external businesses that offer white label solutions that can plug directly into your current offering.
Some obvious revenue-generating products you can upsell to your existing customer base include; Banking as a Service (BaaS), remittance services, investment and wealth management, insurance products, payment solutions and credit services. If you’re more risk-tolerant, then you could even look to offer crypto exchange.
I’m seeing more of a trend in fintech where companies are increasingly exploring equity swaps and mergers. It’s a great way for businesses to trade on their strengths and diversify their offerings. A typical example might be a digital bank that merges with an investment platform to offer seamless banking and investment services, or a remittance service that acquires a credit-building company to provide integrated financial wellness tools. Working with other fintechs in a symbiotic relationship can make you more operationally efficient, reduce overheads, retain customers and – perhaps most importantly – appeal to new ones.
Lend a hand, retain a customer
A significant opportunity for fintechs is in lending. Bank of England data showed that consumer credit grew 8.1% year-on-year in 2023, a five-year high. Appetite is there, and with a UK market size north of £7 billion, the embedded lending sector really is becoming the flagship opportunity for revenue generation within the embedded finance sector. From a user experience standpoint, there is almost a prerequisite for fintechs to now seamlessly integrate lending options directly into their digital platforms and offer their customer base the most complete experience.
I don’t see the rough macroeconomic waters smoothing out any time soon. With half of the world’s democratic nations holding elections this year, there is no crystal ball that can predict what 2025 and beyond might look like. The time to future-proof is now. Protect your customer base. Leverage data. Upsell. Create a seamless user experience. But, most importantly of all, diversify. The future of financial services will be holistic, and those that don’t step up to the plate and begin to embed more offerings for their customers to choose from face a pretty harsh reality.