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Fintech Funding Has Reduced, But It Could Be Great News For Customers

Thankfully it looks like the UK has dodged a 2023 recession. Things were certainly bleaker at the end of 2022 when The Economist was not asking if there would be a recession, they were just asking how bad it is going to be.

 Although interest rates have been going up, it also looks like there will be more home loans. Mortage lending is expected to increase by about 1.2% this year, which compares to predictions of a drop in lending from as recently as February.

 The economy isn’t quite roaring, but it is heading in the right direction.

However, this recovery isn’t extending to fintech. Q1 2023 saw an 83% drop in funding compared to the same time last year. Some people would call that a lack of confidence in fintech generally, but there is still a lot of confidence out there.

Look at some of these numbers for reasons why this confidence remains. In 2020, around 58% of American consumers used fintech products or technology to manage their finances. Just one year later, this was 88%. 2021 was a genuine tipping point where fintech stopped being niche or for early adopters - now it’s normal. 

A third of consumers are now comfortable using digital wallets. Most people still trust traditional payment services such as Visa or Mastercard more than their apps, but this attitude is changing.

However, what needs to change for fintech to now adapt to an environment where it is being trusted by more consumers, but there is less cash available for investment in new ideas and services?

I believe that this situation may be creating a golden era for the customer.

Think about the various factors. There is less cash coming from investors so it’s harder to get new brands started. The services that are already available need to make their service as frictionless as possible - so any barriers that prevent adoption are removed. In addition, the customer experience has to be placed at the heart of whatever service is being provided.

The opportunity is out there. Look at this April 2023 survey by Accenture. Although 38% of British adults have a bank account with a digital-only challenger, only 12% use it as their main bank. If you are aged 18-24 then it is twice as likely you will be with a challenger compared to the 55+ age range.

The fintech community should not be crying out at the drop in funding, they should be focusing hard on their service offering and making it so easy to switch to them that there is no reason to not do it.

Think of what the customers really need. Deliver that and make sure they are aware of the reasons why they shouldn’t be using those traditional services any longer. Customers will move. We have passed the tipping point now, it’s easier to gain consumer trust than ever before. Does anyone still have doubts about a service like Apple Pay?

Although there may be fewer new fintech launches this year, I predict there will be a lot of activity as customer-centric services challenge traditional banks and insurance companies - even more than ever before.

Let me know what you think about fintech growth and the opportunities for this sector in 2023.

An era that can be great news for customers

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 June, 2023, 11:21Be the first to give this comment the thumbs up 0 likes

Sorry but I predict exactly the opposite effect of funding winter. Back in the days of ZIRP, fintechs got truckloads of funding and could run on losses for a long time so were able to eliminate overdraft protection and other fees that customers hated about traditional banks.

With funding cratering, fintechs will need to make revenues and profits from their core operations. While they can build more frictionless workflows to attract more customers, they probably need to do what banks have been doing all along to monetize those customers. That's not something that customers are going to love.

To cite a personal example, a leading mobile wallet supported free-of-cost credit card topup for 10+ years whereas, since the middle of last year, it has started slapping a 2% surcharge for the same transaction. Obviously, as a consumer, I'm not thrilled about this fees and I've jettisioned this product.

Hail VC Subsidy.

Neil Glover

Neil Glover

Senior Director, Customer Solutions


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13 Apr


Tunbridge Wells

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