No man is an island when it comes to fintech, and in the pursuit of a better world driven by better financial services, it’s clear that standing together means progressing together. This September at The Fintech Times, we’ll be delving into every corner of what it means to be a fintech ecosystem. We’ve dedicated the entire month to investigating what makes a successful fintech ecosystem, how fintechs can work together more effectively, as well as providing a regional view of some of the industry’s best examples of community collaboration.
Moving on to our final week of coverage into fintech ecosystems, we’ll be using this opportunity to discuss the role of expansions, mergers and acquisitions within the fintech industry.
Today we begin the week with a highly-anticipated investigation into the expansion of fintech services.
To expand is to be successful, and it’s an ambition that all fintechs share. Unfortunately however, the road to becoming a truly global brand is never an easy one to navigate, and an appetite for success will largely depend on individual factors unique to the characteristics of the business.
But fear not, as we have consolidated a diverse range of industry experts to share with us what they believe to be the tools critical to a successful expansion.
Launching our discussion, here Irene Skrynova, global head of customer success at the payments company Unlimint, outlines the tools a fintech must have to hand if it is to successfully expand within today’s market.
Skrynova underlines innovation as a necessity for the most competitive fintechs, and when a larger player cannot adapt quickly enough due to its internal limitations, Skrynova says the pursuit of a fintech partnership in this instance can cultivate many various benefits for expansion.
In regards to expansion, the right partnerships can generate “new products and revenue streams,” comments Skrynova.
“Whether in the form of a pilot project, or a fully implemented product, corporations and startups share the burdens and therefore reduce costs, risks, and project timelines, fast-tracking the development of disruptive solutions,” she continues.
Skrynova goes on to explain how partnerships are able to establish a solid foundation for both companies to grow and facilitate the development of the ecosystems in which the companies operate.
Continuing her analysis, Skrynova affirms that partnerships are capable of reaching new markets and demographics.
“Incumbents have built up a solid and loyal customer base over many years. Collaboration with disruptors to expand to new geographies or customer segments can protect and increase those customer numbers,” she comments.
Circling back, Skrynova emphasises how innovation is the key to successful expansion, and through the right partnerships, fintechs will be able to deliver innovations quickly and expand at speed.
Recognising the development of in-house solutions as costly and time-consuming for larger players, Skrynova comments that “partnering with disruptors which have already created valuable capabilities or filled a distinct market gap can be a very effective route.”
“Incumbent firms which spot such valuable capabilities and know-how at an early stage can gain a valuable advantage, so incumbents should seek such partnership possibilities when they see a need to move quickly in a new direction,” Skrynova concludes.
Automating dead weight
Continuing our conversation, Catherine Dahl explains that for any tech company to expand and grow at the pace required by investors, “it needs to be an efficient company.”
“That does not mean profit, but it does mean leveraging technology to move faster on less people,” she continues. “Fintech is no exception.”
Dahl is the CEO and co-founder of the accounts payable automation software company Beanworks. She led the startup to and through an acquisition in 2021, landing them under the Quadient umbrella of automation companies.
Dahl explains how Beanworks needed to grow 100 per cent year-on-year (YoY) to attract investment to scale that growth rate and get the solution impact it wanted and the ROI the founders wanted.
In order to achieve this, “we had to automate as much as we could, as soon as we could afford it,” Dahl comments. “Software was the way we did it.”
The company started its journey with a CRM that it could leverage to automate and use as a true customer relationship management system, as opposed to an exclusively sales-focused tool.
“We invested in certifying our team to use this tool to its maximum potential,” she continues. “We used as many free applications as we could at first, then paid for it when we had to.
Although any software company will have a huge development tech stack, Dahl questions how many actually think outside of that department and take it from lead to lifetime customer.
“Of course, Beanworks by Quadient is an accounts payable automation platform that automates a manual accounting process where we save our customers FTEs as they deploy it,” she comments.
“But we also provide the data visibility into an area that was traditional blind – letting operational managers see the spend in real-time enabling them to make faster and better decisions.
“With the right set of tools in place, we started to grow at more than 100 per cent in 2017 and have not slowed down since. This was an essential strategy for us.”
Regulations and legislation has continued to match the pace of growth within the fintech industry. In this light, Christian Lund emphasises how “it’s imperative that these organisations are set up in a way that allows them to adhere to new regulations at a moment’s notice.”
As co-founder of the document generation platform Templafy, Lund explains how the key to achieving this is by getting document generation processes in order.
“Business is often done through the canvas of a document. From a pitch deck to a contract to an email, all of these pieces of business content often house critical information for moving a company forward,” he says.
To solidify his point, Lund points to data that suggests that 84 per cent of employees in the US agreed that content is the most important driver of business success and that it is essential in regard to revenue.
According to his source, one-third of respondents said that more than half of their company’s annual revenue is directly connected to the content.
“However, this value can all be diluted if your document isn’t up-to-date with the latest regulatory language necessary,” adds Lund.
Lund’s underlying point is that fintech companies must ensure that they have an adequate document governance policy in place to scale their business.
According to Lund, this can be done by implementing content enablement solutions that intelligently connect content to people within their existing workflows.
“This allows enterprises to remove the responsibility of protecting their brand and security from individual employees and put it on automation technology instead,” he explains.
“When this is the case, companies no longer need to struggle with documents that miss mandatory information, classification and metadata.
“Content enablement allows for easily managed templates while enforcing mandatory classification and automating data security policies.
“Through these tools, fintech organisations can truly scale business document creation and allow documents to reach their fullest potential, without sacrificing compliance, security or revenue.”
Niche and nice
For John Dearing, “New fintech startups are entering the market every day and too many make the mistake of trying to serve too many customer segments too quickly.”
Dearing is the managing director and partner at Capstone Strategic, an M&A advisory firm that provides expertise in the areas of strategic growth, due diligence, valuation and prospect evaluation.
To expand successfully, Dearing advises fintechs to focus on one area and become the go-to for that niche.
“Whether it is a focus on product-specific lending, fraud prevention, or platforms to streamline process and workflows,” he continues, “it’s best to identify the niche and expand based on that vision and mission.”
Although the offering needs to be niche and specific, Dearing goes on to explain that in order for a fintech to successfully expand, its offering must be user-friendly and easy to use.
“If apps and website interfaces are buggy and overly complex, no one will stick around to use the product,” he says.
“For M&A consideration of customer interfacing tech companies, it is critical to review both effectiveness and user ease of the current version and what it will mean to scale during growth, especially for older customers who are not as tech-savvy.”
Dearing confirms that fintechs will shape the future of global finance. As a piece of parting advice, he circles back with “those that find the right niche and make their technology platforms easily accessible are the most likely to expand into new markets and beyond borders.”
The right mindset
In concluding our conversation, for now, here Vikas Gupta outlines the three elements that drive the successful expansion of fintech services.
Gupta is the CEO of Abizo, a fintech start-up based in Reno, Nevada that provides a financial services platform for rental properties, providing a platform for rent collection, banking, lending and insurance.
Gupta urges the audience to consider three things.
“The first two are knowing what you’re good at, and knowing what you need to be good at to win,” he explains.
“If the distance between what you’re good at and what you need to be good at is too far, then you may want to look for a third-party service or tool to provide that capability.”
He then goes on to detail the third piece of advice as knowing what’s going to differentiate you in the market.
“Generally speaking, if certain capabilities are not differentiators (e.g., everyone needs bank statements, but you’re unlikely to win by providing a better bank statement), then it may make more sense to outsource those so you can focus your energy and innovation on where you can differentiate.”