What does survival of the fittest mean for fintechs in a post-COVID-19 world? What does survival of the fittest mean for fintechs in a post-COVID-19 world? What does survival of the fittest mean for fintechs in a post-COVID-19 world?

What does survival of the fittest mean for fintechs in a post-COVID-19 world?

Thought Leadership 7 minutes to read
Chris Truce

Head of Fintech, Saxo Bank

COVID-19 is an unprecedented test of the resilience of businesses large and small. The crisis has plunged vast swathes of the global economy into a deep freeze. Question is, when the markets thaw will the world will be a different place, or will we fall back into existing trappings? 

Many firms have already started to reduce their capital expenditure, examine costs and more will adapt and evolve their tactical strategies over the next 12 months. COVID-19 has already led to a shift in mindset for many businesses: from an opportunistic point of view pre-COVID, where they sought to invest in boosting revenue and profits, to a focus on survival as firms plan how to stay afloat while waiting for the economy to thaw.

Facing up to reality and partnering up for success
In this climate, fintechs that have yet to find a viable business model or sufficient investor funding will ultimately face an inevitable demise. The question of fighting for survival becomes a reality for more mature fintechs, which already have a viable business model and started generating revenue along with strong and reliable financial backing from investors. From there, the challenge to survive presents two key considerations. One, a need to shore up their businesses to endure the difficult economic conditions. Two, mature fintechs must prove their fundamental value amidst this post-pandemic crises in order to attract fresh funding from the venture community, competing not only against other fintechs but across other markets and sectors that already exist within a VC’s portfolio.

Fintechs that have grown rapidly - perhaps started their international expansion before the crisis - may now find themselves with disparate operations yet to fully develop or mature, but still an important part of their client offering. Others may have been developing proprietary technology – an expensive and time-consuming task – but now find these projects difficult to continue with a partial and/or remote workforce. Not least the complexities that arise trying to brainstorm and collaborate in this new remote working environment in order to combat these challenges. Never-the-less these projects remain vital to maintaining and building value propositions but evidently require a different approach to suit a new reality.

Critically, fintechs and other financial services firms should evaluate their priorities to determine which services and operations should be kept at the business’s core and which should be added or altered to suit the post-COVID environment. APIs, for example, are the software building blocks critical to improving user experience, adding new functionality and broadening access to new asset classes, and they offer an efficient way for fintechs to implement small but impactful changes for the business and for customers. A key pillar of fintech firms’ survival strategy should therefore include carefully planning which APIs are needed to improve or add functionality – for example, firms need to decide whether they want to add access to markets, improving user experience or building new tools – without the need for considerable internal resources.

We have observed that some companies have made strategic decisions to keep engines running by pausing large projects and focusing resources instead on pumping out smaller projects. To be able to tap into these low-hanging fruits for the business, yet at the same time offer a fresh and consistent experience for customers, even fintechs would do well to partner with new tech providers who offer the tools and resources necessary to successfully deliver quick wins for both the company and customers.

Emerge stronger on the other side of COVID-19
Besides delivering quick and sustainable wins through partnerships, fintechs must also consider how to demonstrate value, pre-empt shifts in demand and boost profitability to maintain attractiveness to current and potential investors and secure critical funding. This means they need to focus on their metrics and underlying results. Successful founders must pivot their story to demonstrate they have extended financial runway, managed productivity, and closed sales with a relevant product during this challenging period.

To survive, cutting costs and complexity becomes a matter of life and death for fintechs that want to live through COVID-19 and come out stronger on the other side. As mentioned earlier, successfully delivering punchy and effective initiatives to enhance offerings and bring in more customers is imperative because it brings in revenue. As the industry adjusts, fintechs must find the formula to plan and implement complex technology projects remotely, while keeping costs down and scaling the business to be relevant to customers in a post-COVID-19 world.

COVID-19’s impact and permanent legacy is perhaps still wide open but what is certain is that there will be seismic shifts to fintechs large and small around the world. Survival no longer boils down to just how much backing fintechs have financially, but how strategic and prudent they are in tapping into third party technologies to relieve cost and operational pressures. Delivering viable projects and the small, quick wins could make a real difference to business and customer experience in the long run and buy fintechs time to strengthen their offerings and fundamentals to emerge stronger on the other side of COVID-19.

This article was first published in Fintech Futures: https://www.fintechfutures.com/2020/06/what-does-survival-of-the-fittest-mean-for-fintechs-in-a-post-covid-19-world/

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.