Amid the toughest investment environment we’ve seen in years and economic challenges that show no sign of ending, fintechs need to shake their ‘lone wolf’ reputation.
Writing for Payment Expert, Karine Martinez, Head of Sales at Edenred Payment Solutions, discusses the benefits of a partnership approach, and how the right payments partner can help fintechs thrive.
Fintechs have long been seen as the rebels of the finance sector, stepping away from traditional financial institutions and offering innovative alternatives to the increasingly tech-savvy consumer. Until now, this approach has attracted the attention of investors – both 2018 and 2019 saw about $140 billion invested in the fintech space.
But post-pandemic, unrestricted capital spending has waned, even in this still- booming industry. While predictions show the fintech industry growing at a compound annual growth rate of more than 22% a year, surging from $11.8 billion in 2018 to around $306 billion this year, it’s not immune to the challenges all sectors are facing.
As well as struggling to secure investors and raise funds, they face competition from financial and tech giants like PayPal and Amazon, and are feeling the pressure from often-overwhelming government regulations. Companies must also follow a number of standards including GDPR, GLBA, the Wiretap Act, and the Money Laundering Control Act. Simply keeping up is a business-wide commitment that takes time and eats into a fintech’s resources.
Add to this sharp valuation declines in both public and private markets, dramatic interest rate spikes and rising inflation, and it becomes clear why it’s time for a strategic re-think.
Strength in numbers
Long-term fintech success means hitting reset and abandoning the ‘go it alone’ mentality. At Edenred Payment Solutions we see this in action every day as we work closely with both start-ups and established businesses looking for a reliable and flexible partner to manage their processing, issuing, and account-based needs.
Our partnership with Suits Me is just one example of how successful a partnership approach can be. In 2021, Suits Me partnered with us to enable a wide range of services that would further help its customers, most of whom have faced barriers when trying to open traditional bank accounts. By utilising Edenred Payment Solutions’ technology and licences for issuing cards and e-money, Suits Me is now able to offer services including Debit BIN, Mastercard Settlement, Banking Service, BACs In, CHAPs In, Direct Debit, Direct Debit Indemnity Claim and PayPoint cash load.
By following this lead, and collaborating with the right payment partner, fintechs can tap into the technology and expertise they need to help them scale.
Even traditional banks are taking this approach, with almost 90% of financial institutions considering fintech partnerships to be very important to their business, up from less than half (49%) in 2019.
Finding the perfect partner
Considering the ongoing volatility and tough economic conditions, it’s never been more important for companies to present potential investors with compelling business strategies to receive funding support in 2023. Key to this is finding the right partner who can help grow their product offerings without stepping outside existing regulatory frameworks.
To this end, ‘do what you do best and outsource the rest’ is sound advice, but perhaps easier said than done. Fintechs can thrive or fall depending on the choices they make, so it’s crucial to partner with a reputable vendor since delivery to market, customer service, and the quality of your offering depend so much on them.
Look for a partner that can provide the upgrades, improvements, and access to emerging technologies that ensure you get, and retain, the competitive edge needed to make your enterprise a success. This will also allow you to focus your attention entirely on growing your fintech business.
The fintech industry is facing many challenges and a partnership approach is one of the best ways to overcome them.
Partnerships between an innovative fintechs and an established brand such as Edenred Payment Solutions are an effective way to fast-track speed to market and reduce costs across the value chain. At a time when inflation is higher than it’s been in decades, these efficiencies are an important consideration for businesses in 2023 and beyond.