This year marks the 10th anniversary of the fintech phenomenon.
Companies such as E*TRADE, Rocket Mortgage, and TurboTax began to disrupt the established financial services sector well before 2012, but that year marked the turning point when fintech morphed into a sustained movement that would drastically change how most people manage their money.
If you’re a fintech startup, you will face four main types of competitors over the next decade:
- Traditional financial firms offering more of a “super app” experience with strong member benefits and perks;
- Advanced decentralized finance protocols that can offer financial products that involve real-world assets;
- Increasingly common embedded financial products sold by non-financial firms;
- A government-issued CBDC in many (but not all) countries.
Your firm will need a very strong value proposition to compete with all four types of competitors.
This leaves most firms with two options over the next decade. One avenue is to specialize in a handful of products or services that you believe will have value on their own that consumers will sign up for despite robust competitor ecosystems. Alternatively, you need to develop a comprehensive strategy to compete and build a compelling suite of products, services and perks.
How can fintech startups prepare to compete in the next decade? Here are four steps you can take to remain competitive.
Any corporate strategy document will remain a fantasy on paper if your tech infrastructure is outdated and incapable of meeting your future needs.
Your tech stack must support fintech’s cutting edge
The foundational step of any long-term strategy for the 2020s is to revamp your firm’s tech stack to support future needs. You will need modern tech infrastructure that can support greater cross-product automation, a sophisticated AI assistant, more integrations with external parties such as the crypto ecosystem, and non-financial perks/benefits.
The process for improving your tech stack varies based on the type of firm. If you work for a large bank still running COBL, the first step is likely a massive investment in a multi-year process to migrate to a modern and streamlined tech infrastructure. If you are a relatively young fintech company, you generally have more “white space” to design your stack. The challenge for smaller companies isn’t dealing with decades of tech debt; rather, it’s optimizing limited engineering resources to build the best possible tech stack.
Modernizing tech infrastructure is a difficult and expensive proposition. Generally speaking, the best way to get company leadership on board with such investments is to highlight what competitors are doing to help them understand the competitive threat.