How can fintechs overcome the problem of scaling in an unstable market?

The fintech industry has grown rapidly throughout the last decade, but at the end of every growth phase comes a period of consolidation. While that's not necessarily a bad thing, potentially leading to economies of scale, increased efficiency, and lower prices for consumers, it can also mean a concentration of market power, which can make survival, let alone scaling, difficult. With enhanced compliance standards putting pressure on smaller businesses and socioeconomic factors impacting the entire sector, only fintechs with a robust growth strategy are likely to succeed. So, how can you make sure that your business is one of the successful few?

Is there a secret to fintech scaling at a time of consolidation?

On average, only 25% of fintechs succeed. It's not a great innings. There are many reasons for this, but one of the most prevalent until very recently has been the reliance on an outdated growth strategy. With a focus on growth at any cost, companies pushed to scale, risking their stability to gain access to new customers and new territories. Most of them failed. A new strategy is needed to not only take fintechs through the current period of consolidation, but well into the period beyond. 

Strategic growth tactics for fintechs

Data-driven decision making

Everyone knows that data is important. But not all businesses know how to use data to its full advantage. If used properly, data can fully inform decisions, guiding you towards the best choices for your customers, and therefore your business. In my company, we use data throughout. We don't just track user engagement; we analyse our entire customer journey. Using that information to assess which users stay, why they followed through to signup completion, why other users dropped off, and where they left the platform. When our uptake dropped off, we decided to split test every stage of our onboarding process, until we were able to discover what was preventing people from making the final signup commitment. Then we used that data to smooth out the pinch points and simplify the onboarding process. I can't claim that it was easy, but we were rewarded by an increase in conversion rates of over 600%, which made it entirely worth the effort. 

Perhaps the most important lesson from that whole experience was that most potential customers don't leave a platform because they dislike the product. They leave because they're not comfortable with the interface. Whether it's too slow, confusing, or too sales driven. When you use your data properly, it can show you what the problem is and how to resolve it. 

User experience

User experience (UX) has become increasingly important across all sectors in recent years. But particularly so in finance, where users need to feel comfortable that they know what they're doing before committing their funds. If you can make the experience of using your platform as simple and friendly as possible for your customers, you're more likely to retain them. The aim should be the creation of a frictionless, intuitive interface, that allows your customers to feel comfortable and confident. That way, they'll stick around long enough to make the important sign-up decisions. 

Niche focus

In its formative years, fintech sought to serve everyone. The problem is, as the old adage goes, you can only please some of the people some of the time. The wider and more diluted your customer base, the less likely you are to keep your customers happy. If you have a niche focus, however, you have the ability to tailor your products and services to suit the unique needs of your customer base. Improving your customer service, enhancing your reputation, building long-term loyalty, and differentiating your brand. 

Once you've properly secured that core customer base, and have systems in place to ensure that you can continue to meet their evolving needs, then it may be possible to expand your business into a secondary market. But this can only be done incrementally and with that sustained focus, if you want to keep your business strong and healthy.

Trust and transparency

Trust has been largely absent from the relationship between consumers and the financial industry in recent years. The 2008 global financial crisis has left an indelible mark. So, if you want your business to succeed, you have to show that you are worthy of your customer's trust. Regulation has helped in this area, bringing legitimacy and transparency to fintech. But compliance isn't enough. Customers don't want fintechs to work to the letter of the law, they want them to go further. Maximising security, ensuring constant transparency, being open to third-party security audits, informing customers of potential risks, and openly admitting to their mistakes.  

Education 

Tying in with all of the above is education, something that has always been at the heart of my business. If you want your customers to really trust your business, you have to help them to understand it. And that means educating them. Whether you provide tutorials, investment guides, or webinars, if you want your customers to grow their portfolio with confidence, you have to help them fully understand the space that they're moving into. While fintech is a lot more mainstream than it once was, it's still something completely new to a lot of more traditional investors. So, whether you're working with business customers or individual investors, it will always benefit you to help them better understand the space. 

The fintech industry is finally reaching maturity, but that transition was never going to be painless. There will be attrition. Whether it's a reduction of startups, the merging of SMEs, or the loss of more established names. And that's not easy. But it doesn't mean that you can't make a success, even within the current climate. But if you want your fintech business to scale, you have to take a highly strategic approach. Putting your customers first, ensuring that your products and services meet their needs and are accessible, and ensuring complete transparency.  Keep that in mind, and keep your focus, and your fintech business will not only survive, but grow.