A reflection on Fintech: taking inspiration from the article „Detour: An altered path to profit for European fintechs“, published online by McKinsey & Company, it is important to think about the present and future state of health of the Fintech sector, also considering the historical context of global health emergency we are living.
The prospects of Fintech
Startups and Fintech companies have allowed sectors such as banking and finance to take the first steps towards a finally agile and digitized evolution. Just the speed of use and implementation of new features is one of the features that most characterize this type of innovation. Although this and other strengths make Fintech an attractive sector, it risks slowing down abruptly after a period of very accelerated development. The reasons? Above all, the economic crisis that followed the Covid-9 pandemic. If, on the one hand, this crisis has further emphasized the need to digitize processes and solutions, a discourse that is also valid for the universe-retail, on the other hand, it could cause a major reorganization of the Fintech system. Acknowledging the existence of this new scenario, the article proposed by McKinsey & Company suggests, as a possible response to difficulties of the present, but especially of the future, an adjustment in practices and policies for Fintech companies, expressed through four actions to be taken into high consideration.
Fintech: the next step
The advent of technologically advanced solutions to meet the needs of the banking and financial landscape has been a real revolution, fueling the development of Fintech companies and startups and bringing their rating to the stars. Processes and innovations that, before this „revolution“ were developed during a very long time, are now carried out within a few minutes.
Fintech has been able to return dynamism, speed and wide range of use to the areas mentioned above and this is probably the main merit that can be assigned to this new course. However, despite the obvious advantages that banking and financial operations carried out through Fintech solutions guarantee, the path to profitability for startups and companies in this sector, already complex before the epidemic, now appears even more uphill. One of the causes highlighted by the article concerns the reduction of external financing, primarily from venture capitalists. It is unavoidable to note that, behind this collapse in available funds (-30% in Europe in the first half of 2020 compared to the previous year), the economic uncertainty resulting from the health emergency plays a decisive role.
Here the issue, talking about Fintech becomes serious because we are talking about a critical structural problem since, for many companies, external financing serves to fuel a cycle that needs time and money before reaching profitability. In addition to this, the financial crisis has exacerbated the fragilities of a business model that, when compared to that of the big banks, is unsustainable in the medium term due to a reduced ability to define and implement a profitable revenue system.
There are several actions aimed at strategic adjustments recommended to reduce the risks arising from this emergency and to make the best use of the sector’s potential.
The first of these suggests a greater focus on the areas of intervention that can really bring added value, cutting instead any possible unnecessary costs. It is also necessary to pay particular attention to changes in user needs, so as to ensure a rapid and targeted response. The third recommended action concerns a review of your business model.
The most interesting action, according to MOLO17, is the latter. For companies and startups Fintech that aim to consolidate their position and guarantee a business model, reaching cutting-edge technologies and qualified personnel through collaborations and/or acquisitions is a quick and ideal solution to maintain their competitiveness, all the more so if the skills acquired are, in some way, complementary to those already possessed.
Choosing the right digital partner, both for Fintech and other evolving sectors, is the wiser choice. For this reason, MOLO17’s commitment to offering itself as a reliable strategic partner with cutting-edge skills and knowledge in the development of innovative technologies represents a resource in the search for a partnership able to guarantee added value. MOLO//17 creates value through change. In a world that is evolving faster and faster, we make our customers come before the others. We are the ideal, agile, professional and reliable partner for those who want to become the technological reference point in their sector.
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