This year marks the 10th anniversary of the fintech phenomenon.
Companies such as E*TRADE, Rocket Mortgage and TurboTax began disrupting the established financial services industry long before 2012, but this year marked a turning point when fintech morphed into a sustained movement that would radically change the way which most people manage their money.
If you are a fintech startup, you will face four main types of competitors over the next decade:
- Traditional financial companies offering more of a “super app” experience with strong member perks and benefits;
- Advanced decentralized financial protocols that can offer financial products involving real-world assets;
- increasingly common integrated financial products sold by non-financial companies;
- A government-issued CBDC in many (but not all) countries.
Your business will need a very strong value proposition to compete with the four types of competitors.
That leaves most companies 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 and that consumers will sign up for despite robust competing ecosystems. Alternatively, you need to develop a comprehensive strategy to compete and create an appealing suite of products, services, and benefits.
How can fintech startups prepare to compete in the next decade? Here are four steps you can take to stay competitive.
Any business strategy document will remain a paper fantasy if your technology infrastructure is outdated and unable to meet your future needs.
Your tech stack needs to support the cutting edge of fintech
The fundamental step in any long-term strategy for the 2020s is to revamp your company’s technology stack to meet future needs. You will need a modern technology infrastructure that can support greater cross-product automation, a sophisticated AI wizard, more integrations with external parties such as the crypto ecosystem, and non-financial perks/benefits .
The process of improving your tech stack varies depending on the type of business. If you work for a large bank that still runs COBL, the first step is likely to be a massive investment in a multi-year migration process to a modern, streamlined technology infrastructure. If you are a relatively young fintech company, you usually have more “white space” to design your stack. The challenge for small businesses isn’t managing decades of tech debt; rather, it is about optimizing limited engineering resources to create the best technology stack possible.
Modernizing the technology infrastructure is a difficult and expensive proposition. Generally speaking, the best way to involve company leadership in such investments is to highlight what competitors are doing to help them understand the competitive threat.