Fintech
Why a CX Partnership Will Take the Pressure Off Your Fintech –
As financial technology funding continues to decline and existing investors’ pressure for fiscal responsibility continues to increase, finding the right customer experience delivery partner to help control spend and return on investment could ultimately decide whether your organization will thrive or simply survive in the current economic climate.
After a decade of record-breaking investments, deal-making, and VC backing, fintechs are quickly coming back to Earth. After growing year-over-year to an all-time high of $141 billion in 2021, funding in the sector has declined to $79 billion in 2022 and halved again in 2023 to just $39 billion.
Yet even as funding has gone from a torrent to a trickle, and even as the broader tech sector is shedding jobs at a record pace, there have been over 250,000 publicly announced layoffs In the last 12 months alone, fintechs are still able to control not only the speed of their descent, but also where they land.
A controlled descent
However, such control, whether your company collapses or grows again, will require a combination of partnership and parsimony.
The need for financial restraint should be obvious, as in the current environment investors are prioritizing companies that are targeting profitability or that demonstrate the ability to balance burn rate with customer retention and lifetime value, rather than chasing growth at all costs.
But given the speed with which technology is driving change within (and beyond) the industry, fintechs can’t simply sit idle to keep spending in check. There’s a real need to keep moving forward and maintain ambition, and to do so while retaining their existing customer base.
This point is crucial because, even in times of financial abundance, fintechs have been guilty of chasing growth at all costs. It’s okay to move fast and break things, as long as those things aren’t customer relationships or positive brand perception.
Don’t lose your edge
The inherent advantages of being a digital startup in an owner-driven world can also work against you. Because your brand is developing in real time, there is no legacy to protect and no legacy systems to slow down your decision-making. That means an enviable ability to pivot. But pivoting too quickly because a new market or opportunity presents itself can run the risk of alienating existing customers.
Likewise, trying to increase market share by attempting to tap into a larger, more diverse customer base can lead to short-term victory and long-term disappointment unless your approach to CX delivery is up to the task of meeting a different set of customer needs.
Even if your brand is still in its infancy in the broader context of your industry, providing and maintaining a positive customer experience is your key differentiator. After all, disappointment with the service levels provided by incumbent financial institutions and the perception that these organizations do not recognize individual needs is typically the reason you’ve won investment and attracted consumer interest.
Customer Experience Fuels Growth
That’s why honing your CX to reflect different expectations—what a Gen Z customer finds intuitive, a Gen X prospect might find frustrating—is critical to sustaining growth. And unless you want your burn rate to spiral out of control again, the only way to achieve this level of refinement without breaking the bank or damaging existing investor (or customer) relationships is through partnerships.
If your organization has access to and can collaborate with the right consultants and experts, especially in the area of customer experience delivery, many of these potential pitfalls can be avoided. And more importantly, given the current economic conditions, costs can be better managed and burn rates reduced, without extinguishing the fire that fueled your organization’s initial success or continued ambition.
A partnership approach
For example, with the right CX partner, you can develop accurate personas (that reflect new types of customers) and align them with channels of engagement. New customer journeys can be mapped out, validated, and optimized to work before any growth campaigns. As these campaigns bear fruit and grow your customer base, the right partnership will ensure you can meet the needs of each new customer without increasing operational costs.
And that’s critical. As a fintech grows, if every aspect of your business is an in-house operation, then every aspect of the organization needs to grow, both in resources and budgets. At best, that means investing energy in non-core elements of the business. At worst, it means accelerating the burn rate beyond the timeframe of any reasonable return on investment.
Accessory competence
This problem can be compounded by the fact that founders — understandably — want to maintain control. It’s their ship and they’re steering it. But often, if they can’t delegate or loosen their grip, then that ship will be in very dangerous waters.
In the current environment, fintechs need to recognize which parts of the business are ancillary and which are their core competencies. They also need to understand that what they consider ancillary is the expertise of the right partner.
Creating the right partnerships, rather than trying to do everything at once, will reduce operating costs and increase service levels, particularly in terms of customer experience, and can also increase, rather than reduce, growth potential, especially if the expansion opportunity extends beyond national borders.
Leading organizations in the BPO space are experts in compliance and regulation. Many fintechs are not burdened by regulations when they start out. However, as they grow in terms of customer base, asset class, product mix, or deposit balance, they quickly reach a point where compliance and regulation are as important as innovation.
That’s why it’s critical to partner with experts who understand and are already compliant with all forms of regulation and legislation currently in place in every major and secondary financial market. Having access to this level of expertise makes it easier to pivot your business or explore new markets or opportunities in other industries, or simply know that your business would pass any due diligence conducted prior to a potential partnership with an established financial services organization.
To learn more about data, automation and GenAI in the industry, read “A Data Date: The Best Practices Guide to Customer Experience in Banking and Financial Services.”