Fintech

Why a CX Partnership Will Take the Pressure Off Your Fintech –

Published

6 months ago

29 July, 2024

Why a CX partnership will relieve pressure on your fintech. Banking building with futuristic look surrounding it.

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.”

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

Source

Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

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Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”