This year’s Fintech Nexus did not disappoint! The gathering and active discussion and debate among participants showed the resilience and enthusiasm of the industry. There was plenty of 1:1 networking and the opportunity to reconnect with friends and relationships while also meeting new connections. And of course, there were many, many parties where conversations continued through the night. There was a recognition that things are tough and we need to get through this cycle. The optimism for the future was contagious with an understanding that great solutions and companies are being created right now – the future is looking bright beyond today’s challenges.
Here are some takeaways from this year’s conference:
1. The current environment is tough and one that we have not seen since the dot.com bust. Investor appetite has dramatically slowed since exits are unclear. This is a cycle, and growing companies need to manage their runway to survive and come out the other end. Focus should be on profitability and unit economics while adhering to regulatory compliance. Existing fintechs that come through the cycle will be very strong. Scale in revenues and customers matter—M&A activity is expected and will require creativity to find curated buyers, build relationships, and generate demand. Financial Technology Partners / FT Partners Current
2. Despite this, the fintech industry is poised for strong growth with companies that have proven and vetted their value propositions and business models. When our world went digital post-COVID there was a run-up in investor demand and some companies with unproven business models continued to raise funding through multiple rounds. The recent decline is a normalization from this hypergrowth. The outlook for fintech is incredibly promising with strong forecasted growth in revenue and margin—driven by cutting-edge innovation with products that start with the underlying customer problem to be solved. It is expected that venture capital will go back to basics and require proof of business models before further funding rounds—resulting in strong and resilient companies going forward. QED Investors
3. Fintech lenders see an opportunity to finance small businesses in their time of need as they deal with economic headwinds. Fintech lenders see a great opportunity and responsibility to leverage data and analytics to drive underwriting efficiency, access a broader set of data to assess the financial health of a business at a fairer price, and provide transparency to help small business owners compare their options so they can make decisions that improve their financial standing over time as their business grows. Lendio Funding Circle US Credibly Nav Technologies, Inc. Intuit American Express
4. Financial products and services for the traditionally underserved need to be built uniquely and meet customers where they are. This requires being customer-obsessed to understand the customer through significant research and feedback loops. There should be no preconceived notions when approaching product design—trust is built by creating true value for customers. Tala Commonwealth Block
5. More work is needed in the industry to address the root causes of disparities in the treatment of marginalized segments of the population. Segments of the population are not reflected in credit bureau data; housing appraisal values can differ between white and people of color; the number of black or women-owned banks has declined through the years. These issues need to be addressed and remediated since access to credit and homeownership are paths to prosperity. Experian FairPlay AI Ready Life
6. Fintechs and banks are embracing collaboration to create win-win opportunities. Fintechs focus on cutting-edge product innovation and customer experience while benefiting from a bank’s compliance systems and lower cost of capital. A fintech can create a network of banks to manage asset/liability management, and banks can gain access to digital channels to grow deposits, loans, and customers. Embedded finance will create many opportunities with new kinds of providers, but execution will be very complex since significant cross-functional (marketing, loyalty, IT, product, strategy) coordination will be required at the partner with people who may not understand the complexities of payments and/or lending. Other requirements include top management buy-in, skill to navigate a large company, and strong due diligence at the beginning of the relationship. QED Investors Upgrade Inc. Netspend CardFree Mastercard Jifiti LiftForward
7. Many stakeholders are excited about the power of open banking, including the regulators. Open banking can enable financial service providers to see a more holistic view of the customer. The automated use of such data creates a better customer experience and reduces errors. These advancements could make it easier for a customer to switch providers leading to an increase in competition. The CFPB expects rules to be completed next year and is seeking engagement from market participants including fintechs and intermediaries. Privacy remains a concern as is the risk that detailed transaction data could be used for other purposes. Codat Lili Consumer Financial Protection Bureau
As we get through this rough patch, we will emerge stronger. I’m looking forward to seeing what is created and participating in Fintech Nexus again next year!