Signs of Caution Ahead for FinTech — FinTechtris

Signs of Caution Ahead for FinTech — FinTechtris

2022 is the year that modern FinTech faces its first significant test.

Traditional financial institutions and other industry pundits see this as a defining moment for fintechs, whose high-flying valuations came with new funding rounds (every 12-18 months) instead of actual growth. Only true industry heavyweights are expected to emerge from the current downturn. The challenge will test fintechs and companies of all sizes — from early stage startups, established mid-size firms, to enterprises.


An immediate concern lies with these groups is connected to launching a minimum viable product (MVP). Funding is needed to create a prototype, run testing with beta users, and iterate. However, VCs and other investors have tightened their checkbooks in the past year — many cancelling commitments to startups abruptly. It’s a classic “chicken-and-egg” dilemma for founders: ‘funding first to build’ VS. ‘building first to get funded.’

For young companies able to gain angel investors or enough funding, there’s also increased scrutiny in raising again soon after initial launch. Gaining early traction and ongoing growth from early adopters makes or breaks a project. The common thread that separates those with strong teams & MVPs comes down to:

  • Value proposition: what is an end-user ultimately “buying”, OR what pain point is being addressed (in a differentiated way)? why should a prospective customer sign up (or stay) with this product/company?

  • Solid business model: this is a mix of monetization path, ability to scale users and activity, and transaction needs; ultimately it’s all about unit economics such as cost per acquisition of user and net revenue per user;

  • Acquisition Strategy: not only growing new users monthly, but incentivizing them to increase usage of your platform; dormant users, accounts without balances, and unused cards are only a cost center for platforms;

To be the “Stripe/Venmo/etc. of [blank]” is no longer enough. Founders must dig deep (now more than ever) and focus on why their platform is needed and what’s being offered (to address the user’s core need).


For established, mid-sized firms (with an existing platform & clients), the challenge shifts to further building user base and increasing activity per user (such as deposit balances, card spend, services used). Doing so may require exploring new products from new vendors/providers OR building a program stack and owning in-house.

Product teams can narrow down what should come next, but the true challenge comes in choosing a path forward:

  • Building a product from scratch in financial services is a ‘tall task’ due to licensing, banking stack, and the need for multiple parties (payment networks & processors, back-office compliance, card issuers, etc.).

  • Going with Banking-as-a-Service (BaaS) providers isn’t straightforward either — regulators are already concerned and calling out compliance oversights of fintechs (more to come in next week’s post).

  • Being a referral partner to an existing program comes with minimal obligations, but also minimal revenue (e.g. one-time referral fee) and no longer owning the user relationship (since there’s a handoff);

Making the wrong choice of path or provider leads to a loss of time and resources, which is crucial in a hyper-competitive financial services market. We rallied top discussion topics to consider in this post last year.

Overall, the next six months (end of Q3 through Q1 2023) will tell different stories — the early stage startups able to gain initial funding to launch, and others continuing to wait for their opportunity. For mid-sized companies and enterprises, what they deliver next AND how (build, partner, refer) will define long-term success. Adding to this mix is whether or not economic conditions improve soon — a judgement call that fintech firms of all sizes need to make.

Go to Publisher: Articles – FinTechtris
Author: William Morales, Founder