We’ve all seen the headlines: Fintech is struggling. Since last year, valuations are down 70%-80%, deal activity is down 67% and layoffs have plagued many former industry favorites.
But fintech is resilient. Innovation continues to drive new developments in lending, payments, crypto and, in particular, infrastructure, showing that the industry still has lots of room for growth. And even though investment activity decreased this year, it still remains well above where it was in 2019 and 2020.
Infrastructure providers have a unique opportunity to be a bright spot amidst all the doom and gloom. Over the years, infrastructure has enabled fintech companies and non-financial services companies alike to seamlessly integrate financial products into their platforms.
However, as the market grew crowded, infrastructure providers have started competing over who can develop the least expensive product and sign the most fintech companies. The infrastructure market is overlooking a pivotal opportunity to build additional product capabilities that address pain points arising from the struggles of fintech.
Infrastructure providers can help connect fintech companies with incumbent banks so that they can both reap the benefits of the interest rate environment.
Infrastructure providers must reprioritize and find a way to grow their capabilities for their current customers instead of just signing new ones. To do this, they’ll have to take a closer look at the problems those customers deal with on a daily basis. What does a fintech company do when it’s under a fraud attack? What does a new compliance order in the U.K. mean for their business? How do they retain customers who are terrified by news of skyrocketing interest rates and inflation?
These are the questions the leaders of the fintech industry face daily, and infrastructure providers need to understand how they can help answer them.
Identifying and addressing pain points
The influx of prodigious amounts of cash in the financial infrastructure sector has crowded the space with newcomers. Addressing specific fintech pain points is not only a way to help the fintech industry out; it’s also a way for infrastructure providers to differentiate themselves and show that they provide real value.
The draw of additional customers and revenue streams has caused fintech companies to explore international waters. In an increasingly globalized world, international coverage is no longer optional.
Infrastructure providers must meet their customers’ appetite for global growth by ensuring that their platform is available in countries outside the U.S. They also need to ensure their platform helps fintech companies stay compliant with rapidly changing global regulations — more on that below.