Spearheading through recession in the Fintech world
Economies of scale: In the time of recession, it becomes difficult for financial institutes to run the certain functions in-house due to volume drop like processing checks, printing and sending customer communications, running back-office operations etc.Studies suggest that all above mentioned business got benefited during/ after last recession.Hence financial institutes are in dire need of outsourcing partner who could run these ancillary & expansive functions for them. Fintech(s) must identify these non-core functions of banks where volumes are dropping and build economies of scale around these services.
Out of the box commercial modelling: Since our customers will be going through financial distress & feeling the pressure of reducing cash flow, so think out of box to structure commercials to make the deals attractive. Some of the pointers in this direction could be buy now pay later, increasing payment term, developing new innovations in partnership mode etc.
Cross sell through strategic partnerships: Though cross selling by building strategic partnerships with organizations with complimentary product sets is always on the radar of organizations, however this becomes one of top priority for FinTech(s)to pump up the sales through different channels.
Focus Innovation Vs. Letting go employees: During recession as the sales go down, there is constant cost pressure of reducing team size to manage bottom line. However, letting go employees is a costly affair in terms of knowledge loss, negative publicity of the brand, rehiring/ training efforts (at the time of new sales). In case there is appetite of retaining some of the good performers even if sales pipeline looks grim at the moment, then one must identify time boxed innovation opportunities those could not be prioritized during non-recession period due to customer commitments & deploy these people on such initiatives by forming task forces/ focused groups to come up with something new that could help organization in cost savings or improved time to market or new product to stay ahead of curve.
Forward-looking attitude: Given that recession is not going to stay forever, one must not completely put breaks to growth engine andkeep the forward-looking attitude alive by staying invested in one or two disruptive investments. Here few of the disruptive ideasthat Fintech can evaluate to stay competitive and secure themselves from future disruptive trends:
Crypto currency payments: Crypto currency or digital currency payments are still far from mass adoption, bringing something that could simplify crypto currency payments is worth exploring and evaluating. Fintech(s) definitively has a big playing field in this area, some of the examples could be supporting digital/ crypto currency through core banking, lending, payment gateway, credit/ debitplatforms and many more.
Digital Vaults: Trends show that there is constant rise in payments through vaults vs. card payments. Moreover, vaults have simplified the micro payments to large extent in last few years. Though this technology is already maturing in countries like India however it has great potential in many other geographies. Further cross border (multi-currency) payments through vault are another area worth exploring and evaluating.
Neo Banking: Covid has made all of us learn a lot by shutting down our physical office premises and working from home. No one has ever imagined the way we have been creative in adopting new ways of working. This has presented us with the adoption of Neo Banking idea, i.e.,new-age online banks without any physical presencewith no or minimal restrictions.
Metaverse Banking: Metaverse concept in banking is not far from reality, given the way investments on simplifying the supporting gadgets are being made and Fintech(s) has big role to play here.
Advance Fraud Detection: Security is always utmost priority for the financial institutes, as the supporting technology is evolving vastly so are the threats to these platforms. To counter these threats,financial institutes will always be in desperateneed of Advance Artificial Intelligence based security systemthat could learn and adapt to these threats as quickly as possible.
Plug and playumbrella platforms: Integrating tons of systems during implementation in fintech world takes hell of effort and time. Fintech(s) must attempt to come up with their umbrella plug and play offerings to speed up the implementations.
Open Banking Standardization: Recently lot of efforts are going into developingthe APIs to unleash the potential of open banking. The next challenge industry would be presented with is standardization of these APIs, currently there are no open banking (API) standards available. Fintech can evolve as open banking market leaderbydriving standardization efforts in this area.
Other Levers: Other levers those could be helpful: consolidation of platforms, cross leveraging of different verticals/ functions, vendor re-negotiation, reducing infrastructure cost etc.
It’s true that recession is an unfortunate event, however it’s also evident that it brings some positive changes in terms of opening new revenue streams, faster disruptive technology adoption, offshoring maturity, reducing company spend and many more. Let’s hope that recession knocking on the door is over soon and it’s not deep enough to create a big dent to industry’ growth.