Over most of the past decade, fintech firms have experienced rapid growth and increasing consumer adoption, fueled by digitization, changing consumer behaviors, and abundant investor funding. In response to a continued inflow of investment funding, many fintechs prioritized hyper-growth above all else, focusing on acquiring users over achieving profitability.
In 2022, the funding environment shifted significantly as economic conditions deteriorated. Investors grew more risk averse and emphasized profitability over growth. As a result, fintech valuations dropped precipitously.
Invasion of the Fintechs:
During the past decade, fintechs have profoundly reshaped certain areas of financial services with their innovative, differentiated and customer-centric value propositions, collaborative business models, and cross-skilled and agile teams.
These shifts in marketplace behaviors forced most fintech firms to focus on building sustainable and profitable business models, moving away from unbridled pursuit of scale. Many fintech firms needed to re-calibrate their cost structure. This resulted in layoffs, reductions in marketing budgets, and even a closing of existing customer relationships that did not meet minimum revenue or engagement criteria. This transition also required a review of existing business models, opening doors to potential M&A, partnerships and collaborations.
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