Fintechs need to develop new strategies

The uncertain economic environment, inflation and rising interest rates are leading investors to be more cautious. As a result, fintechs, which until now have focused more on growth than profitability, are finding it harder to raise funds and are having to review their strategy. For their part, traditional financial players are also rethinking their strategies.

Banks lighten their portfolios

Coming into force on January 13, 2018, PSD2, the second European directive on payment services, has introduced major changes withopen banking. Forced to share their customer data with other financial players, particularly startups, banks have also had to adapt to the massive arrival of fintechs on the payment market.

As early as 2017, the Crédit Mutuel Arkéa group decided to turn this upheaval in the sector into an opportunity: it embarked on startup creations and acquisitions, and bought fintech Pumpkin, an app for transferring money from person to person, with the aim of turning it into a neobank.

This year, however, Crédit Mutuel Arkéa has changed its tune and put an end to Pumpkin's activities, which should be closed down in the next few months. The group has also sold its payment subsidiary Mangopay, its online kitty Leechi and its account aggregator Budget Insight.

Crédit Mutuel Arkéa is no exception in today's financial landscape, and other traditional players are following suit, such as German insurer Allianz, which announced on Wednesday that it was shutting down the Heymoney application due to insufficient user numbers.

Fintechs can no longer bet on growth

Fintechs are also developing new strategies. The current uncertain economic climate, inflation and rising interest rates are leading investors to be increasingly cautious.

For a long time, fintechs were all about growth, ignoring profitability targets and relying on fund-raising to offset any losses. But the current context and the reluctance of investors are calling this model into question.

Valuations are falling, and funds are increasingly difficult to raise, forcing fintechs to rethink their plans. The big names in the market have not been spared, like Swedish fintech Klarna, a specialist in fractional payments, whose valuation could be divided by 3 and which has decided to cut 700 jobs, i.e. 10% of its workforce.

Some startups have chosen to seize the new opportunities arising in this context, following the example of French fintech iBanFirst, which has just acquired one of its competitors, Cornhill, a British company specializing in foreign exchange transactions.

French fintech Silvr, for its part, is doing well in this troubled environment: a specialist in "revenue-based financing", an alternative to bank loans and fund-raising, it is receiving an increasing number of requests.