The once-abundant funding sources have vanished, casting a shadow over the industry's future. Fintechs must reassess their operational blueprints – growth at any cost is no longer appealing to investors.

As we find ourselves in 2023, the repercussions of these seismic shifts are growing increasingly apparent. The industry teeters on the brink of another transformative decade, poised to harness the potential of emerging technologies and trends that will continue to shape the course of financial evolution.

Sustainability is the new go-to-market

In a challenging market, innovation is still crucial and must be balanced with risk mitigation to ensure sustainable growth. In the first half of 2023, fintechs focused on improving their operational efficiencies and cash flow to help weather economic difficulties and remain attractive to investors.

Reducing operational expenses and taking a less aggressive stand with business development and growth is important. In the past, fintechs focused on narrow product propositions, addressing a specific need. While such a focus remains for startups, this is not enough. Partnerships and third-party platforms allow fintechs to drive revenue and improve the customer experience, helping build a strong foundation in a volatile market.

Although a customer focus has traditionally been fintech's calling card, customer trust and loyalty are critical when acquisition cost is heavier to bear. Smaller service providers are less able to accommodate the acquisition cost and will struggle if they lose focus on consumer loyalty and trust.

Starting small, testing big with industry insights

Fintechs are under pressure to raise funds with evidence of product market fit. Even corporates are under budgetary constraints and are reluctant to spend large amounts before validating a concept. A Minimum Viable Product (MVP) is enough to win early adopter customers, but not so many that significant time and money are invested in creating them. Fintechs, startups, and corporates would greatly benefit from teaming up with established embedded finance players who can help them through this process.

Teaming up with infrastructure providers helps fintechs and corporates demonstrate market traction. Traction has become more important than ever - the progress and momentum of a business will sway or deter investors and determine whether a startup receives any part of the dwindling fintech investment pot. And in the corporate boardroom, it will make or break an initiative. Traction is measured in various ways, including revenue, user percentage growth, burn rate, revenue, retention and the quality and quantity of partnerships. Startups should keep a close eye on these metrics, especially when profitability is tough to achieve in the current economic climate.

Time to stop chasing growth at any cost

The era of prioritising growth at any cost has passed, evident in the ongoing wave of job cuts sweeping through the tech sector. Pride must be set aside to allow growth ambitions to temper with financial prudence.

Of course, fintechs can employ various strategies to attain this goal. Establishing partnerships with embedded finance providers or banking institutions empowers fintechs to expand their customer base and corporates to serve better their existing clients. Not only that but enter fresh markets, enhance brand recognition, and expand regulatory and industry knowledge.

Dwindling investment isn't the death knell for progress and innovation in the fintech industry. On the contrary, it prompts the opportunity for sustainability and course correction. Fintechs still hold the power to reshape the financial globe.