While the digital transformation has waged its war of change across all industries, in few sectors are the effects of this trend more evident than in FinTech. To illustrate this point, consider this statistic: In 2010, US FinTechs garnered less than $1 billion in venture funding; by 2020, that number skyrocketed to $20.5 billion.

In this blog series, we’ll explore the meaning behind these numbers and shed light on the opportunities that await.

Customer Acquisition

You don’t need us to tell you how critical and competitive customer acquisition is in the FinTech space. But you might not know just how critical and competitive it may be.

For example, advertising spend has increased to $24 billion thus far in 2021—nearly triple from the ad spend in all of 2016. While the product is certainly important for players in FinTech, customer acquisition and retention may be equally so.

Square’s Cash App recently demonstrated an example of some creative and effective customer acquisition. Their social media campaign #CashAppFriday garnered considerable traction and attention by encouraging customers to tweet about the product every Friday in a campaign built to send their users money.

In a similar move, Step targeted its younger audience with remarkably effective campaigns on TikTok like #TeamBlue / #TeamPink / #TeamYellow where users could tout the use of their Step card depending on the color of the card they chose.

Both brands executed an effective top-of-funnel strategy—but that would hardly matter without the highly social engagement that followed immediately after.

Going forward, FinTechs will have to continue to push the envelope to acquire customers in a hotly competitive market.

Better Infrastructure Enables Innovation

We’ve come a long way from FinTechs needing to spend millions of venture funding and years of development solely to get their product to market.

Now, integrated infrastructure has drastically cut engineering build and maintenance time into a single API. What does all of this saved time, money, and resources allow for?

Innovation. And lots of it.

Now, more than ever, FinTechs can dedicate larger and larger chunks of time and effort into addressing user segments that may have been traditionally left behind—all while enjoying a significantly decreased cost to deliver their products.

Examples of such innovation in recent years abound. For example:

As neo-banks began to launch, they realized the need to connect to existing bank accounts birthing account aggregation. Enter, Plaid.
As neo-banks grew, they soon discovered that the Lifetime Value of a direct deposit account was significantly higher than a regular account. Enter, Pinwheel.
As the user base continued to expand globally, it became imperative to “Know Your Customer.” Enter, Persona.
As audiences materialized and many brands began to issue their own cards, “issuing-as-a-service” was born. Enter, Marqeta.
And so on.

Regardless of the specific vein of innovation, there is one common, uniting feature that helped make all of them possible: a deep, sound, and effective infrastructure that rapidly increased time-to-market.

Going forward, it’s expected that FinTech infrastructure will continue to be a thriving business model as it “lends itself well to developer-led growth and unit economics that scale with end customers.”

Embedded Finance Takes Center Stage

One of the more eye-opening trends in financial services can be shown simply by the following statistic: over the last thirty years, the number of commercial banks has steadily declined from 18,000 to below 5,800.

Why?

Banking, like so much else, has increasingly moved towards where most people now spend their lives: online.

App-based systems and embedded finance (integrating financial services of all types into third-party platforms through APIs) have been jostling for position with the traditional “trip to the bank” and now takes center stage.

With an increasing set of tools at its disposal, like photo capture for check cashing and peer-to-peer (P2P) payments, embedded finance offers the level of convenience and autonomy the modern consumer desires.

Capitalizing on this trend, companies like Square, Coupa, Shopify, and Wix have drastically altered their product lines to offer financial products within their very own software—and exponentially grew their total addressable market (TAM) in the process. Embedded finance allowed companies like these to evolve from companies that offered only software to those that offered software, issuing, payments, and lending. And more are following suit.

Of the 20,000+ software businesses in the U.S. that touch payments, most are mirroring a similar development to the aforementioned companies: expanding beyond just a core software solution to tap into additional lines of revenue.

As more and more consumers spend more and more time online, we expect the disruption of embedded finance on the traditional banking system only to increase.

Crypto Asserts itself into the Mainstream

The past years have held steady momentum for cryptocurrency, bringing it from its dark corner in the back of the store to prime position in the window display. But with popularity comes scrutiny—we’ll explore more below:

As of November 2020, private addresses on Bitcoin reached an all-time high of 25.6 million and daily active addresses reached a peak of 1.4 million this April, indicating a much more robust engagement within the network.

Responding to this level of activity, apps now allow consumers to purchase crypto with the press of a thumb and stablecoin wallets are in high demand for both consumers and institutions—a far cry from where we stood mere years ago.

A few more notable developments to pay attention to in the crypto space:

A rise in the number of larger holders and institutional accounts holding Bitcoin as a treasury asset.
The introduction of crypto EFTs.
An increase in the number of institutions moving their asset allocations to Bitcoin
The decentralized finance crypto market cap has exploded from $2 billion in January 2020 to $126 billion in April 2021

What to expect going forward:

A rise in crypto use cases as a native currency on the internet.
An increase in the number and convenience of applications to support the crypto community.
As government regulations increase, so too will volatility in the digital asset market.

Just a few months ago, new crypto regulations in the US (mandating that any crypto transfer worth $10,000+ be reported to the IRS) brought about simultaneous volatility in price. But as regulations mature and the accompanying questions become answered in the future, expect more stability and less volatility.

Looking for world-class talent in the fintech and lending space? Martin Executive Recruiting has the expertise and network to connect you with your ideal hire. Get in touch with us today and learn what we can do for you.