Fintech Strategies for Resilience in Economic Downturns

In the face of escalating inflation, rising interest rates, and the looming specter of cyber threats, businesses are undergoing a metamorphosis to cultivate resilience. The current landscape prompts a crucial examination of how enterprises navigate the multifaceted challenges that often lie beyond their control. This month, The Fintech Times delves into the ways businesses are showcasing resilience against both internal and external factors.

When an organization addresses its reputation, several factors come to the forefront. Foremost among them is the representation by the company, largely embodied by its workforce. Then, there’s the company’s capacity to withstand adversity during challenging periods. Finally, the manner in which a company rebounds from adverse experiences, particularly within the financial sphere where this encompasses responses to cyberattacks, plays a pivotal role. 

Markus Prommik, co-founder and CEO of Finfra, an embedded lending infrastructure provider, underscores the need for a multifaceted approach to resilience, emphasizing that it’s not a one-size-fits-all solution. He accentuates the significance of decisiveness in any chosen strategy.

«In times of economic downturn, resilience can be built through focus, cost-effectiveness, and the ability to seize opportunities. This might involve improving the core product or service, reducing unnecessary costs, and enhancing user value.»

Prommik’s advice is clear: during economic downturns, it’s imperative to curtail excess and non-essential endeavors with precision. Furthermore, downturns often unveil prospects for growth. For instance, fintechs can step into the lending arena as traditional banks tighten their underwriting criteria, presenting an opening for superior financial solutions.

Uldis Teraudkalns, CEO of Nexpay, a payment provider, identifies two pivotal principles underpinning fintech resilience: prudent financial management and a strategic growth mindset. Teraudkalns stresses that proactive financial health is paramount.

«To truly thrive, it’s essential to strike a balance between conserving resources and driving innovation. Economic downturns, while challenging, can be reasonable times to advance. Competitors who indiscriminately cut spending on product development and advertising risk ceding market share.»

Teraudkalns cites the case of TransferWise (now Wise) which, rather than contracting during economic downturns, broadened its product offerings, solidifying its market stance and staying ahead of competitors. He contends that enduring resilience necessitates strategic investments that steer companies toward lasting success.

Julien Lafouge, CFO of Spendesk, a spending management solution, proposes a counterintuitive approach to economic downturns. Instead of narrowing focus to budget cuts, he advocates embracing growth opportunities.

«Staying resilient in an economic downturn not only requires the same 360-degree thinking needed to hold onto top talent, but a business strategy that prioritises sustainable growth.»

Lafouge underscores the importance of identifying efficient channels for revenue generation and repurposing them as levers of efficiency. This involves pinpointing investments that yield substantial value, all while ensuring a sustainable growth trajectory.

Thomas Dolan, president and co-founder of 28Stone, a fintech application provider, echoes the sentiment that resilience hinges on harmonizing technology and workforce, ensuring top-notch customer service and innovation.

«Keeping costs under control is very important. While offshoring was once held up to be an ‘ideal’ model, increasingly we’re encouraging companies to look at ‘rightshoring’—making sure that they have the right, high-touch areas close to home and staffed appropriately.»

Dolan advocates a balanced approach where companies judiciously allocate tasks, processes, and development to locations that provide cost efficiency and expertise. This approach affords breathing room for growth while safeguarding existing operations.

As the economic landscape weathers volatility, fintech enterprises are forging resilient pathways through judicious financial management, strategic investment, and adaptability. Their responses to adversity serve as the crucible in which true resilience is forged, setting them apart in a rapidly changing world.