10 trends for startups to watch in 2022 and beyond (Trend 3)

For years, the world of finance has been undergoing radical change. Traditional banking is under increasing pressure as industry boundaries blur, aided by technology advances. New players, from crowdfunding firms to technology companies, have gained footholds in the financial landscape and are democratising access to and provision of funding.

We are living in a ‘less-cash’ society – not quite cashless yet – with new payment solutions popping up constantly. Mobile devices, sensors, wearables, apps and the internet of things are changing the payment landscape and your financial service provider is not necessarily a part of it. Increasingly technology companies, e.g. Google, Apple, Facebook, Amazon, are working on convenient payment solutions, often integrated with their own ecosystems, that may cut out the middleman (banks).

Like the rest of the world, the financial industry is going digital. In a world of electronic transactions, contactless payments and digital currencies, paper money no longer rules. Blockchain technology, originally the province of cryptocurrencies like bitcoin, is driving fundamental shifts in how business is done, the roles of intermediaries and the economics of banking.

However, as more and more financial transactions take place in cyberspace the issue of security is rising – and cybercrime is a headache that companies, governments and consumers are pouring billions of dollars into combating.

For companies, the sources of funding have diversified greatly. Beyond traditional financial players and technology companies, today the crowd is in everything, almost. And if it’s not there now, it will be soon. Crowdfunding has gained real traction with new businesses and investors alike. Peer-to-peer lending is also growing rapidly in many countries. The pool of investors for early stage businesses is also expanding, as high net worth individuals organise themselves into networks of peers, less wealthy investors access deals through new funding structures, governments increase business support, family offices look for improved returns in a low interest environment, corporates engage with startups to innovate and VC and private equity players expand their activities.

What does this mean for startups?

• Fintech is “hot”: If you are a startup focused on disrupting the traditional finance system, there are many opportunities. But be aware, there are also many players, – both new and traditional – some with very deep pockets, so do research your target segment carefully and listen to customers to identify how you can add value and differentiate your company effectively. Here’s a hint: It’s not by dropping all the latest buzzwords into your company’s description! What’s your secret sauce?

• Customers will demand seamless payments: Customers are quickly picking up new technologies to make payments fast, simple and easy to use, e.g. contactless payments during the pandemic. They are also becoming comfortable using multiple payment channels from credit cards to Paypal to e-banking. Making it easy for customers to pay for your products and services is going to go a long way towards building traction and loyalty – and desire to engage with your company. As before, also ensure your payment systems are transparent – do be clear about returns, free trials, discounts and more.

• Take advantage of “free” money: There are many grants, low cost loans, investment incentives and special offers for startups from suppliers. Make sure you do your homework on these as it will help your company grow faster, make you more attractive to investors and reduce the amount of equity you need to give away, particularly at an early stage when your valuation is at its lowest. Subscribe to grant newsletters, explore government incentives and grants and look at supplier offers for your country.

• Focus on smart money: While the investor landscape is becoming more diverse, this does not mean you should take funding from anyone that offers it to you. What you are looking for is “smart” money, investors that will do more than provide cash, for example, bring expertise and contacts in your chosen market, be able to open doors for you, and/or provide credibility that will encourage customers and other stakeholders to support your business as it gains traction. Think about it like a relationship – early investors will be with you for the long haul as you grow your business and will be your first port of call in future funding rounds. Choose them wisely and treat them well!