How to Stay Competitive in the Fast-Paced World of Fintech

The fintech industry has grown remarkably in the past decade, propelled by technological advances and shifting consumer behaviour. However, the hypergrowth era has given way to a more challenging landscape where profitability and sustainable growth take precedence. For fintech companies, the question is no longer just about rapid expansion—it’s about staying competitive while adapting to evolving market conditions. In this new reality, a thoughtful and measured approach to growth is essential to thrive.

The Shift from Hypergrowth to Measured Growth

FinTechs have traditionally been in hypergrowth mode, backed by significant venture capital and investor enthusiasm. From 2015 to 2020, fintechs saw an explosion of deal activity and capital inflows, reaching unprecedented heights. In 2021, the industry raised a staggering $92.3 billion in funding, a 177% increase from the previous year. However, that level of growth was unsustainable. By 2022, fintech funding declined 40%, and the era of easy capital was over.

In today’s environment, fintechs must shift from a "growth at any cost" mentality to a more balanced and sustainable growth model. Here are the key strategies fintech companies can adopt to stay competitive:

1. Focus on Core Strengths

One of the most important steps for fintech companies is to double down on their core strengths. Whether it’s a specific product, customer base, or market segment, fintech must ensure their foundational business is solid before expanding into new areas. Companies that focus on their core offerings are 1.6 times more likely to outperform their peers. This involves refining existing products, improving customer service, and ensuring a stable business model that can weather economic fluctuations.

For instance, many fintechs that tried to expand into multiple products or markets during the hypergrowth phase are now taking a step back to strengthen their core. This shift allows them to allocate resources efficiently and build a reliable, profitable foundation before considering expansion.

2. Adopt a Measured Expansion Strategy

Expansion remains a growth avenue, but in today’s market, it must be done thoughtfully. Instead of aggressive and broad market penetration, fintechs should look for adjacent markets or services that complement their core offerings. Expansion could involve entering a new geographical market or adding a service that enhances the existing product ecosystem, but only when the core business is stable.

3. Prioritize Profitability Over Growth

In the hypergrowth era, fintechs often prioritized user acquisition and revenue growth, expecting profits to follow. That strategy is no longer viable. Investors and stakeholders are now placing greater emphasis on profitability. Companies must focus on unit economics—balancing customer acquisition costs with customer lifetime value (LTV). By keeping a sharp focus on profitability metrics like the LTV/CAC (Customer Acquisition Cost) ratio, fintechs can ensure that every growth initiative delivers long-term value.

Latin American fintechs, for instance, have demonstrated strong unit economics, with 68% of fintechs in the region reporting an LTV/CAC ratio greater than five. This shows that they are acquiring customers who will generate enough revenue over their lifetime to justify the acquisition cost, allowing for sustainable growth without sacrificing profitability.

4. Cost Discipline and Operational Efficiency

As funding becomes scarcer, cost management is critical. The fintechs that have successfully navigated recent market downturns have done so through strict cost discipline. McKinsey's research found that 50% of public fintechs were profitable in 2022, and the main differentiator between profitable and non-profitable companies was cost management—not revenue growth. Profitable fintechs were able to reduce costs by 3%, while non-profitable ones saw costs rise by 27%.

FinTechs must become leaner, negotiate costs more aggressively, and streamline operations to ensure they can remain competitive with fewer resources.

5. Leverage Partnerships and Strategic Mergers

As the fintech ecosystem matures, partnerships and mergers can be a powerful tool for growth. Rather than relying solely on organic expansion, fintechs can explore strategic partnerships or mergers with complementary companies. This allows them to quickly access new technologies, markets, or customer bases without the resource drain of building those capabilities in-house.

6. Keep Innovation Alive

Fintech’s competitive advantage has always been rooted in innovation. Unlike traditional financial institutions, fintechs are agile and unencumbered by legacy systems. As fintech transitions to more sustainable growth strategies, maintaining a culture of innovation is crucial. The next big disruptor could be around the corner, whether it’s in the form of blockchain, artificial intelligence, or embedded finance. Staying at the forefront of technological trends will help fintechs stay competitive as the industry evolves.

For example, companies like Monzo revolutionized the banking industry by creating simple, intuitive user experiences that challenged the need for traditional bank branches.

Conclusively, in the fast-paced world of fintech, staying competitive requires more than just rapid expansion. Fintech companies must prioritize profitability, focus on core strengths, and adopt measured growth strategies aligning with their long-term goals. By exercising cost discipline, leveraging strategic partnerships, and keeping innovation alive, fintechs can continue to thrive—even in challenging economic environments. As the industry matures, the fintechs that balance growth with sustainability will emerge as leaders in the new financial landscape.