2020 saw a complete shift in the way fintech startups worked. Just like for many businesses in other industries, furloughing employees was the only option for some fintechs. Others had to find completely new sources of income, whilst a few fortunate ones found themselves in the right place at the right time with a business model that could thrive.
A company that was a part of the latter group, that was able to accelerate its success during the pandemic without having to compromise its original business plan, was Vyne, a payments company using open banking to power account-to-account payments for online businesses. CEO and co-founder of Vyne, Karl MacGregor, is a veteran of the fintech world with over 20 years’ experience in the online payments industry, specialising in e-commerce strategy, product management and business development.
Having seen how different companies have adjusted to the pandemic, here he shares his views on the effects the pandemic had on start-ups and how they can move forward.
What an interesting year it has been for the fintech space. A little over 12 months ago no-one could have predicted just how much the pandemic would change the way we live and the way we work so fundamentally. Now, as lockdowns lift and vaccine rollouts continue apace, we’re in a unique position to look back, and with the benefit of hindsight, figure out exactly what we’ve learned from one of the toughest challenges the modern world has ever faced.
A challenge that was multiplied in start-ups like ours, as we launched in a period of unprecedented disruption to the fintech space and the world at large. Much like a ship starting its maiden voyage in a hurricane, everything was much more difficult than predicted, but it has made us much better sailors for surviving it. Adapt, react and overcome. The pandemic affected fintech startups in three distinct ways. Some had to shift to “survival mode”, either furloughing much of their staff or even ceasing operations in the short term. Others had to rapidly shift focus as their usual sources of revenue were disrupted by the changes in daily life. A few more fortunate businesses found themselves in the right place at the right time, with their existing business model able to thrive in the “new normal”.
We found ourselves in the second group in March of 2020. At first, payments companies like ours seemed to be in a good position – as the need for digital engagement increased online shopping demand. But while some e-commerce merchants thrived, the areas we had been initially targeting with our launch were disproportionately affected by lockdowns – travel, entertainment and hospitality. Fortunately, the nature of our solution (transferring money directly from customers to merchants) was equally suitable for sectors experiencing a boom during lockdown – such as online retail. But this did still mean starting from scratch with new partners and reshaping our buying personas on the fly. This was compounded by everyone else going through the same difficult adjustment period that we were. Some merchants adjusted to the new market quickly, while others pressed pause as key staff had been furloughed in an excellent example of how interconnected the fintech space is.
Respond to external factors by looking inward
In the wider fintech startup space businesses that succeeded during this time pulled away from those that didn’t because of their ability to pivot. This doesn’t mean reshaping your entire business to fit with the new economic reality, but rather repositioning around a singular central point. This should be the very core of your business, the single goal that you’ve set out to reach.
For Vyne this means making e-commerce payments direct, secure and fast but far from just transactional. We’re making open banking payments the best way to pay and get paid through transparent, open and fair relationships. Making sure that every decision we made aligned with this goal is what allowed us to adapt quickly to new scenarios instead of wasting energy pursuing ideas that would no longer work. Like many others, we found it difficult to respond with our usual level of agility while the wider financial industry was paralysed by their own problems (huge call centre queues, payment holiday requests, cancellations and refunds). But our response of increasing focus on sectors that had remained untouched or that were expanding business over the course of the pandemic (such as money remittance, retail, gaming and account top-ups) is what made our launch a success. The lesson here was to be flexible about how we reached our goals, and willing to abandon the best laid plans when the ground they were built on began to shift. But this did not mean it was easy. Far from it. Just because things look good from the outside doesn’t mean there isn’t a frantic amount of work going on behind the scenes to make the best of a bad situation.
The right people at the right time
Nowhere was this more obvious than on the personal level. The pandemic didn’t just disrupt the business landscape, it completely rewrote what it meant to work in general, with the vast majority of people in the space forced to work from home. Hiring the right people is the best way to stay resilient in a crisis. More so than business direction or the structure of an organisation – it is individuals and the relationship you have with them that make it possible to adapt to seismic changes.
As a start-up going through the always tricky launch period, we invest in people to reach our growth goals, but in 2020 it wasn’t easy. The level of uncertainty in the job market left many people nervous about exploring new opportunities. The lesson here was to radically rethink the hiring process to adapt to decentralised working. Once you remove the office from the day-to-day work operations, why would you restrict your hiring to people within a certain distance? The global hiring market is your oyster, and looking further afield for the right fit has never been more possible. This change affects the way we work just as much as it does finding the right people. It means changing how you interact with colleagues to focus on the quality of your connections, the frequency of meeting online, and the speed of conversations and decision making.
While other fintechs cut staff, or began a hiring freeze, we were able to grow from 7 to 20 people in the last 12 months, recruiting exclusively remotely. I’m sure a lot of companies will continue remote working for the immediate future, in fact many employees are calling for it, but remote working is the beginning of a cultural change in the way businesses and their employees operate. There isn’t yet a substitute for quick quips over the watercooler that help build personal connections, but decentralised working at scale is still in its infancy, and we will see improvements in time. Some of us will inevitably return to the office floor, but hopefully with lessons learned around remote working combining the best of both worlds – encouraging collaboration while giving employees the freedom to manage their work and home life in balance.
Necessity is the mother of invention
But difficult times breed innovation, and while it’s too early to say what the long term effects of the pandemic will be on the fintech space, the crisis has obviously pushed digital adoption forward significantly. This change means that it is all the more important for Fintech and e-commerce businesses to solve the long term underlying problems of friction, cost and complexity. With consumers driving strategy in this space, we will continue to see enterprise businesses increasing efficiency through automated processes and enhanced UX to increase conversion rates through accessible online services. This acceleration of these strategies will trickle down to smaller businesses all the faster. Those who previously found it too costly to establish an online presence, now have a greater choice of high-quality solutions, and a competitive market to drive this adoption.
For fintech’s themselves, many are well-positioned to contribute to the industry and to society in meaningful ways. Those focused on areas like advancing financial inclusion, the gig economy, or directly reducing overheads for merchants will be well-positioned to thrive well beyond the end of the pandemic. While our first 18 months were rocky, the lessons we’ve learned from responding to the market at speed are invaluable. Not just for navigating crises, but for our future activities in general. Looking back at this period in the future, I’ll be proud to say that it didn’t beat us down. We made it through more focused, more resilient, and more aligned as a business. Hopefully, the hard-learned lessons from this period will help guide the fintechs of the future when they face crises of their own.