The Covid-19 pandemic placed immense stress on the global economy, bringing down many industries to their knees by severely hampering the businesses and curbing access to capital. The fintech industry also faced distinct challenges, ranging from dried-up funding, poor cash flows, and operational hiccups to interest rate cuts and an overall subdued economy.
Fast forward to 2022, the situation appears turning around with the markets bouncing back to the new normal. This recovery phase brings forth renewed business opportunities for fintech companies as the demand rises and turns more granular. As such, fintech companies serve a broad spectrum of the financial services market, including insurance, mortgage, payments, wealth management, international money transfers, consumer banking, etc.
However, given the invariably competitive and dynamic landscape, the pillars of technology, human capital, and process play critical roles in fintech players’ success. These factors – if leveraged well – can create a competitive advantage for fintech companies and stimulate their growth.
Aggravated Challenges During COVID-19 Pandemic
Let’s first review some of the key challenges that were aggravated during the pandemic.
1. Lack of funds and capital raising opportunities
According to a report published by Stanford Law School, early-stage fintech companies faced a financial crunch in 2020 as VC investors in the wake of the pandemic retracted investments to support their existing portfolios. Further, the gloomy outlook of the economy affected the IPO opportunities for fintech firms to raise capital from the market.
2. Need to improve operational efficiency
Funding issues coupled with pre-pandemic staffing levels necessitated fintech companies like other organizations and sectors to emphasize “optimization” and track the ROIs more stringently. Tracking the cash burn rates and improving operational efficiency were critical needs to reduce the cost burden. However, this capability often needs process remodeling and technological upgrades requiring upfront investments.
3. Deliver value in a highly competitive market
Interest rate cuts and ready availability of cheaper products made the market highly competitive. Even the big players offered loans and other services at extremely low rates to attract and retain customers. Fintech companies, mostly comprising the startups, were already reeling under cost pressure and had to find ways to offer “value” while tackling the high cost of doing business.
Key Imperatives for Growth-Focused Fintechs
With the economy bouncing back to pre-pandemic levels, markets now offer significant growth opportunities. Fintech firms can make hay out of the situation provided they take the necessary steps to augment their operations with the right mix of people, processes, and technology.
Here are some of the key action areas that are imperative for fintech companies to augment market readiness.
1. Leverage Digital Knowledge Operations (DKO)
The pandemic emphasized the importance of adopting “digital.” Companies and people relied heavily on digital technologies to communicate, transact, and operate in a market that went almost entirely remote.
The period of turmoil proved that companies that embraced digital ways survived, thrived, and even dominated the market. In other words, “digitized operations” have been proven as the key to market success today, more than ever, and this reality applies to fintech players as well.
Digital Knowledge Operations (DKO) is a powerful framework to enable full-scale agile operations for fintech and other financial institutions. DKO helps businesses harness the potential of design thinking, intelligent technologies (such as machine learning), and human capital to maximize operational efficiencies and reduce costs.
2. Race Ahead with Intelligent Automation (IA)
Intelligent Automation or IA offers a host of technologies to mechanize repetitive tasks and processes, increasing the overall process efficiency and accuracy. Using IA, fintech companies can speed up their operations and turnaround time and free up valuable capacity for strategic initiatives.
For example, Robotic Process Automation (RPA) can automate a majority of the back-office operations such as data extraction, data entry, etc. Likewise, Business Process Management (BPM) can increase process efficiency and agility by automating the workflows and facilitating interactions.
3. Attract Talent Through Right-shoring
Some tasks are best performed by specialists, fully or in conjunction with a software tool. These tasks demand human intervention to ensure failsafe execution on account of compliance needs, strategic nature, complexity, etc.
Therefore, a critical and ongoing need for fintech and financial institutions is to have a talent pool readily available to operate the processes across time zones.
The right-shoring model provides the solution by provisioning a mix of in-house and outsourced teams based on the preferred shore. Right-shoring is a next-level offshoring model, which emphasizes cost-effectiveness, productivity, and availability to meet the “follow-the-sun” delivery needs.
[Suggested Reading]: Unleashing Growth for Mortgage Lenders with “Right-shoring”
The Way Forward
An optimal mix of people, processes, and technology is critical to the success of businesses in the digital economy, and fintech companies aren’t untouched by this fact. Notably, the Digital Knowledge Operations or DKO framework can help businesses attain peak operational efficiency, productivity, and agility by targeting specific problem areas at the micro-level. At the same time, it can help fintech operations meet regulatory compliance and deliver superior customer experiences.
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