Fintech investment has crashed. How can startups build their businesses?
05 Oct 2023
As we move into 2023, accessing technology from as close to the source as possible will become increasingly important for businesses. Many ecommerce firms depend on third-party platforms to facilitate their payments, as they should — a marketplace shouldn’t be forced to also become a payments business just to move money efficiently around the world.
But this quick access to payments technology often means that the instigating businesses is three or four times removed from the flow of funds — for instance, a UK business wanting to access Indonesia connects to a US fintech that sits on top of a processor in Singapore, that sits on top of a local PSP in Indonesia, that is then finally connected to the main payment methods in the country.
While not accessing technology from the source won’t be a problem for early-stage businesses; for those that are scaling, looking to expand into new geographies, or industrialise their offering, this presents a huge issue. Operating outside the flow of funds means that businesses have less control — they have multiple providers’ best practices to adhere to, which means they can’t easily tweak things, and can’t ultimately provide their customers with optimal service from a commercial and operational standpoint. Being so far removed from the flow of funds means that relying on these networks of networks becomes incredibly expensive for scaling businesses — the unit economics just don’t work for them.
These issues pose serious threats to a business’s ability to scale and in 2023 I think we’re going to see more businesses taking a look under the hood and discovering just what they’ve sacrificed for quick access to connecting technology.
Whenever there is macroeconomic pressure on an industry, there is often a knee-jerk response. As we have seen, with the current cost of living crisis, soaring inflation, and broader market downturn, many businesses have slowed down expansion plans or made difficult cuts to non-essential operations.
Though it may seem counter-intuitive, especially given current global economic conditions, now is exactly the time to look further afield and diversify your supply chain and customer base. Executing on expansion plans when times are tough — meaning that the business is focused on staying lean while driving revenue — can lay perfect foundations for the post-recession recovery.
But, this is easier said than done — international growth is costly, complicated and time consuming. In 2023, we expect to see more and more businesses turning to platforms that can ramp up their expansion plans quickly and efficiently, without chewing up huge amounts of resources or time.
Many online marketplaces — ecommerce platforms that bring together buyers and sellers — are recognising that the seller side of their business model needs just as much innovation and attention as the buyer side, which has historically held prominence.
The seller is the cornerstone of success for many businesses — without them there would be no buyers, and consequently no revenue. As the landscape becomes more competitive, online marketplaces are realising they need to reduce friction for their sellers. This will come in the form of better processes, more protection, better economics, and better user experiences.
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