We recently had the pleasure of bringing together a number of senior fintech leaders to discuss how the sector can continue on its impressive trajectory and how the latest emerging technologies can drive sustainable revenue growth.

The exclusive fintech breakfast and high-level roundtable discussion (‘Pathways to profit: Building fintech’s future’) was held in London, a prominent global fintech hub, and expertly moderated by Doug Mackenzie, Head of Content & Programming, Fintech Fringe. 

The conversation centred around improving customer acquisition and retention rates whilst enhancing digital products and navigating complex regulatory and sustainability challenges.

Speakers honed in on the important role that differentiation plays in standing out in today’s market and the increasing regulatory focus on Environmental, Social and Governance (ESG)-related disclosures. They also tackled the potential of artificial intelligence (AI) in financial services and delved into the need for greater financial literacy, particularly when it comes to educating younger audiences.

Additionally, against a backdrop of Robinhood acquiring Bitstamp for $200 million and eToro linking record revenue to cryptoassets, speakers shared their insights on how to succeed in the crypto market, covering regulatory compliance, establishing strategic partnerships, offering additional value, and catering to the needs of Gen Z.

Here are some of the key themes from the day.

The need for differentiation

A number of participants highlighted the crucial role of differentiation when it comes to driving success in the financial services space. 

“Financial services are pretty undifferentiated,” said Chris Parker, Head of Marketing, Tandem Bank. “We’re all doing the same things really, and so I believe the biggest untapped value is in differentiation, and how you then position your brand versus your competitors.”

“Tandem is simple – we’re here to help people transition to a greener lifestyle, save a bit of money, and leave the planet in a better way. If you can tap into that, you’ve got a point of differentiation that’s compelling for a large cohort of people.”

Differentiation can also be linked to how fintechs leverage new technologies, such as AI, to reduce burn rate and unlock new operational efficiencies. One speaker said that research at his previous company revealed 85% of business processes can be automated, and used the example of a CFO at a start-up needing to do expenses due to a lack of resources – harnessing the right tools can make a fintech company much more lean and efficient. 

Another way to differentiate your proposition is by pivoting to serve a new segment of the market. Zumo’s CFO and Deputy CEO Devina Paul explained how Zumo has undergone this process. “We were originally a consumer brand,” she said. “And then a couple of years ago we realised there was an early appetite for a B2B and enterprise offering in the crypto sphere because for a company to just spin up a proposition from scratch takes too much investment. But we have that – we’ve spent five years building it and we’re registered with the Financial Conduct Authority (FCA), so we can now help our partners through our learnings and our tech stack.”

The increasing importance of ESG reporting

As touched on by a number of speakers, a genuine focus on ESG factors can be a differentiator for ambitious fintechs, but it’s also fast becoming a regulatory requirement.

The European Union’s Markets in Crypto-Assets Regulation (MiCA) and the Corporate Sustainability Reporting Directive (CSRD) are both putting new reporting requirements on fintechs and other financial institutions, so there is a pressing need for solutions that help companies calculate and disclose their carbon emissions. The participants were unanimous in their agreement that further innovation is needed when it comes to governance structures in this area. 

CSRD Scope 3, for example, refers to the need to report indirect emissions not produced by a company itself but related to its value chain. There is a lot for fintechs to get their head around to ensure they are meeting regulatory obligations. 

“One of the main challenges facing fintechs in the ESG arena is connecting the calculation of emissions from Scope 3 to their ESG reporting,” explained Sareh Razavi, who currently serves as a Non-Executive Director for Net Zero and Sustainability at Nettle. 

“There’s a behavioural change required, but also a need for better metrics. And when it comes to digital assets, it becomes even harder for many companies because they may not understand the technical details of blockchain, which adds another layer of complexity.”

Zumo launched its Oxygen solution in response to challenges around ESG reporting in the digital assets sector. “Banks and other financial institutions have ESG mandates,” added Zumo’s Devina Paul. “We developed Oxygen because it helps us with our own sustainability reporting, but we quickly realised it’s a product that other fintechs and banks are looking for – it’s made them a lot more comfortable when it comes to offering crypto to their customers.”

Making the case for better education

The roundtable participants covered the ‘E’ and ‘G’ in ESG in depth, but also spoke about the ‘S’ at length. 

Tandem’s Chris Parker said one of the biggest contributions that the fintech sector can make is towards increasing financial literacy. “If people have poor financial literacy, they’re likely to live in systemic debt. There’s nothing in the national curriculum that mandates financial literacy, so we have a big role to play in helping to elevate it.”

“We want to focus on helping young audiences, from the age of 12” added Elena Assimakopoulos, Marketing Lead at Prograd. “We’re helping young people to earn money by learning about finances. Most traditional financial institutions aren’t really focused on this audience, so there’s a clear gap fintechs can fill.”

Speakers also discussed the different initiatives they have introduced to boost financial education. “We take a lot of university students into the office in Amsterdam to teach them about trading and how business operations work,” said Chantal Bradford, Business Development and Institutional Sales, Deribit. “The way we think we can help is through training and first-hand experience.” 

A number of speakers emphasised the importance of education in the crypto space for Gen Z, who think differently than previous generations and are looking for new investment opportunities. This sentiment reflected Zumo’s recent research, conducted in partnership with Focaldata, that showed a third (34%) of both 18-24 and 25-34 year-olds think the growth of the crypto industry should be front of mind for the UK’s politicians. 

“I think the revenue generating market is definitely Gen Z,” said Chad Walls, EMEA Institutional Sales Lead, Komainu. “From an early age, they’re on the apps, like GoHenry, so why would they then go back to traditional banks?” 

“One of our initial ventures was a crypto-educational show focused on cryptocurrencies and blockchain technology,” added Samira Abdulova, Head of the Global Communications and Partnerships Department at WhiteBIT. “Our founders invited celebrities to discuss financial literacy and the latest advancements in technology. Additionally, our company launched Europe’s first master’s certificate program at the National University of Kyiv-Mohyla Academy in Ukraine. This summer, the program saw its first graduates, who received the first-ever tokenized educational certificates on the blockchain—an innovative example of integrating blockchain technology into higher education.” 

Of course, when it comes to crypto, education doesn’t end with Gen Z. There are other audiences getting increasingly involved. “The institutions are coming into the crypto space now, so there’s a lot of education that goes with that,” said Komainu’s Chad Walls. “It starts with custody – who’s holding the assets, and explaining to them about blockchain and the governance around it. They’re now jumping at the opportunities on offer.”

Onboarding and exploring new partnerships

The roundtable participants also discussed the successes they were seeing through detailed onboarding programmes.

“Initially our revenue mainly came from affiliate referrals, but now we help young people with money by getting them to do an onboarding questionnaire,” explained Prograd’s Elena Assimakopoulos. “They can then come onto our site and see lots of ways to earn, save or invest. It’s like GoCompare for the new generation of financial products.”

“And because we’ve now got so much data on our young audience, the traditional banks are coming to us for partnerships to inform, and tailor, their own products and services. Partnerships have come into play quite a lot now and it’s very lucrative.”

Partnerships, and the onboarding element that fintechs can provide, was a prominent theme throughout the morning. “It’s all about that long-term relationship and helping businesses to expand their product footprint, without having to do it all themselves,” said Sean Kiernan, Founder and CEO, Greengage. “We offer them the baseline and structure that they can then build on and grow.”

Partnerships are proving especially important as more institutional investors enter the digital assets arena. 

“People are coming in and looking for a safe harbour – so the regulatory approach is definitely the way to go,” said Komainu’s Chad Walls. “For us as a regulated custodian, having the right licences globally opens new doors. That’s where it starts, and we emphasise institutional grade, regulatory custodianship and then offer added value services on top of that, like off-exchange settlement.”

Delivering additional value

Talking of added value, another big takeaway from the roundtable was the need for constant evolution so you can offer partners and customers what they’re looking for in a changing market. 

“Likeability and listening play a big role,” said a Director from a leading multinational investment house. “People want to work with someone they like, so being helpful and educating them about the newer products and services that are available helps with customer stickiness, especially amongst the younger generations.”

Fintechs should be looking to help their partners and customers find new solutions to old problems, such as exploring tokenisation to make wholesale markets more accessible to small and medium-sized enterprises (SMEs). 

“With the SME lending markets, private credit has come in to fill some of the gap – but it’s still expensive due to not having cheap deposit bases,” said Greengage’s Kiernan. “The likes of Coinbase are now coming in with protocols to tokenize commercial paper and traditional products to bring down the price points and make it more accessible for a small business.”

Providing that extra value can come in many different guises. For example, it can be helping to simplify a complex proposition. “We’ve simplified the investing experience,” said Richard Brain, Business Development Lead, InvestEngine. “We offer low-cost ETF investing, which includes blockchain, Web3, and digital asset ETFs to help diversify one’s portfolio. This appeals to an audience looking for alternative digital investment vehicles.”

It can also be helping companies to explore new markets as they seek to expand. “We recognise the importance of harnessing different advantages in different jurisdictions in order to make regular banking more crypto friendly,” said Bahar Ozmaldar, Sales Manager, Financial House, which helps build fintech systems to address customers’ problems. “We’re working to improve the relationship between fiat currencies and crypto, making things easier for those involved in the growing industry.”

Or – and a nice note to end on – providing greater value can simply be making people feel better about money. “Look at Monzo,” said Tandem’s Chris Parker. “They have great UX and a cool coral card – but, beyond that, they’re changing the conversation to make you feel more positive about your money.”

That type of positioning is invaluable to brands, and a sentiment the roundtable all got behind.