On affinity-focused fintech, the future of BNPL and more • TechCrunch
An interview with the co-founders of the VC firm Fiat Ventures and its sister arm Fiat Growth
Of all venture capital funding invested in 2021, around one in five dollars went to fintech. But this boom now appears to be behind us, as global fintech funding activity returned to pre-2021 levels.
Even worse, fintech hasn’t escaped the latest wave of tech layoffs, with high-profile companies like Brex, Chime and Stripe making headlines for this disheartening reason in recent weeks.
And yet fintech startups are still being founded and funded this year. Of the 223 companies in Y Combinator’s summer 2022 batch, 79 more or less fell into the fintech category.
Why are entrepreneurs and investors still investing in fintech, and where? To find out more, we reached out to fintech-focused VC firm Fiat Ventures.
Fiat co-founders Alex Harris, Drew Glover and Marcos Fernandez also run its sister arm, Fiat Growth, a growth consultancy working with fintech and insurtech clients. This enables them to comment not only on sector trends from an investor’s perspective, but also share practical advice.
One of their key recommendations is that fintech startups lean into customer acquisition channels whose cost is less variable or seasonal than others, but our exchange covered a wider range of topics, from financial inclusion to offline channels and more. Read on:
Editor’s note: This interview has been edited for length and clarity. Many of the associated companies are portfolio companies of Fiat Ventures or customers of Fiat Growth.
TC: What makes you say that “fintech acquisition funnels are too complicated”?
Alex Harris: Fintech products by nature have complicated acquisition funnels and registration flows. Some complications are inevitable in a highly regulated environment, but unnecessary complications can arise when rigorous tests are not used and funnels include unnecessary bloat.
Even the smallest detail can generate friction. For example, in the know-your-customer (KYC) process, many fintechs will ask a customer for their full social security number. In most cases, for non-credit products, only the last four digits of the SSN are required for identification purposes. Even if it’s only a five-figure difference, this can have a meaningful impact on conversion rates that can save large sums at scale.
Data is absolutely king, but there is a time and a place for data collection and personalization. Too often, a data team with good intentions will ask questions about personalization and demographics directly in an enrollment process. However, these questions may most often come in a post-signup survey or periodically throughout the life cycle of a customer. Even after registration, these questions must be thought through. We regularly see data collected for the sake of collecting it, with no actionable insights derived from it.
