CEOs of Rapyd, Revolut and Klarna look ahead to Fintech in 2023.

• After a windy year for the sector, fintech startups are prioritizing profitability.
• CEOs of Revolut, Klarna, Wefox and Rapyd outlined the new reality for consumer-facing fintech.
• “Investors changed the rules of the game overnight,” Rapyd CEO Arik Shtilman told Insider.

Consumer fintech is facing something of an identity crisis.

Many startups in the sector have been forced away from their rapid growth strategies and instead asked to focus on making their businesses profitable after years of losses incurred by investors.

“Investors changed the rules of the game overnight,” Arik Shtilman, CEO and founder of $15 billion fintech Rapyd told Insider at the Slush conference in Helsinki.

“Think about the fact that you are a professional football player all your life playing in the Premier League and one day you wake up in the morning and they tell you that you are playing basketball in the NBA starting today. This is not fair, but life is not fair . Businesses must adapt to the new rules and the new game.”

Profitability has been highlighted by a number of fintech’s biggest CEOs, including Revolut’s Nik Storonsky. The $33 billion UK neobank posted healthy profits in 2020 and Storonsky insisted his company was still profitable. However, the company’s annual results for 2021 have not yet been published.

Sebastian Siemiatkowski, chief executive of buy-now-pays-later giant Klarna, which saw an 85% fall in valuation this year, said in December that the company would be profitable month-on-month after the summer of 2023.

Similarly, Mubadala-backed German insurance technology startup wefox’s CEO said the company had reduced its growth plans for 2023 as part of its revised profitability targets.

“We still see investor interest at higher valuations, but I think it’s important for public markets to be a healthy business growing on strong fundamentals,” CEO Julian Teicke told Insider. “We aim to be all-in profitable before we go public.”

A sharp sight

The reality of the current market is strong for consumer-facing fintechs.

Fintech investment has returned to pre-pandemic levels with around $13.4 billion invested in the sector in the third quarter of the year, according to Dealroom data. It has fallen 64% — about $23.6 billion — from a record high in the last three months of 2021.

The downturn has not only been limited to the private markets. Listed trading app Robinhood and card issuer Marqeta have both seen massive drops in their share prices since going public. Meanwhile, the outlook for growth is no longer as rosy with inflation and a looming recession biting into spending and transaction volumes.

Layoffs have become a regular part of technology startups in 2022, and Klarna in particular cut 10% of employees in May. The consensus from CEOs appears to be one of caution into 2023 with less hiring expected, rather than any kind of blanket freeze.

Revolut tends to get rid of its lowest-performing employees on a quarterly basis, but CEO Nik Storonsky told Insider that the company will continue to be “conservative in terms of hiring because we look at what goals we want to achieve and work backwards with the departments to get a budget for staff. ,” he said.

The decision to lay off employees is never easy, and in some cases the move may come from a purely cost-cutting perspective or is perhaps an admission of overstaffing during the COVID-19 pandemic.

Regardless of whether the focus on profitability has been pushed by investors or not, the tide has now turned for the fintech sector in Europe. A number of leading private players such as Starling Bank, Zilch and Zopa have all claimed profitability in 2022, dispelling the notion that cash flow positivity is too lofty a goal.