Why reputational capital is a must for Fintech startups in this economic downturn

Valentina Drofa, founder and CEO of fintech PR consultancy Drofa Comms.

There is no need to remind anyone who cares as deeply as I do about fintech about the state of the industry in light of the latest news. But for those who are far away from fintech (but decided to click on this article), I will give you cold statistics. In Q3 2022, fintech startups raised 40% less than in Q2. In terms of VC funding, fintech is the third worst performer, down 62% year-on-year.

This means that now more than ever, players in the fintech market must prioritize customer trust and relationships with stakeholders in order to build robust credibility in the face of challenges. This credibility will determine how easily your company can attract investment and maintain its liquidity. And there’s no better way to ensure your business can stand out against the economic downturn than by investing in your reputational capital.

What is reputational capital (and how to earn it)

First, let’s define reputational capital. This term primarily represents the trust in a company and its leaders and the value of their brand, both corporate and personal, in the eyes of the market. CEOs and founders can easily damage the company they embody with questionable behavior, rash decisions and actions, as reputational capital directly affects the company’s brand.

Reputational capital can be accumulated from your customers, investors, employees, partners – anyone who has heard of your company. Simply put, it’s the first thought people have when they hear the brand’s name. Naturally, it is better for you if that thought is positive.

Reputational capital may be intangible in nature, but don’t underestimate the value it can add to a company. It is a critical factor that affects your business’s long-term success, as it helps you acquire new customers and retain existing ones when the going gets tough.

As a professional with more than 15 years in fintech and PR, I have seen how a brand’s reputation can lift you up and just as easily bring you down. Take the global financial crisis of 2007-2008. Unethical lending practices and extreme and irresponsible risk-taking led to the bursting of the American housing bubble and ultimately the recession.

The public perception was that rich businessmen received special treatment while ordinary people did not. In public, what industry leaders lacked most were openness, admitting mistakes, and above all compassion for people’s suffering. This “crisis of confidence” led to a loss of confidence in financial institutions, and we should learn from the mistakes of the past and avoid repeating them in the fintech space today.

In a crisis, the least companies can do is to show their human faces, address the difficulties experienced by their public, engage in social responsibility initiatives and show ethical leadership. Such times provide the company’s CEO with an excellent opportunity to supercharge the brand’s reputation.

The role of a business leader’s personal brand

A decade or so ago, business leaders and CEOs were expected to just run companies. Today they lead economic and political systems. Take Elon Musk, who can move entire markets with a single tweet. Like it or not, this is the reality we work in – even more so in the fintech sphere.

Of course, it’s not enough to write a few posts on random topics in your company blog to establish yourself as a credible, reliable thought leader. You must maintain a consistent effort to achieve success.

First, find the subjects and topics of your expertise and stick to them. They must be relevant to your industry and what your business does. If you want to become a fintech thought leader like a neobank founder, save your food restraint for another occasion.

Don’t be afraid to share an opinion that is different from others; Standing out from the crowd is a huge advantage if you know what you’re talking about. Although I would advise you to be nuanced in this regard, as saying something highly controversial can easily reduce the reputation you have been trying to build for months or even years.

Despite their expertise, thought leaders are always willing to learn more from other influencers and media or attend conferences that keep them updated with the latest market trends and help meet the right people. International fintech conferences are a significant part of my work schedule, so I plan them in advance and advise you to do so as well.

Attending specialized events will help you declare yourself as a prominent figure in the fintech world and even gain media coverage as a panel speaker. The fintech market is even faster and more disruptive than any other high-tech industry, with daily game-changing innovations, so don’t miss the chance to use conferences as a working tool to get your name out there.

How reputational capital can help Fintech

Even in the face of the recent downturn, scandals and layoffs, I believe the fintech industry has a promising future. Some predict that the global financial technology market will grow by 13%, reaching $225 billion by 2027.

I would even argue that one of the main reasons why the industry has a bright future lies in the nature of fintech: It is more lively and filled with constant innovations. And the managers are more adaptable than in many other conservative industries.

Meanwhile, as this sector bounces back, the reputation of companies that stand tall in the current tough times will play a big role in fintech’s development. A market built by strong firms with expert managers who value reputational capital will become a decisive factor in improving the industry’s overall image and helping it grow towards a better future.

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