As the global economy faces the threat of a recession, FinTechs are experiencing difficult times due to surging inflation rates, the rising cost of living, the spillover effect of the pandemic and the Russia-Ukraine war. The slowdown in funding, combined with a drop in valuations across regions, is compelling FinTechs to prioritize cost reduction while still innovating. According to a Financial Times report, almost half a trillion dollars has been wiped off FinTech valuation. FinTechs must find a balance between managing costs and generating revenue.
The lack of funding can be challenging for a sector that relies on technology-driven disruption. Private investment in FinTech has slowed since the record-breaking streak in 2021, making it difficult for companies to accelerate new product development, acquire customers and expand into newer geographies. To overcome this, savvy FinTechs are forming strategic partnerships to manage their back-office operations cost-effectively and focus on what they do best – innovate at speed and scale.
Gaining a Competitive Edge through Cost Reduction
Tackling complexities associated with an altered environment is time-consuming and costly and warrants the expertise of a strategic partner that can co-create profitable outcomes. ISG observes that with back-office operations driving 30 to 50 percent of the operational costs, strategic partnerships can support the objectives of FinTech cost reduction, process excellence and on-demand access to skilled resources.
For instance, a leading US FinTech, as it transitioned from a banking app to a full-fledged bank, faced back-office challenges it had not encountered previously. It realized it needed to bring down its cost structure while focusing on growth. Forging a strategic collaboration, the FinTech transformed its back office to cut costs and achieve speed and scalability. It streamlined vital back-office tasks such as anti-money laundering sanctions screening, account maintenance, exception handling and communications management by leveraging analytics, robotic process automation, Artificial Intelligence (AI) and machine learning.
A partner with a deep industry understanding of FinTechs’ operations can facilitate process excellence with frameworks, proven risk management strategies and multi-channel customer engagement. Underpinned by intelligent automation, these approaches are continuously enhanced with analytics-driven insights.
For instance, customer onboarding is a pain point, given the need for many checks and verifications. 68 percent of new consumers abandon a financial application when the experience leaves much to be desired. Partners help to eliminate friction in customer onboarding and reduce the cost of customer acquisition.
Equally important is customer retention, which can be significantly enhanced by mapping customer journeys to design hyper-personalized experiences. AI-enabled systems provide real-time insights into customer pain points, empowering contact center agents to engage with contextual insights and resolve queries quickly and effectively. This results in higher customer satisfaction and cost optimization by reducing the call handling time.
Collaboration with the right partner also ensures strict adherence to risk management and regulatory compliance requirements. Designing operations on a solid foundation with comprehensive controls supported by policies and documentation is core to the financial services industry. Moreover, global regulators have been closely monitoring financial crime compliance and penalized financial institutions with fines amounting to USD 2.25 Billion in 2021 for non-compliance.
Co-creating the Right Outcomes
Provider-led modular solutions and accelerators can help FinTechs efficiently manage, integrate and scale their core back-office operations. These operations-as-a-service solutions can significantly reduce costs by leveraging automation-led efficient processes and flexible commercial models.
These benefits funnel into further cost efficiencies when partners leverage global delivery and pass on the benefits of cost arbitrage. Equipped with a watertight controls framework, comprehensive procedure manuals and standardized documentation, best-in-class partners can scale the business seamlessly across locations and maintain consistent quality in back-office operations and customer experience.
FinTech cost optimization is inherent in the core business model. Just as the quest for value creation is inextricably linked with collaborative partnerships, execution calls for building alliances to co-create outcomes that exceed individual capabilities.
To know more about how WNS is helping FinTechs optimize costs, visit FinTech Operations | Banking BPM | WNS