Last month, Innovate Finance hosted its ninth Global Summit at the historic Guildhall; a highly-anticipated industry event by the fintech community. This year, Manigo’s co-founder and Head of Growth, Olya Parafiyanovich, spoke on a panel discussing Manigo’s experience of scaling throughout a crisis.
Alongside CurrencyCloud, incuto and Primary Bid, plus Innovate Finance’s Rashee Pandee moderating, Olya gave some insight on why there is no easy money anymore for fintechs, and the fact that everything is cyclical – we may be seeing a down period now, but it won’t be forever.
A look into our thoughts on the key questions asked and our mindset around the current economic situation, plus how startups and scaleups should approach growing as a business.
What does scaling mean to you? If you look at scaling now, verses when you first started, has the definition of the term ‘scaling’ changed?
Scaling and funding go hand-in-hand. Companies like Monzo, Revolut and TransferWise were scaling at a time when you could buy growth.
We live in a very different investment world today. It looks like the era of easy money is finished – for now anyway. We have seen the first quarter funding results and it is quite obvious that the environment has dramatically changed; fintechs have no doubt been hit the hardest because they have enjoyed the steepest ride over the last few years. Another way to visualise the current landscape is the rarity of tech unicorns in 2023. Only 13 unicorns were created in Q12023 versus 127 in Q12022, this is equal to a 90% decline.
Unit economics has become the new name of the game. It means that companies need to be profitable on a transaction basis – those cash-bleeding business models are no longer sustainable which was evident by a recent collapse of a very large player in the payment space.
Another macro factor we could look at is that interest rates are going up. This affects the cost of capital – making it higher – forcing pressure on startups to deliver a higher forward-hurdle rate to win the investors cash.
To tie it back, scaling has changed completely because of the availability of capital and the welcome return to a culture of refocusing on bottom-line profitability.
All in all, the markets are screaming for responsible and sustainable growth.
What is the impact of recent crises on your scaling plans?
At Manigo, we believe that the fittest of the bunch will win. Difficult circumstances will discipline you like nothing else; it forces every founder to think critically about optimising on every level: the operations, the product, the team. At Manigo, we had to sit down and honestly reassess our revenue strategy and also the product itself. We’ve done this across three fronts:
1) Platform resilience.
We have seen a lot of regulatory changes over the past years. As a result, it alters a vendor’s risk appetite, geographical coverage and many other factors. In addition to that, each vendor has its own strengths and weaknesses so it is not enough to just be connected to just one banking partner etc. – this creates space for platform vulnerabilities and ultimately, it impacts the clients.
At Manigo, we firmly believe that the future of BaaS is in easy, robust fintech infrastructure connections. That’s why we are taking BaaS offering a step further and building multiplugs on each vendor vertical.
2) Where is growth happening today?
We are evaluating where growth is still happening in the current economic downturn and aligning our product roadmap with those opportunities. Buy-now-pay-later (BNPL), credit, crypto are all here to stay, so we are making room for the items which are ripe to scale.
3) Are we fully commercialising our tech asset?
We may be biassed, but we know that we have built an incredible tech platform – this is something we have been told time and time again by the industry experts, clients and partners.
We continue to offer a fully managed turnkey BaaS solution, yet we also have built a modern core banking software (account and customer management capabilities, transactions management, compliance, risk, controls, etc.) which a lot of companies out there, including the licensed ones, lack, want and need. We are enhancing and diversifying our offering by extending our platform to large companies or licensed entities on a SaaS basis.
What are your plans for the next year? Do you plan to continue scaling or pause for thought?
At Manigo, we absolutely plan to continue scaling, but only at a sustainable pace.
With every crisis there is always a silver lining so we should focus on the points that can yield the most revenue and opportunities in the current environment.
For once, there is a fantastic talent pool out there after all of the recent layoffs; it was tricky to secure top talent in recent years and now we are spoilt for choice.
Furthermore, partnerships are the backbone of our business model (and many fintechs would also agree). There are so many opportunities to transform businesses today as gaps for the financially underserved have become more pronounced and have finally had the spotlight they deserve. At Manigo, we can give these businesses a financial solution for their end-customers that is bespoke and fits in seamlessly with their current offering and branding.
If you had a crystal ball what would you say is coming over the next 6-12 months?
This is a tricky one as no one could have predicted the two major black swans we had in the last three years.
We are simply going through another cycle. Just like in the past, we will come out on the other side stronger.
Lower valuations are leading to healthy fintech merger and acquisition (M&A) activity which is something that we are already seeing. For example, Acorns recently purchased GoHenry, Marqeta acquired Power Finance, so M&A could continue and even accelerate if multiples decline further. Furthermore, the IPO market has been frozen, but the pipeline of public listing deals is swelling. If the Fed stops hiking rates, we might see a rebound of IPOs in the second half of the year which will be a promising sign to the industry as a whole.
What’s important to remember is that some of the greatest fintechs can rise in times of crisis. Looking back, Stripe, Venmo, and Square (now Block) all emerged from the ashes of the (2008/9) global financial crisis. We will see some really healthy companies scaling forward and the industry as a whole can only go up from here.
Manigo, a leading fintech-as-a-service platform, provides a 360-package for any business who wants to incorporate modern, digital banking products such as smart payments, FX and accounts capabilities into their offerings.
In a matter of weeks, anyone can use our comprehensive API suite, whitelabel solution or program management to build in-app offerings that will delight and retain customers, boost revenues and increase brand loyalty.
From backend card and payment processing, to middleware integrations and frontend applications, we continue to be the only global, digital banking enabler in the region that covers the entire value chain.
Focus on your strengths and leave your #DigitalBanking transformation to Manigo.