Over the past 20 years, the fintech industry has experienced a remarkable transformation driven by rapid technological advancements and changing consumer demands.
The early 2000s saw the rise of online banking and electronic payments, both of which began to challenge traditional financial institutions. The introduction of cloud computing, automation, and mobile technology further revolutionized the sector, enabling fintech companies to offer more efficient, scalable and cost-effective solutions.
Innovations in these areas helped fintech companies attract a larger customer base and level the playing field with more established banks. In recent years, the arrival of artificial intelligence has driven significant innovations in the industry. In fact, most financial companies believe AI will benefit their business in the next three years.
It’s no secret that the odds of a startup becoming a unicorn are slim. Still, examining the successes of industry leaders allows new fintech innovators to learn how to provide transformative solutions for their customers and bring their organizations to unprecedented heights. This article will dive into five key trends that all successful unicorn fintechs follow, offering valuable insights for aspiring enterprises.
5 Qualities of a Fintech Unicorn
- Disruptive innovation.
- Consistent funding.
- Ability to expand and scale globally.
- Balanced mix of founders and sitting executives.
- Strong employee engagement and retention strategies.
1. Disruptive Innovation
Disruptive innovation lies at the heart of every unicorn fintech operation. Successful fintech companies introduce groundbreaking products or services that significantly alter the market landscape. In other words, they create technology that disrupts the landscape as we know it.
Leading fintech unicorns have excelled by embracing any form of new, disruptive technology and using it to revolutionize traditional finance services from their static past to a more dynamic future. The common denominator of all of these innovations is that they all attracted massive user bases and forced conventional financial institutions to rethink their strategies and adopt these new technologies. This forced adoption is what we know as disruption.
Popular examples include PayPal, which transformed the payments industry by offering convenient and secure online payment options. Likewise, Robinhood famously disrupted the investment sector by improving access to financial markets through readily accessible trading platforms.
The lesson for emerging fintechs is clear: To achieve unicorn status, you must continuously seek out opportunities for disruptive innovation. This involves staying ahead of industry trends and being willing to challenge the status quo and requires a certain degree of fearlessness on the part of leaders as well as complete and total trust on the part of team members. Neither of these are easy to maintain when so much is on the line, of course. Disruptive innovation doesn’t happen quietly, and forced adoption doesn’t happen gently. By fostering a culture of innovation and can-do attitude, fintech startups can create products and services that redefine the market and drive substantial growth. This transformation starts with leadership.
2. Consistent Funding
The secret to securing consistent funding for fintech unicorns lies in investor relationships. A successful relationship comprises three key components.
Transparency and Open Communication
Clear communication about your company’s goals and strategy is crucial for forming strong investor partnerships. This transparency helps investors assess fit, showcase strategic thinking, and allow leadership to prioritize relationships with aligned investors. This means regular investor calls, an open-door policy, and consistently backing up your talk with action.
This ongoing dialogue also allows investors to share their expertise and help solve challenges the company may face. These meetings shouldn’t just be boxes to check, either. Investors often have valuable and important insights, and leaders should enter these meetings prepared to listen to what they have to say.
Scalable Compliance
A compliance program that grows with your company can signal organizational thoughtfulness and preparedness to investors. For earlier-stage startups, this may only involve essential legal and regulatory adherence, while larger startups may need a more robust compliance program. Appropriate compliance programs provide assurance, foster trust, and demonstrate strategic thinking, potentially leading to improved decision-making and efficiency. They’ll be necessary no matter what, so the sooner, the better. Early compliance programs build an important foundation for success without stumbles down the road.
Dedicated Investor Relations
Creating a team focused on investor relations streamlines communication and improves investor accessibility. This ensures timely responses and efficient information distribution, strengthening relationships by making investors feel valued and heard.
Few things, if any, are as important as securing consistent funding. The only way your company will reach unicorn status is by ensuring investors believe in you, your vision, and your organization’s capabilities.
3. Ability to Expand and Scale Globally
A defining trend among unicorn fintechs is the ability to expand and scale globally. This capability allows these companies to tap into new markets, growing their customer bases, which in turn leads to significant revenue growth.
A successful expansion starts with conducting thorough market research and understanding the regulatory landscape of each target country. This involves connecting with on-the-ground resources such as local regulators and legal experts. In addition, beyond the compliance experts, try to have lots of conversations with local organizations to get an insider’s view on the business landscape. My company did this when we expanded into the U.K., to our benefit.
Investing in scalable infrastructure and technology is vital to any expansion effort. Employing available technology-based solutions to manage global transactions and diverse compliance regulations (such as crucial compliance programs that are critical to navigating the different regulatory dynamics) will be instrumental to your company’s successful expansion.
4. Balanced Mix of Founders and Sitting Executives
Although global expansion is crucial, the internal structure of a fintech unicorn is equally important. A crucial trend among successful unicorn fintechs is maintaining a balanced mix of visionary founders and experienced executives. This balance ensures that the organization benefits from both innovative thinking and seasoned expertise.
A healthy mix of varying experiences and personalities allows a team to push each other to do things more productively while ensuring nobody is flying off the handle. Everyone brings different expertise, which is critical when creating a company. This allows everyone to focus on what they know best while also building a comprehensive organization.
To illustrate this principle in action, let’s analyze a real-world example. FloQast has a balanced leadership structure, combining its founders’ visionary insights with seasoned executives’ expertise. Fearlessness, while key, does need to be reined in occasionally. Even the bravest hikers take a guide to Everest, and a unicorn is just a tricky summit.
To complement this fearlessness in leadership and the entrepreneurial spirit core to its success, FloQast has brought experienced external executives, such as CFO and CRO, on board in critical positions to serve as the guide for this impressive hike. This blend of founding members and industry veterans creates a dynamic leadership team that combines innovative startup energy and established business acumen.
5. Strong Employee Engagement and Retention Strategies
One of the critical trends among successful unicorn fintechs is the implementation of strategies to enhance employee engagement and retain top talent, especially when it comes to saving money. In an organization of 100 people, for example, a focus on retention can save $2 million a year — and every dollar counts. Employees, particularly in fields like accounting, are increasingly seeking more strategic, advisory roles that go beyond their traditional “crunching numbers” responsibilities.
Although accountants typically spend significant time on core functions like managing finances (16 percent), transaction processing (14 percent), financial reporting (12 percent), and closing books (13 percent), a vast majority (83 percent) aspire to contribute to strategic decision-making. Only a small fraction feel their strategic value is recognized by leadership, however. These statistics highlight a crucial insight for fintech startups.
Offering employees opportunities to engage in strategic work, like taking input during planning meetings or soliciting feedback on every aspect of the innovation you’re striving for, significantly boosts job satisfaction and retention. Studies show that highly fulfilled accountants are nearly five times more likely to remain with their employer than those with average fulfillment and more than 12 times more likely than those with low fulfillment. Empowering employees to participate in high-level strategy and planning enhances job satisfaction and turns into broader organizational benefits, like loyalty, positive work culture and a higher level of success.
Unicorns Are Rare, but They Exist
Achieving unicorn status in the fintech industry requires a steady commitment to several important trends. Disruptive innovation drives the creation of groundbreaking products that redefine the market. Consistent funding ensures sustained growth. Expanding and scaling globally opens new markets and diversifies the customer base. A balanced mix of founders and experienced executives provides strategic leadership and operational expertise. Finally, you have to implement strategies that attract and retain top talent.
Emerging startups can implement these strategies to achieve unprecedented growth by learning from the success stories of established fintech unicorns. Analyze your current strategies and align them with these five key trends. Integrating these principles into your business model will position your startup for extraordinary success.
