Future of neobanks: some will swim & others will sink. Here’s how to survive the wave 🌊; VC funding slows, but firms keep raising massively 💸; The curious case of Elliott Mgmt, PayPal & Pinterest 🧐

Good Morning FinTech, 2 August

Good evening Everyone,

And happy Tuesday! Today’s issue is coming slightly later but boy, oh boy it’s exciting! We’re going to look at the future of neobanks where some will swim & others will sink (+ what neobanks can start doing to survive the wave), VC funding that seems to be slowing down, yet firms keep raising massive funds (what does it mean and what can we expect in H2 2022), and the curious case of Elliott Management, PayPal & Pinterest (maybe PayPal buying Pinterest isn’t such a bad idea after all?). Let’s jump straight into the awesome stuff:

The future of neobanks: some will swim while others will sink. Here’s how to survive the wave 🌊

Following the money 💰 2021 was a year with a massive infusion of large investments in neobanks and challenger banks across the globe. Given the current turbulences in the markets, it’s obvious that investors are now looking for a return on their investments in the form of sustainable profits (or at least a very clear path to it).

More on this 👉 The seems like common sense now and despite many industry experts raised this even back in 2020, the easy access to capital and focus on growth at all costs have made many startups blind. The truth of the matter is that most neobanks are struggling to reach profitability, and as funding dries up and valuations drop, they’ll need to refine their strategies.

What does this mean? 🤔 In essence, this means that neobanks will need to move from a customer acquisition mindset to cutting costs and growing profitability (we can already see some doing that). Further, this also means pivoting from offering low-cost or no-fee incentives and high yields to creating new revenue-generating offerings.

Those that do this successfully will come out leaner, more cost-efficient, and potentially dominating their markets. Here’s what neobanks can start doing in the short term already: