Setting the Table for the Fintech Feast

The decade of digital is far from over. With 2021 off to a fast start, QED is doubling down on what we do best – advising entrepreneurs to ensure the health of solutions they’ve built. Fintech will continue to have its prolonged “moment” in the coming year, and as founders are considering their current environment, our team put pen to paper on what conversations are starting to be dominated by. Here’s what fintech leaders should be watching:

Financial Inclusion

With a new administration, the next year will bring a renewed focus on inclusion. The Biden agenda gives attention to more and greater stimulus, rural broadband and investments in low-income and minority communities. Though these don’t have direct bearing on fintechs, they hold the promise of restoring economic dynamism to hard hit communities and creating fertile ground for new and innovative approaches to financial services.

The New Office

It will likely take the entirety of 2021 to fully vaccinate in the United States, and well beyond for many of the other markets QED works in, so we can expect more work from home and a limited travel environment most or all of the year. But once we are vaccinated – will these new behaviors stick? We anticipate business travel to be cut by one third of what it was prior to COVID-19, with people in the office less than half the time. And, services that have gained momentum in 2020 - Zoom, eCommerce, home delivery and workouts (looking at you Peloton) - will continue to gain as these behaviors become more engrained. Entrepreneurs should be thinking about the future of these industries, and young founders need to take the new office model into consideration as they continue to build and expand their business.

Dispersion of Talent

We’ve already seen the trend of migration out of cities, where many are settling permanently in vacation destinations. San Francisco is always going to be the tech hub, but it will be easier to start companies anywhere, get funded anywhere, and find talent…anywhere. This is no secret to us, having built our firm from scratch in Alexandria, Virginia, but for many startups this freedom brings more questions and opportunities that weren’t always on the table. We expect companies to replace office space budgets with budgeting for gatherings and culture-building activities to ensure teams remain strong and activated.

• With company freedom, there is also employee freedom, so we do expect an increased level of turnover as it will be much easier to change jobs without location being a top priority. Because of this, founders will have to work harder to create and maintain company culture, which even still will be a less powerful retention tool. Corporate compensation and benefits will require increased attention, and many new approaches will be tested to combat this particular trend. Companies like Bambee will be well positioned to meet increased demand for competitive benefits, as it enables small businesses to offer their employees comparable benefits and HR resources to those that larger companies provide.

Unit Economics, Here to Stay: Measuring profitability on a unit basis will remain a top focus for early-stage companies. Ok, we know this trend isn’t new, but it absolutely will not be going anywhere soon. The importance of being able to make money sustainably and having high return on investment metrics for things like marketing and culture spend will continue to rise more and more to the forefront.

Specific Industry Insights and Impacts: Industries across the board have been heavily impacted by the pandemic over the past year, and there will continue to be a great deal of change and disruption as the new administration makes important decisions that will impact specific industries that touch fintech.

• Student debt payments are looming. The student debt landscape is uncertain as federal student loan payments have been paused since last spring and will likely resume at some point this year. When this does occur, it’s likely that loan servicers will be overwhelmed, billing mistakes will occur, delinquencies will escalate, and there will be some shock to the economy as that liquidity disappears from consumer spending. Companies like Summer will serve as important resources as student loan borrowers navigate how to effectively pay down their debt when that responsibility resumes.
• Reignition of SMBs. Once vaccinations are complete and consumers no longer wary of social activity, The SMBs in hospitality and other afflicted areas that are still standing will enjoy a boom due to less competition and pent up demand. To help refill the supply of SMBs and hospitality businesses, the support engines for that sector will also boom – equipment sellers for restaurants, banks offering SBA loans, POS terminal sellers for new businesses, etc.
• A steep rise in consumer lending. The past year has presented a change in lifestyle for consumers across the country and around the world. This shift in priorities and circumstances will adjust the way consumer lending is done. Digital offerings will continue to gain traction. Platforms like Sundae, a residential real estate marketplace that helps sellers of distressed property get the best prices for their homes, will experience increased adoption. Resources like this that allow consumers to explore options to sell their homes conveniently – and from anywhere – will be highly coveted this year and beyond.

If there’s one thing we’ve learned in the past year, it’s that our operator experience at QED allows us to surgically address and triage in any environment, and we will continue to do in the years to come. Learn more about our team and expertise.