How scale-up FinTechs can drive sustainable growth

The reality is that scale-ups face a unique set of significant challenges that are different to those encountered by start-ups. While the precise definitions of scale-ups can vary, 20% growth in both revenue and employee headcount for at least two years is a fairly common benchmark. To be clear, the growth journeys of both start-ups and scale-ups are fluid and non-linear and each face unique challenges and opportunities.

Through the work with hundreds of FinTechs, the EY FinTech team has helped identify a number of key priorities that must be addressed if firms are going to get on a trajectory of sustainable growth:

1. Developing and motivating a winning team: While a clear vision, an ambition to innovation and sophisticated technology are all key components of FinTech success, a skilled, motivated and cohesive team might be the single most important factor. Having the right people on board – supported, engaged, managed and remunerated in the right way, including full-time employees, contractors and contingent workers, external partners and collaborators – will lead to more innovative ideas, higher levels of performance, and a collaborative culture. The focus will be on skills and talent that drive growth (e.g., product developers and owners, business analysts, data engineers and analysts) and support operational scale (e.g., finance, HR, risk management and digital marketing).

    

2. Managing complex risks and regulatory imperatives: As FinTechs grow and mature, they will naturally encounter increased regulatory scrutiny, as well as increased complexity and risk, including both financial and non-financial risks. Recent top regulatory priorities include the newly released Consumer Duty, payment services directive II (PSD2) review, operational resilience and anti-money laundering. A strong risk management framework goes beyond regulatory compliance to strengthen decision-making in support of sustainable growth. In addition, many firms have to navigate authorisations as their business grows.

    

3. Building effective, resilient and scalable technology and operations: Growing FinTechs often find that their initial operational models are suddenly overwhelmed by increased demand from customers, product owners and investors. Similarly, technology that worked fine with a few clients may be overloaded by increased traffic. It’s easy to forget that FinTechs which develop solutions that drive digital transformation at established financial institutions also need to significantly re-engineer and enhance their operational models and core technology platforms as they gain market traction. Agile-at-scale frameworks can be viable solutions for some firms navigating this challenge.  

    

4. Sharpening customer focus and engagement: FinTech leaders and founders looking for dramatic growth must think carefully about how rising customer expectations and societal shifts affect all dimensions of growth and customer experience. Most scale-up FinTechs need to sharpen their value propositions to attract mainstream consumers and adopt more sophisticated, insight-driven marketing techniques to extend reach and strengthen engagement.

    

5. Mastering finance and funding with speed, rigour and insight: All types of scale-up FinTechs need strong finance teams to address reporting and tax requirements and navigate more detailed regulatory scrutiny. Even more importantly, CFOs can contribute to informed and confident decision-making and serve as business advisors. Highly automated processes for reporting, reconciliation and other core tasks free finance teams to focus on insight generation and high-value work. It’s also important to note that internal functions, as well as regulators, partners and investors, will demand more detailed finance data as the business grows.

    

6. Preparing for a successful IPO: For many FinTechs, initial public offerings (IPOs) are a key goal and milestone on the growth journey. Preparing the organisation for such a major event is critical and should be viewed as a process rather than a one-off event. IPOs require considerable effort, but in our experience, the hard work pays off with better results. Put simply, well-planned and effectively executed IPOs create and increase value for stakeholders. That’s why readiness assessments, that, amongst other things, identify issues that affect value or timing of a sale, are so important.

    

7. Setting the stage for international expansion: While not every UK FinTech plans to go global, those with international ambitions must be ready to navigate specific challenges. There are regulatory implications, of course, but also operational concerns, such as making payments across borders and ensuring the user experience reflects local languages and cultural norms. Strong partners of EY member firms can help FinTechs mind the many critical details without losing sight of the strategic big picture.

    

The EY FinTech scale-up handbook

These priorities form the heart of the EY FinTech scale-up handbook. Beyond exploring these topics in more detail, the EY FinTech scale-up handbook provides actionable tips and raises questions that FinTech founders and executives must ask as they advance on the growth journey. The key to navigating these priorities is balance; each requires a different set of skills, dedicated resources and careful planning to proceed.