“Oh, my sweet summer child,” the old FinTech startup founder said quietly, “what do you know of fear? Fear is for the winter, my little lord, when the snows fall a hundred feet.” 

One of my favorite things I watched this past year was the new Game of Thrones House of the Dragon spinoff. And I can’t help but use the “long winter” the characters of Westeros prepared for as a metaphor for what FinTech startup founders are experiencing right now. 

The decade-long summer of free money is over - a VC winter is upon us. Per CrunchBase data from 3Q, venture funding for 3Q2022 is down by $90 billion (53%) year over year and by $40 billion (33%) quarter over quarter – the lowest quarterly funding amount since the start of the pandemic. 

Despite all the crazy stories this year, there are real opportunities for aspiring FinTech startups and their founders to become new heroes of the multi-trillion dollar banking and embedded finance industry. But in this version, there are no “princes or princesses who are promised” anything - VC angel investments or the fortunes fit for kings and dragon queens. 

In particular, I’m hearing that investors are reluctant to fund future potential unless it comes with concrete customer traction. So, if you’re building a FinTech idea and you need funding today, it’s vital to get your product into the hands of customers fast to ensure it doesn’t end like Season 8 of GoT. 

How will you do that? Take feedback from customers to sharpen your focus and prioritization, and ultimately reward them for helping you. Here are my three tips for achieving those things as you build the next hot neobanking app or embedded finance idea that will shine through the storm: 

1. Getting feedback and insights from your customers with a working product is critical
2. Aim high for the long term, but don’t work on things outside of your minimum viable product (MVP) in the short term
3. Always remember the problems you’re trying to fix for people, and reward them for choosing you

Read on to get the full insights.

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1. Feedback and insights from your customers are critical

In this operating environment, startups can impress investors better when they can point to tangible results and activities. What does that look like in reality? Preparing for these common questions before you head to an investor meeting with your pitch deck:

• Who are your users?
• What are the problems you’re trying to fix for them?
• What do they like, and what do they want?
• Where are you going to meet them? 
  

At the core of it all, the only way to find these answers is to ship something tangible - a working product that people can interact with and use. Everything you’re building right now should be in service to getting a MVP out the door.

To be clear: I’m not saying, “build it, and they will come.” Far too many tech companies shuttered their businesses because they were making solutions in search of problems. But it is easy to slow yourself down by thinking too far ahead regarding what you need to create or extra problems to solve for people.

For instance, if you’re building a consumer FinTech, do you really need to create your own payment processor? In my former teams’ and my personal experiences building financial technology across a variety of companies, what that looks like is 10 - 20 engineers tied up for 18 months and millions of dollars spent building something that may never see the light of day.

A year and a half is a very long time in an environment where FinTechs and embedded banking startups can get to market in three months, if not faster, according to Bain & Co. research. And speed begets opportunity: the same study forecasts that embedded finance transactions in the U.S. will surge to $7 trillion over the next four years, up from $2.6 trillion at present. 

In other words, sprinting to your MVP is more than just getting to the next funding round. It can spell the difference between establishing yourself as a competitor or ceding the field to more nimble entrants. But how do you move fast when there is so much a FinTech needs to account for?

2. Aim high - but don’t make more work for yourself right now

One of the reasons FinTech and embedded banking is such a unique opportunity for high-performing startups looking to invest in the next moon-shot idea is that $7 trillion addressable market looming on the horizon cited in the Bain report, combined with a seemingly rock-bottom customer acquisition cost. 

While traditional banks and established companies can expect CAC in the $50-200 range, we have seen startups with a CAC closer to the $5-$10 enjoyed by Square’s P2P neobank Cash App.

How is that possible? It’s easy for startups building for a niche or underserved user group to acquire new customers when they deeply understand their needs and wants and, as a result, are poised to offer financial products at the exact moment it makes sense. This ability to quickly onboard excited users who want something new is hugely beneficial so startups can free up cash to invest in building their products instead of using it to market them. 

However, the cost of time and resources to create all sorts of experiences for new followers will pile up fast. A FinTech startup or a growing company embedding financial products has to make a standout front-end experience. But it also has to connect to banking infrastructure, ranging from “clunky” to “predating the modern Internet.” And it must stand up to the rigors of compliance and regulatory oversight.

On top of that, customers have far higher standards for user experience and personalization than ever… and most traditional banking apps are missing the mark. A series of J.D. Power studies found that user satisfaction with conventional banking and credit card apps has declined. Practically speaking, the MVP for an embedded banking app needs to do far more than an MVP from another industry sector.

It’s an extra-tall order. The best thing you can do is stop yourself from making it taller than it needs to be. In my role advising startups and building financial ideas at Synctera, I have worked with thousands of people using our platform to develop their ideas. Here are their core targets and products: 

• Financial security
• Debit capabilities
• The ability to track balance and spending
• The ability to send money to friends and family
• Links to external accounts
• Apple Pay and Google Wallet support
• Rewards
• Overdraft protection
  

This, right here, should be the core of your MVP. And because they’re increasingly commoditized by things like Banking as a Service software, it’s far easier to build these upfront or partner to solve these features as fast as possible. Anything else can wait.

One interesting counterpoint: “Do I need Peer to Peer payments (P2P)?” If you are building a consumer or business-facing app and depend on user growth (not user “conversion” from an existing pool of embedded finance users), P2P is required. But if you are doing embedded finance and consumers are already with you, it’s like a home-grown payment processor - not mission-critical.

What about investment capabilities or financing major purchases through embedded banking? Those are long-term goals, not MVP features. Our current funding climate and go-to-market pressure are not likely to sustain the effort it takes for a FinTech to get these features off the ground, much less earn enough trust from users to see widespread adoption.

It’s already hard to build finance and embedded banking startups, especially when you factor in compliance. Don’t make it any harder doing the most with the least when building the first version of your product. And if you’re pursuing these features because you want to create virtuous circles in your users’ lives, there are likely easier ways to do it.

3. Focus on what users truly need, fix their problems, and reward them for choosing you

All other things being equal, embedded banking and new FinTechs will live and die based on their total user experience. I promise you, JPMorgan isn’t losing sleep over your bare-bones checking account app. Traditional bulge bracket banks will eat you alive unless you give users a compelling reason to move their money to your platform. 

What is going to bring your users back for the next transaction? Think about loyalty reward stamps from Five Star car washes or the old Subway Sub Club cards. It’s not wrong to think of those loyalty programs as banking apps in analog.

For a more recent example: at Uber Money, we thought about what mattered most to our drivers. We discovered the most significant motivators were fuel cashback rewards and auto insurance discounts. This discovery guided us as we sought banking partners who could support those rewards. The engagement took off because the rewards we chose were directly relevant and adjacent to the daily work of our users. 

And it wasn’t the only benefit. That talk about virtuous circles? Over time, we discovered that drivers used Uber Money to gain financial footholds that made a real difference in their lives. The ability to receive payments, as well as spend and transfer from debit accounts freed users from paycheck cashing services and many other indignities that sap money from the underbanked. I doubt this would have happened unless we had created an ecosystem to directly benefit the driver and reward them for engagement.

Final thoughts: Small steps now, big strides later

Startups still in the early pages of writing their story are on the hook to produce results to fund their next chapter. Consumers have high expectations, and investors are justifiably picky about deploying their capital. The SaaS whiplash era is real.

But Open View Partners found the qualities that insulate startups from the worst of the whiplash, and they sound like the traits of a well-run FinTech startup. You are tapping into a robust and pre-existing community. And your discoverability is high by definition because things like FinTech and embedded banking are interwoven in the natural moments customers need services.

The trends that grow the total addressable market of FinTech and embedded banking aren’t going anywhere. People want cost reductions, greater financial access, and tangible rewards. The most significant advantage of these apps is the genuine value they can bring to communities in a way that big banks could never capture. 

You can design an experience for your target niche that will save them money or time. Your users can build credit and financial stability while you build their trust in a financial product that is specific and relevant to their lives. By drilling down to a lean, mean, meaningful MVP, startups can position themselves to reach the next leg of their journey and capture even more success in the coming years.

From there, it’s only a matter of time till your story turns into an award-winning HBO show. I can’t wait to watch it.

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