FinTech Endeavors & Updates
Hi there, ✋
I’m Miguel, living in Barcelona, nice to meet you! The end of 2022 it’s just around a corner, and you know what that means… the usual list of new year resolutions, plus nostalgic throwbacks regarding everything that has happened in the fintech industry over the past year. Thus, I want to take this moment to look back into the Fintech industry and all of its achievements — aiming to predict the trend and direction for the next following years.
⚠️ Important disclosure: I’m currently working in Younited as Project Manager — Europe, where we coordinate multiple solutions and business units. However, the views expressed in this blog post are not intended to represent the views of Younited Credit. This post, it’s only & exclusively my personal, individual opinion and does not represent — in no shape or form — the strategy & tactics of the company.
As they say “writing is clarity of thought”, therefore this essay, it’s only a personal exercise of mine to have an overview and interpretation of the Fintech World. 🤓
In this post I’m not unpacking the latest breakthroughs of Artificial Intelligence (aka AI) via theme stories like my other previous posts, because I want to deep-dive on the current status of the Fintech world, more specifically the online consumer loans (i.e. online lending & borrowing).
However, if AI content it’s what you are looking for, please enjoy my recent posts: AI & the Story of the Universe or AI & the Story of “Value Investing” vs “Growth Investing”. 🤖🧠
Intro
The goal of this article, it’s mainly to acknowledge all the milestones, that the industry as a whole has achieved since my last article First FinTech World Experience.
It blows my mind to think that it has been 3 years since I last wrote about Fintech topics, and we are not short of groundbreaking advancements accomplished in the meantime.
Although a lot of things have changed and evolved in this fast pace industry: new players, new features, new models, new customer behaviours, and so on… one thing that has not changed, its Younited’s mission of “helping customers to reach financial well-being”. 🌱
About Younited:
Younited is the leading instant credit provider in Europe. Constant innovation, cutting-edge technology and exceptional user experience have allowed nearly a million customers to have access to instant, simple and transparent credit to refurbish their home, go on vacation, buy a new smartphone or bring any other project to life.
Younited operates in 5 European countries (France, Italy, Spain, Portugal & Germany) and generates close to €2bn in yearly GMV.
As the pioneer in personalized budget coaching, Younited deploys a credit strategy at the service of all to promote more transparency and more inclusiveness.More information on https://www.younited-group.com
In fact, we are in a celebratory mode! 🎉
It was a long year… a lot of iterations, process improvements, mutualize optimizations, testing & learning, overcoming big challenges — huge effort and full commitment across every single team—and as a end of the year reward, we have just released a press announcement sharing the new equity round with our main shareholders, bringing Younited valuation to €1.1bn (here). 🚀
This recognition follows a strong financial results in 2022 with a GMV of €1.6bn (+70%) and total revenues of €190m (+54%).
More importantly, this will allow us to accelerate further the development of our #instantcredit and #openbanking revolution and boost the development of our partnership’s channels across our 5 geographies.
… so, HUGE congrats to all the Younies!! 🦄🌎
Let’s step back ⏳
Lending money to a consumer is a risky activity, the whole core of the business is to be able to accurately manage risk. The anticipation of that risk is entirely based on the information that the lender is able to collect and process. It’s not only crucial to have huge amounts of distinct data points in abundance, but also have the know-how and right tools to examine and process the most important customer details.
The right tools can provide lenders with an edge in terms of risk assessment. With the right software, lenders can accurately assess the creditworthiness of potential borrowers and make decisions with confidence. Additionally, the right software can enable lenders to make faster decisions, allowing them to act on new opportunities quickly.
Usually, lenders would focus on 3 main categories of analyzes:
- KYC (know-your-customer): verify customer for legal and regulatory reasons.
- Solvency: verify income for financing reasons.
- Risk Cover: verify address; job; etc, for fraudulent reasons.
For this to happen, we see the customer experience deteriorates and multiple frictions are put in place to filter out bad players. Since the beginning, customers are asked to provide a wide range of documents that validate their full risk profile. Even though, this system it’s the backbone of the modern banking and what allowed the escalation of the current economic dynamics, it comes with a cost or tax towards the customer. 💳
To demand a credit loan was always an onerous, time-consuming, stressful, and complex event for customers to deal with. Moreover, we see that most customers seek the credit loan at difficult liquidity moments of their lives.
Things have changed when new players and now incumbents have decided to make customers life easier (relativity) by increasing the acceptation rate and rising the interest rates — credit lending specialists exploded as an own line of financing. They were able to give a faster answer to a customer that was in urgent need of one. This opened the gates to aggressive financial products that pushed customers to impossible to get out indebtedness spirals, that only harmed customer’s financial situation.
Tech came to the rescue… 💻
Like in many other domains, the insurgence of new technologies allowed new players to disrupt monopolized markets that in no way shape or form would care about customer experience or long-term value. Before, the focus was to extract all the possible value from the customer in the shortest amount of time, but now innovators could sustain initial depreciated return on investments to achieve higher life-time-value, only due to new tech enablers that made end-to-end journeys more efficient with lower operational costs.
For example: digital signature, or CRM platforms are common features that are seen as minimal service standards, that at the time enabled to scale the amount of to be reviewed demand applications without increasing the risk portfolio.
It was back then a window of opportunity, that capitulated a new generation of financial companies supported by tech mindset (aka Fintech). 💡
Where we find ourselves 🗺️
All the major milestones that Younited has achieved in this 10-year run after inception, clearly illustrates the innovation and entrepreneur mindset that is minted in the company core values. Even though, the European financing banking system is highly regulated, and presents important compliant thresholds that difficult the introduction of new players, Younited was able to extend its own footprint across 5 countries (i.e. France; Italy; Spain; Portugal; Germany).
The sustainable business model that supported Pan-European growth in a highly competitive domain is not only a testament to the excellence of execution and search for new technological approaches, but also to Younited’s customer-centric obsession. As demonstrated by positive ratings and customer feedback, all solutions at Younited begin with finding opportunities to optimize the customer experience and improve the end-to-end journey. This approach also makes, by default, the company’s own systems and processes more efficient.
A clear way to outline how the market has adapted in the last several years, to confront the tech disruption created by players like Younited, it’s through the insights highlighted in the book “7 Powers” by Hamilton Helmer. 📖
The key lesson in the “7 Powers”:
- Power is a configuration that creates the potential for persistent significant differential returns, even in the face of fully committed and competent competition.
- The ultimate goal is value creation. You create strategic differentiation through increased margin and market share simultaneously.
One common power across the newcomers is “Counter-Positioning”, where a “newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing business.”
This was true in the last few years, and Younited took full advantage of the fact by keep focusing on improving customer experience: faster, easier.
However, technological solutions become more mainstream and customer standards have risen, therefore competitors were able to catchup i.e. face disruptors at the same ground levels. If before, being fully digital was the exception, nowadays the opposite happens.
Looking forward 🚀
The future is “Open Banking”, it’s the trigger that will disrupt the consumer loan industry and improve the user experience… why?
We intuitively may automatically support the open banking tech, because in today’s day and age we are surrounded with successful use cases that are based on the exploitation of customer information — and bank transactions are the ultimate embodiment of customer data.
Nevertheless, it’s important to take a step back and understand what are the core values and potential side effects when we full embrace a novel credit approach.
The intrinsic disruption of Open Banking requires us to look at it through multiple angles and challenge the most basic assumptions. It can be a pivot moment for Younited and all credit industry, hence we should expand our thinking and prepare accordingly.
Although it feels like a quick, easy answer, we should not treat it as such. There is an important initial investment to shift product development and the rollback may be highly complex and/or costly.
In hindsight this decision may not be as simple as it looks now. Hence, through this essay I hope to clarify and deep-dive into all the details attached to the subject.
Our goal it’s not only to address “why” Open Banking is important, but also how it is critical as a key differentiator on the future consumer credit landscape. How will it impact our customer experience? What are the main business reasons that foreshadow economic benefits? What are the second order effects to consider?… among other relevant points of view like compliance and regulation constrains.
First, let’s dissect the “strategy” part of it, as UCLA Anderson School of Management professor Richard P. Rumelt identifies in his book “Good Strategy / Bad Strategy”: 📖
- Strategy is designing a way to deal with a challenge. A good strategy, therefore, must identify the challenge to be overcome, and design a way to overcome it. To do that, the kernel of a good strategy contains three elements: a diagnosis, a guiding policy, and coherent action.
He goes even further and gives multiple examples, where we can see strategies being pushed for the sake of short-sided incentives with unrepairable damages. Moreover, he highlights positive examples, like this one referring to Steve Jobs:
- “Jobs did not enunciate some simple-minded growth or market share goal. He did not pretend that pushing on various levers would somehow magically restore Apple to market leadership in personal computers. Instead, he was actually focused on the sources of and barriers to success in his industry — recognizing the next window of opportunity (…)”.
Likewise, Open Banking may be the analog of this window of opportunity for the Fintech world.
What’s next?
Keep on building… keep intentionally listening to our customers, test hypothesis, iterate fast & assertive, plus learn thoroughly. Opportunities are like luck, you will not be able to predict when it will happen (i.e. it’s outside of your control)—yet, you can be prepared for when they happen.
We can see initial hints of the potential of Open Banking and imagine how far it will go in the future.
One thing is certain, customer financial well-being will always be at the center of our priorities. 😻
Thanks! ❤
This blog post does not disclose material nonpublic information pertaining to Younited.
Disclaimer: The opinions expressed on this blog post are those of the author who may be associated person of Younited S.A, and who do not represent the views, opinions and positions of Younited. Information is provided for general educational purposes only and is not intended to constitute investment or other advice on financial products. Younited makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information on this blog post and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Unless otherwise noted, all images provided herein are the property of Younited. This website contains links to third-party websites or other content for information purposes only. Third-party websites are not under the control of Younited, and Younited is not responsible for their contents. The inclusion of any link does not imply endorsement, approval or recommendation by Younited of the site or any association with its operators.