Launching a next-generation fintech in the United States is no easy feat. For European-based fintech firms, the challenges are immense: the US economy, while highly lucrative, is also fiercely competitive and technologically conservative. Investors with the capital to make a risky proposition happen are more risk-averse than ever and Fintech investment in particular is ‘muted’, having dropped 91% since 2021. How can a company with transformative technology succeed in such an environment? Let me take you through our example – a Dutch-founded payments technology company – as a case study on how to do just that.
Our story offers valuable lessons for fintechs hoping to crack the American market. By understanding the current state of the US economy, the payments industry, and the evolving investment landscape, we can see why the right product and approach can open the door to success, even in a challenging market.
A Cautious Consumer and Outdated Infrastructure
The US economy, while recovering from the pandemic’s immediate shockwaves, continues to navigate a complex landscape. Persistent inflation and elevated energy costs are squeezing household budgets, dampening consumer confidence. This economic uncertainty creates a challenging backdrop for new businesses, particularly fintech startups seeking to win over cautious consumers.
Despite a seemingly saturated fintech market, the US consumer landscape reveals significant gaps. While peer-to-peer payment apps like Venmo and Cash App are popular, many Americans still lack access to fundamental features like seamless bank-to-bank transfers, commonplace in Europe. Moreover, innovations like tap-to-pay, QR code payments, and ‘super apps’ have yet to gain significant traction in the US. A staggering 67% of Americans still prefer cash (compared to just 11% in the UK) highlighting a fundamental disconnect between consumer comfort and advanced payment solutions.
This conservative approach extends beyond consumers. The US payments infrastructure, often built on outdated systems, hinders the pace of fintech innovation. Companies that can modernise this infrastructure, offering solutions to banks and payment processors, are poised to gain a significant competitive edge.
In this challenging environment, fintech startups must have a clear, compelling value proposition. By identifying and addressing fundamental pain points, they can win over the cautious US consumer. For example, we target the backbone of the payments industry itself, offering solutions to modernise the infrastructure and streamline processes for banks and payment processors.
A pragmatic shift
The exuberant days of the fintech boom, marked by billion-dollar valuations and headline-grabbing IPOs, have given way to a more sobering reality. Since 2022, fintech investment has significantly dwindled, and major deals have become increasingly rare. The first half of 2024 witnessed a mere five billion-dollar deals in the US, all of which were acquisitions rather than the IPOs or mega-venture funding rounds that defined the recent past.
Investors, once eager to fund ambitious fintech startups, now adopt a more discerning approach. They seek companies with proven business models, experienced teams, and technology that can deliver tangible results in a competitive market. The era of lofty valuations for startups with grand ideas and limited execution appears to be waning.
In this climate of economic uncertainty and cautious consumer sentiment, we entered the US market in 2023 with a clear, pragmatic approach. By focusing on modernising the aging infrastructure of the payments industry, we offered a solution to a critical problem. While many US payment companies rely on outdated systems, our approach and platform provides a much-needed upgrade, enabling faster, more transparent payment processing. This underlying modernisation is not merely about speed; it’s about providing payment processors with real-time, rich data that can be leveraged to enhance customer service, mitigate fraud and develop innovative payment solutions.
Expertise and Focus
In the current climate, launching a fintech in the US requires more than just a big idea. Companies must have a strong value proposition, an understanding of the market’s unique challenges, and a team with the expertise to navigate complex regulatory and operational landscapes.
Our approach shows that even in a tough economic environment, fintechs that solve real-world problems and modernise outdated infrastructure can thrive. By focusing on the fundamentals and offering a transformative product, European fintechs have the potential to not only enter the US market but lead its next wave of innovation.
To learn more, visit: https://www.silverflow.com/
ENDS
About the author
Robert Kraal, Co-founder and CBDO, Silverflow.
Robert Kraal is one of the few people in the world with over 20 years of experience in online payments.
After completing his degree in Geophysics, he started his career at Bibit, the first global Payment Service Provider (PSP) which was acquired by RBS/Worldpay. At RBS/Worldpay he went on to lead account management, before moving on to Google Netherlands. He joined Adyen in 2010 in the role of COO, where he was responsible for building and running the global acquiring and processing service.
As Co-founder and Chief Business Development Officer of Silverflow, Robert is responsible for maintaining relationships with the card schemes, acquirers, PSPs and regulators.
About Silverflow
Silverflow is a new kind of payment processing platform designed for today’s payment needs and fit for the future. A cloud-native solution with a single API to the card networks. One platform with one connection. Reducing cost and complexity, easy to use, data-rich, Silverflow frees you to innovate.
For more information contact Silverflow: https://www.silverflow.com/
