Do products create markets?

In Fintech, the answer is dual. Banking, brokerage and insurance are secular industries, yet technology has transformed services and behaviors, for both consumers and enterprises.

🤙🏻 Demand: when low-cost airlines debuted in the 1970s, they didn't just take passengers from legacy carriers; they opened up the market to people who couldn't afford to fly until then. Similarly, several Fintech companies have broadened their markets. Square (now Block) or SumUp made credit card payments possible for any merchant. Coinbase brought cryptocurrencies to over 150 M users. Revolut democratized cross-border payments and became a financial super-app. These examples illustrate how innovation can stimulate demand in markets that were either underserved or overpriced.

😇 Behavior: other startups have focused on meeting new customers needs and behaviors: ubiquitous banking and brokerage through mobile apps; no-fee model from neobanks such as Chime; convenient embedded financial services like Klarna. These services typically boast higher NPS scores than incumbents. They often started with consumers, but quickly spread to enterprise segments. According to BCG, the growth of B2B Fintech should double that of the whole space by 2030 (which itself should grow 6x to $1.5 T).

🛠️ Infrastructure: another notable aspect of Fintech innovation is its focus on building foundational infrastructure. For instance, community banks and new market entrants can digitize operations and automate workflows efficiently through readily available building blocks and “off the shelf” tools and services. This approach not only cuts costs and reduces the need for custom solutions but also enhances integration capabilities and user experiences.

In short: the fragmentation of financial infrastructure has been driven by a wave of venture-backed companies that have competed heavily to unbundle banking and brokerage operations into best-in-class point solutions. While some ventures have achieved Product Market Fit, their Serviceable Obtainable Market may not scale to unicorn or IPO growth. To sustain the innovation initiated by their founders, these companies might need to recalibrate their ambitions and explore alternative funding and operational strategies, such as venture buyouts.