Do you need to “shrink to grow”?

After decades of hypergrowth, fintechs have entered a new era of value creation, where the focus is on sustainable, profitable growth according to McKinsey & Company "Fintechs: A New Paradigm of Growth” report

🏦 Banking Transformation: with fast digital adoption, Fintechs gain equal levels of customer satisfaction and trust as traditional banks. 35% of US SMBs are considering fintech for lending and pricing.

🌎 Expanding Ecosystem: Fintechs accounted for 5% of the global banking sector's net revenue in 2022, with the potential to increase to $400+ billion by 2028, especially in emerging markets.

💰 Fintech Fundraising: early-stage Fintech show higher resiliency. B2B segments experienced smaller funding declines YoY while growth stage companies (series C+) showed a 50%+ funding drop.

👛 Cost Discipline: successful companies demonstrate profitability through effective cost control. In LatAm, 68% of fintechs reported an LTV/CAC greater than 5 - a sign of fueling growth without sacrificing profitability.

🌱 Sustainable Growth: by scaling back from underperforming activities or regions, Fintech can reinvest capital into high-performing segments (“shrink to grow”), and be 1.4x more likely to outperform peers.

🔀 Programmatic M&A: with IPO and SPAC activity considerably slower, many fintechs are turning to private markets for funding. M&A transactions tend to deliver higher returns.

In short: the impact of Fintech on banking, brokerage and payments is lasting, but many sound VC-backed businesses are operationally misconfigured for high growth. It calls for alternative exit strategies, beyond traditional venture-scale outcomes.