Why communications in the fintech sector always seems to lag behind valuations—and what we can do to fix it.
The Nineties are seemingly once again in vogue, with the massive wave of today’s financial technology startups mirroring the promise of that earlier era’s tech boom. The ever-broadening fintech ecosystem has benefited tremendously as the COVID-19 pandemic helped prove its mettle, while venture capital and private equity have swooped in, allowing these startups to stay private longer and net valuations in the billions or even tens of billions before listing.
From a communications perspective, however, the journey has been far from smooth sailing. As companies’ values have jumped by orders of magnitude, they’ve also found themselves under a hotter spotlight sooner—whether from media, regulators or influencer audiences. This increased scrutiny has quickly—even spectacularly— given measure to the reputational costs at play. Yet many organizations are still working from a lean, sales-centric communications model: announcing client wins for industry validation, hyping new features and going into the weeds on tech jargon that excites engineers but few others, all in an effort to beef up the next financing round. Such a scattered approach plays more easily in an extremely frothy, but likely fleeting, investment environment while new platform users are joining in droves. But neither investors nor clients will be so sanguine about improvised and non-strategic communications when the company—or an executive—missteps and tarnishes a previously clean reputation.
This begs the question: How should fin- techs professionalize communications in a way that delivers provable, lasting value? Our recent experience teaches a few lessons, and these begin with the fast-moving and compressed nature of fintech financing. Fintechs engaging with new investors and seeing earlier angels exit need to drive visibility effectively. They can net eight- or nine-figure growth investments, but often lack the team to manage messaging alignment and coordination among founders and lead investors, expertise around internal communications, or the media relationships necessary to convert and extend the coverage of the deal. And at a time when their funding series are delving deeper and deeper into the alphabet, they must be able to execute this process fluidly and repeatedly.
A second issue centers on brand and the competitive environment. Fintechs born in the years following the 2008 credit crisis, such as Stripe and Square, had the luxury of laying low and taking their time to let their offerings grow into the market. Today’s quick-moving financing means fintechs must constantly assess the landscape for new competitors and, for that matter, new ideas and points of differentiation. Clients tell us that their phones are ringing with acquisition offers, even while they’re still maturing, trying to develop their business strategy and refine their message.
The key to navigating this complex situation lies in being thoughtful about your brand, your strategic outreach to analysts and influencers, and being methodical about your approach to telling the company’s story—focusing not just on the keywords or the technology attributes, but more importantly on the sector expertise, personality and corporate priorities that set you apart.
As many fintechs mature beyond VC darlings, these priorities grow more acute as they find it more challenging to get the attention of press and stay relevant within the industry dialogue. Often, as firms’ focus shifts from the tech world to business and financial media, so does the media dialogue. Where an influential technology blog can delve into the minutiae of solution features, mainstream business and financial media write about business and industry challenges, macroeconomic issues and strategy. Fintechs’ communications must evolve from remaining centered on product features to focusing on the business challenges they solve for their clients.
There’s also the task of managing the organization’s reputation through unexpected crises, which often require specialized communications expertise. With the range and sophistication of cyber threats rising exponentially, customer data seemingly becomes more vulnerable by the week. Enforcement actions are increasing, and calls for fintechs to be more highly regulated grow louder as their systemic importance rises. When facing these complex risks, it serves companies best to have a solid brand foundation and communications structure in place, rather than trying to address issues from behind.
Finally, secular matters of corporate social responsibility, sustainability and DEI issues are being increasingly prioritized as elements of technology industry debate— and as criteria for selection among potential clients and investors. Most startups recognize the importance of these topics and their rising currency, but feel they have nothing differentiating to say. Chances are they may, but simply don’t know how to express or position it effectively.
The future of financial communications is inarguably intertwined with the future of technology, and with the market moving at record speed, expectations of upstart financial services organizations are shifting underfoot. 2021 will be remembered as a moment when fintech truly took off, with valuations skyrocketing behind an unquenchable thirst for new ways of paying for goods, investing in stocks—or “Stonks”—and conducting business digitally. As companies navigate this dynamic environment, having a professional, strategic communications capability could make all the difference, both today and tomorrow.
Tim Bourgaize Murray is Vice President at Stanton.
Article was originally featured in O’Dwyer’s PR News.