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’s take Silverflow, a Dutch-founded payments technology company, as a case study on how to do just that.
Silverflow’s story offers valuable lessons for fintechs hoping to crack the US 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.
The US economy in 2024
As of 2024, the US economy continues to grapple with the aftershocks of the Covid-19 pandemic. While the immediate recessionary fears have subsided, the economy is not fully in the clear. Rising inflation and elevated energy prices are eating into household budgets, causing consumer confidence to remain shaky. This dampened economic optimism creates a tough environment for any new business, especially one that needs to gain the trust of consumers and businesses alike.
Despite the seemingly vast fintech landscape in the US, American consumers actually have limited access to financial technologies that are considered basic in other parts of the world. While the likes of Venmo, Cash App, and Zelle offer peer-to-peer transfers, many Americans rely on them because they lack access to seamless bank-to-bank transfers – a feature common in Europe.
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Likewise, innovations like tap to pay, QR code payments, and ‘super apps’ (apps that bundle multiple services like payments, banking, and shopping) have yet to penetrate the US market in any meaningful way. A staggering 67% of Americans still prefer to use cash, compared to just 11% in the UK. This reliance on cash points to a fundamental gap in consumer comfort with, and access to, advanced payment solutions.
The conservatism in US financial technology isn’t just limited to consumers. The payments infrastructure, in many cases, is built on outdated systems that are difficult to upgrade, hampering the pace of fintech innovation. Companies that can offer products to modernise this infrastructure stand to gain significant competitive advantage.
The US consumer is cautious in 2024. With economic headwinds still blowing and a generally risk-averse culture when it comes to adopting new financial technology, launching a fintech start-up can feel like an uphill battle. But there’s a silver lining: when new technology solves fundamental problems and makes life easier, Americans are willing to embrace it.
This is where having a clear, compelling value proposition becomes critical. Fintech companies that can pinpoint gaps in the current system and offer innovative solutions are more likely to win over the cautious consumer. In Silverflow’s case, its solution wasn’t aimed at consumers directly, but rather at the backbone of the payments industry itself, addressing pain points for banks and payment processors alike.
US fintech investment: A shift to caution
The fintech boom of the early 2020s has cooled considerably. Since 2022, fintech investment has sharply declined, and major deals have been few and far between. In the first half of 2024, only five $1bn+ deals occurred in the US, and all were buyouts, rather than the IPOs or mega-venture funding rounds that were commonplace just a few years prior.
Investors, once eager to pour money into fintech start-ups with bold visions, are now more discerning. They seek companies with solid business models, experienced teams, and technology that can prove its worth in a highly competitive space. The ‘start-up era’ – where companies with grand ideas and minimal execution were able to secure massive funding – appears to be over.
This shift in investor sentiment has made it crucial for fintechs to demonstrate not only the value of their product but also their ability to thrive in a challenging market.
In this environment of economic uncertainty, conservative consumers, and cautious investors, Silverflow entered the US market in 2023 with a clear, compelling proposition. Their focus? Modernising the ageing infrastructure of the payments industry to unlock more efficient data processing and better transactional insights.
While many US payment companies rely on legacy systems, Silverflow’s platform offered a much-needed upgrade, making it easier for companies to process payments faster and with more transparency. This underlying modernisation is not just about speeding up transactions; it’s about providing payment processors with access to real-time, rich data that can be used to improve customer service, reduce fraud, and create 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.
Silverflow’s 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.
Robert Kraal is co-founder and CBDO of Silverflow
