THE FINTECH PROFITABILITY REPORT: Why fintechs are struggling to turn a profit, and the hurdles they must overcome to see success

BI Intelligence

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Most fintechs, even the unicorns, aren't profitable.

Despite having innovative ideas and live products that are successfully disrupting the financial services industry, these fintechs' business models are increasingly proving to be fundamentally flawed.

In a new report, BI Intelligence explores the reasons why fintechs are struggling to turn a profit, providing examples of the unique problems each segment of fintech faces. We also outline what some firms are doing to overcome these challenges, and highlight the key factors to be considered by fintechs, and their investors, if they want to reach profitability.

Here are some of the key takeaways from the report:

• Even the largest fintechs have failed to achieve meaningful profits. For example, British unicorns Transferwise and Funding Circle have seen ever-increasing losses since launch — in the latter's case to the tune of £37 million ($48 million) in its most recent filing, and are only now approaching profitability.
• The profitability question is becoming increasingly important. That's due to a combination of factors including declining VC investment in the sector and increasing pressure from existing investors to see returns. 
• Not all fintechs want to turn a profit, but those that do are facing significant challenges. Obstacles to profitability affect all fintech segments including neobanking, robo-advising, money transfer, and marketplace lending.
• Forced to adapt their models, fintechs are employing multiple tactics to reach profitability. These include partnerships, diversification of funding sources, acting as third-party suppliers to other firms, adding new products, and seeking global expansion.
• There a number of considerations that fintechs and their investors must make, and several actions they must take, to get on the path to profitability. These include deciding whether to focus on scale, establishing a stable business plan, and assessing the benefits of varied funding sources.

 In full, the report:

• Explains why the profitability question is increasingly being raised.
• Outlines why fintechs in different segments are failing to turn a profit.
• Gives examples of just how large some fintechs' losses are. 
• Explores how fintechs are striving to solve the profitability problem.
• Outlines vital considerations for fintechs and their investors.

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