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3 recession-proof fintech categories poised for success

iStock 1147332704 - Global Banking | Finance
Sponsored Feature Presented by Wildfire Systems

By Shawn Conahan, Chief Revenue Officer, Wildfire Systems

Shawn Conahan Chief Revenue Officer Wildfire Systems - Global Banking | Finance

Shawn Conahan, Chief Revenue Officer, Wildfire Systems

Is the U.S. headed for a recession? Surely one can simply look at the prices of everyday items to know that things are less affordable. While on its own that may not mean we can expect a general downturn, many of us may be feeling that our dollars do not stretch as far as they once did.

Time will tell if consumer anxiety about affordability will turn into a full-blown pullback of consumer spending. All of the major stock indices are well off their historical highs, and U.S. inflation hit a 40-year high earlier this spring. Meanwhile the private markets are doing fine. In Q1 of 2022, over $82 billion poured into early-stage companies, marking the fourth largest quarterly total on record. A slow economy is a pretty good time to start a company, with their long success horizons – 5-10 years on average – making them generally able to survive the volatility of public markets.

But there is at least one silver lining to an economic downturn: Some startups actually do even better because of a recession. Startup founders are out to solve problems, and if recessions do anything, they cause problems. This means that recessions can actually be GREAT for certain companies if they are solving economic problems for consumers. Two examples from recent history are Uber and AirBNB. Both were started during the last recession, and both enabled efficiency and economic advantage for both buyers and sellers in their respective fields.

It is also difficult to imagine Groupon doing as well as it did, had it not been founded during the backdrop of the economic chaos that began in 2008. The reason for this is simple: When times are good, people certainly don’t mind saving money, but when times are tight, they will absolutely seek out opportunities to save money, and they will do it in droves. The business model of all of these companies is fairly straightforward: Buyers get a better deal while sellers get more revenue. What better time to offer such a value proposition than in a time of economic anxiety?

With that said, here are 3 fintech categories that provide an economic advantage, which is particularly useful in a down economy:

1.Debt Management. With debt spiraling out of control for many people, companies that hit this problem head on are a welcome addition to consumers’ arsenals to make financial gains. One example is Acorns*. Acorns not only helps customers save for their future by rounding up payments then automatically investing the difference, they also recently bought Pillar, which uses AI to help consumers develop a plan to get out of student loan debt.

Tally is another useful app that helps its customers pay down credit card debt more quickly, using an algorithm to target consumers’ highest-interest rate cards first. And finally, Caribou helps consumers quickly and easily refinance their auto loans and find better rates on car insurance. With the cost of gas in the stratosphere, helping to save money on transportation is a major win in a tight economy.

2.Recommerce. “Recommerce” is the term describing, more plainly, selling your stuff to other people when you are done with it. There is huge demand right now for supply of goods, and companies such as Decluttr, Twig, and Responsible all enable the circular economy in their own ways. Decluttr makes the process of selling old tech like cell phones and tablets, easy. Twig’s resale platform allows sellers to “instantly” turn their items into cash (it becomes stored value on a Visa debit card.) Finally, Responsible’s niche is for buyers and sellers of streetwear and cult fashion brands.

Regardless of the niche, resale platforms like these all benefit both buyers and sellers in a tough economy, enabling a marketplace that gives buyers a better deal on “lightly used” items they purchase while simultaneously putting extra money in the pockets of sellers.

3.Accessing “Found Money.” Even though prices have gone up significantly, people still need to buy things. And when customers do decide to spend their money, the companies that help consumers easily find ways they can save or earn a little bit more, are thriving. One such type of company helping customers “find extra money” when they do shop, offers cashback rewards for online shopping.

You can scarcely turn on a TV lately without hearing Samuel L. Jackson proclaim, “You don’t have to be a Capital One customer to get cash back from Capital One Shopping.” The popular program offers consumers a way to earn cash back and find coupons while shopping. As another example, PayPal bought Honey to offer the same shopping rewards functionality to its customers. And now, seeing the value to consumers and the effect on loyalty it creates, many other banks and credit card issuers are rushing to offer a competitive product for their customers. After all, nothing says, “I love you” like free money, and consumers have come to expect such love from their financial institutions. But these banks cannot all build the functionality themselves. That’s why many banks and financial institutions partner with companies like Wildfire. We power these types of programs with a white-label platform that enables companies to offer shopping rewards to their customers.

Another type of fintech in the “found money” category is one which helps customers maximize their credit card benefits and other savings while shopping. One example of this is Kudos*. Since credit card rewards are often tiered or conditional, customers don’t always know which card best maximizes their rewards. Kudos suggests the best credit card to use for a customer’s purchase as they are shopping. Another example is ScribeUp*, a unique service to gain control over subscription fees, helping consumers to find and cancel unwanted subscription bills.

Many innovative fintechs have launched relatively frictionless ways to help customers access these additional methods of saving or earning money, and to conveniently make their dollars go a little further. Since consumers are always going to spend money, regardless of the economic environment, the companies leaning into the curve to help budgets stretch further are particularly well-positioned for the future. Some of the startups in these categories may even be the Ubers, AirBNBs and Groupons of their generation. As financial uncertainty persists, these companies and other innovators like them that use technology to find ways to make consumers’ budgets stretch out, are likely to continue gaining traction, so let’s wish them luck!

*Acorns, Kudos, and ScribeUp are Wildfire Systems partners

About the author

At Wildfire, Shawn develops strategic partnerships with major finance, banking, and fintech companies to enable the creation of new revenue streams and modernizing their customer experience to position them competitively for the future of banking and money. He has been an entrepreneur, senior executive and investor in the wireless, technology and Internet industries for over 15 years, having previously built and sold three companies. His industry experience ranges from digital media to wireless technology to big data where the common thread has been building platforms with broad applicability.

Global Banking & Finance Review


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