On Tuesday, the fintech startup Zilch announced operating profit for July 2024. This is the first time the company has hit profitability since its inception four years ago. According to CNBC, Zilch has hit profitability faster than most consumer fintechs that have broken even.

Against the Odds

Zilch reported a $130 million annual revenue run rate. This is double the run rate the fintech reported last year. According to the company CEO, Zilch turned profitable and grew its business despite the prevailing high-interest environment.

“If you think of the last two and a half, three years, a lot of VC-backed companies, especially high growth fintech businesses have had to cut their way to profitability. It’s not been easy. And, for Zilch, we took a different approach. We looked at this and said let’s grow our way to profitability,” Zilch’s Co-founder and CEO, Philip Belamant said.

Competition Landscape

In the buy now, pay later fintech space, Zilch faces stiff competition from Klarna. Just recently, Klarna launched two new products– a cashback offering and a personal checking account.

Other competitors include Monzo, Starling, and Revolut. Monzo and Starling took over four and three years respectively to realize an initial profit. This wasn’t the case for Revolut. The digital banking startup took a shorter time, breaking even in just two years after launching.

Revolut’s growth has been remarkable. Last month, the company hit the $45 billion valuation mark to become the most valuable fintech startup in Europe. Revolut realized this major milestone just weeks after receiving a UK banking license following a three-year struggle.

Zilch IPO

Zilch’s profitability announcement comes at a time when the company is planning to list publicly in the UK. In June, Belamant told CNBC that the startup was planning an IPO over the next one to two years.

The fintech startup raised $125 million in debt financing from Deutsche Bank the same month. This deal gives Zilch access to a maximum credit of $315 million from Deutsche Bank and other banks. This credit leeway allows Zilch to triple its overall sales in the coming years.

Zilch’s rival, Klarna is also planning to list on the UK stock market in the medium term. Zilch appointed ex-Aviva CEO, Mark Wilson as a non-executive director. Wilson expressed excitement to join the fintech startup and committed to steer it towards sustainable success.

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Klarna is popular for its buy now, pay later loans that allow users to pay for products through interest-free installments. According to CNBC, the fintech company launched new products to encourage users to shift their saving and spending transactions on its platform.

New Opportunity

Klarna is rolling out the new products in 12 markets in Europe and the U.S. The company says the products will be reflected as ‘cashback’ and ‘balance’ on the Klarna App. According to Klarna’s founder and CEO, Sebastian Siemiatkowski, the products allow users to earn some money as they shop.

“These new products make it easier for customers to manage multiple scheduled payments, helping our customers use Klarna for more frequent purchases and driving loyalty. Klarna wants to support all consumers with their everyday spending and allow people to earn money while they shop and manage it in a Klarna account,” Siemiatkowski told CNBC.

EU customers will earn up to 3.58% interest on deposits made on Klarna. However, U.S. customers will not earn interest on deposits. In Ireland, Klarna will be competing with Revolut which is already offering interest-earning accounts to users. Revolut received a U.K. banking license last year.

Key Features

The new Klarna balance feature will allow users to keep their money in a personal account that’s very similar to a bank. They can use their deposits to purchase items and pay their buy now, pay later loans. Klarna users will also receive refunds directly in their accounts for any returned items.

The cashback feature allows users to earn rewards. Users can get up to 10% of the value of items they purchase from participating retailers as Klarna cashback rewards. The money earned is automatically deposited in their balance account.

This isn’t the first time that Klarna is offering conventional banking services. The fintech company has been offering savings and account products in Germany since 2021.

Klarna IPO

The unveiling of the two products is a major step for Klarna’s range of products as its U.S initial public offer draws closer. The company has not set a timeline for the stock market listing, but the company says the IPO could still happen this year. Early this year, Siemiatkowski gave the Klarna IPO update during a CNBC interview.

“We still have a few steps and work ahead of ourselves. But we’re keen on becoming a public company,” he said.

Klarna’s IPO valuation on the secondary market stands at billions of dollars. Currently, the fintech company is talking to investors about a share sale to provide it with some liquidity.

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2. Blockchain Applications

Cryptocurrency and blockchain have become highly controversial things to talk about these days. Some people are pro-crypto and will give you examples of people who’ve become rich overnight thanks to crypto-trading. While others who don’t like it will explain the absurdity of these currencies.

Regardless of your opinion on cryptocurrency, blockchain has huge potential to improve FinTech as it’s doing already. The blockchain enables distributed ledger technology (DLT) that allows you to record and share data across multiple data stores. Furthermore, blockchain enables other recent FinTech innovations like digital wallets, digital assets, decentralized finance (DeFi), and non-fungible tokens (NFT).

Things like smart contracts, digital wallets, and the blockchain make cross-border payments have faster settlement times, access to newer markets, lower costs, increased security, and greater transparency compared to traditional payment methods.

3. Voice-Enabled Payments

Voice assistants are becoming a part of daily lives. Regardless of the brand of your smartphone, there will be a smart assistant to help you navigate the phone and the web. Voice-enabled payments is a FinTech innovation that allows users to make payments using voice commands. This can be done through a variety of devices, such as smartphones, smart speakers, and even point-of-sale (POS) systems.

To make a voice-enabled payment, you need to have a linked payment method, such as a credit or debit card, or a mobile wallet. When you initiate a payment, the voice assistant will verify and authenticate it using your linked payment method.

Voice-enabled payments offer a number of benefits to both users and merchants. For users, voice-enabled payments are convenient and hands-free. They can be made without having to type or enter any information, which can be especially useful when users are multitasking or in situations where they cannot use their hands, such as when driving or cooking. Voice-enabled payments can also be more secure than traditional payment methods, such as credit cards, as they use biometric authentication to verify the user’s identity.

For merchants, voice-enabled payments can help to improve the customer experience and increase sales. They can also help to reduce fraud and improve operational efficiency.

4. Virtual/Online Cards

Cashless payments have been the primary mode of transaction for consumers. It is by and large better, faster, and easier than handing over cash. Some primary modes of cashless payments include online payments, debit cards, and credit cards.

The use of virtual cards is an emerging FinTech innovation that is making it easier for consumers to apply for new cards and use them conveniently. Since online shopping has become common, users relying on it completely don’t need to use their physical cards at all. Which begs the question, what if new users don’t ever need a physical card?

Virtual cards bring more to the table than just the convenience of applying and using them. They’re great for protection against fraud by limiting the amount of information shared during a transaction. They also offer spending control features like setting amount limits and choosing specific vendors only. As online shopping becomes even more mainstream than it already is, virtual cards will become better.

5. Robotic Process Automation

Automation is a major trend this decade in every industry. Businesses want to maximize efficiency and reduce labor costs using automation in every possible part of the process. Robotic Process Automation (RTA) uses AI, computers, or any machine to perform specific tasks. These tasks can range from copy and paste to filling or moving forms.

Now, this isn’t exactly a ground-breaking FinTech innovation. However, it solves mundane problems and improves general tasks. In FinTech, RPA promises to improve customer experience, increase productivity, and make the accounting process better.

Some other important applications of RPA are KYC and AML procedures where RPA automates manual tasks and helps with abnormal activity detection. It also supports banks with tedious processes like mortgage lending and loan underwriting.

Some people fear that RPA is a major threat to many jobs. That concern has its merits but the fact remains; If banks and finance institutions want to offer better customer services, they need RPA in some capacity.

The post Next-Gen Finance With 7 Exciting Fintech Innovations in 2024 appeared first on Tech Research Online.