those that indebt you are in decline, those that help you save are skyrocketing

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The temporary pandemic and the sum of the invasion of Ukraine and inflation in a perhaps not-so-temporary way they have changed the economic sign: recession already seems inevitable and we will have to face her.

With this change of cycle, business activity is also modulated to adapt to it. In the case of fintech there are two large, well-defined groups: those that help to consume, even if it is by getting into debt; and those that help save or at least plan personal finances. The former fit better in cycles of expansion. The second, in those of crisis. Even though the latter direct savings towards the purchase of goods, they do so through a less risky practice than the former.

From “pay later” to “save now”

In recent times, the kings of fintech have been the companies in the BNPL sector (Buy Now Pay Later, “buy now, pay later”) that allow purchases of not very high amounts to be split, generally up to 1,000 euros or dollars. Klarna is the main one, but there are many more and even Apple has succumbed to this trend.

The underlying danger of these applications, to be promoting systematic indebtedness to access consumption, something that in turn has more followers among people who live up to date, without savings. Something that, in expansion cycles, may not be too problematic as long as the income remains (that is, you keep your job).

If the crisis arrives, unemployment increases and, on top of that, inflation continues unchecked, causing us to lose purchasing power, we have the perfect storm for those who built their lifestyle on “buy now, pay later”. Nothing new for any Spanish citizen who had the use of reason in 2007, but now via an app, instead of via television ads and a phone number to call.

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It is not a gratuitous cabal, it is something that is beginning to show obvious signs. In the United States, which is ahead in the use of this type of “solutions”, there are people using Klarna to split the purchase of essential productslike foods to fill the fridge with. A symptom of being on the edge of the precipice.

This might not be bad news for Klarna beyond a threat to its delinquency rates, but the rise in interest rates by both the European ECB and the US FED constrains its room for manoeuvre: its business model is to offer financing free to the consumer, charging a small commission to the merchant and applying interest to the buyer if he requires a longer term than the one established by default to return the money. Klarna’s valuation has fallen as uncertainty about the economy and anti-inflation measures have risen. of backdrop, the eyes of the regulators injecting themselves into these companies.

Klarna is not alone in this fall: Affirm, another similar financier based in San Francisco, has lost 85% of its value since November. Apple, which recently entered this game, presumably will not have a problem like Klarna’s because it does not require financing, it is the one that advances the money to Apple Pay Later users, but the threat of increasing delinquencies would affect it in any way. the same way.

They are the companies that they can leave with an eroded reputation in a context of crisisin the same way that in post-crisis-2008 Spain there were companies that were permanently associated with the image of a cruel creditor.

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On the other side of the scale, companies that focus on helping us save. From insurance comparators, home supplies or fiber and mobile rates to financial management platforms in connection with our bank accounts.

“People are crazy looking for lower prices and stability”

In line with the latter is Fintonica Spanish fintech that has been offering budgeting and expense analysis for years, as well as service proposals with better rates than those that its users have contracted, and even has launched a personal finance program emphasizing the benefits of saving after warning that we Spaniards only save 7% of our income, and almost half of citizens do not save anything directly.

goin

goinother Made in Spain with the specific purpose of helping us save in an automated way and offering small returns on that capital, it has been on the market for four years, but in the last year it has tripled its user base. Although the change they have noticed began at the beginning of the pandemic. “Since the first month of confinement we have seen an increase in the number of people who worry about saving more. Many people lost their jobs or were in ERTE for a long time, they understood the hard way how important it is to prepare for the future”, tells us its CEO, David Riudor.

Although you haven’t noticed a big change recently, he does believe it is imminent. Specifically, from September. “It will be the worst month in history in Spain. ICO credits will have to be returned and there are many startups that are having a hard time finding financing. Many companies have not fired workers yet because it is summer, they should have paid for vacations anyway, so they wait until September. There we will see the accumulated effects of the pandemic, the prices of raw materials… It will be vitally important to have a better financial education, difficult times are coming, to squeeze.”

roams

In a similar line is the palentina roams, a mobile and fiber rate comparator that has been extended to smartphones, television, finance, insurance, energy, alarms… to help find the best options for price. “This month of June we have had our traffic record and leads [ventas]. And June has always been one of the worst months, because people are thinking about vacations, not about changing rates. This year is upside downit is: people are looking like crazy for rates that give them lower prices and above all, stability. That you do not receive unexpected expenses in your insurance, in your electricity bill…”, says Eduardo Delgado, CEO of a company that usually has its peaks in September, November and December for the start of the course campaigns, Black Friday and Christmas.

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It is a pre-crisis moment. Many people decide not to buy expensive objects and minimize the costs of services that they do not want or cannot give up, such as the Internet or electricity. They also look for many ‘bargains’, such as a card that pays 40 euros to your account if you make a few expenses. Brands are seeing that it is a good time to attract customers who are having a hard time making ends meet. Neobanks, energy companies, telecoms… Even large companies through their sub-brands, such as Telef√≥nica and O2, lowering prices“, he comments.

After a singular parenthesis, that of the two years of the pandemic, with massive printing of money and containment measures, it is possible that the economic cycle will change. And with it, that of the fintech, less popular for quick financing, and perhaps more loved in cases where they help save, not consume on credit.

Featured Illustration: Vector pocket / Freepik.

The temporary pandemic and the sum of the invasion of Ukraine and inflation in a perhaps not-so-temporary way they have…

The temporary pandemic and the sum of the invasion of Ukraine and inflation in a perhaps not-so-temporary way they have…

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