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Amid Macro Headwinds, Stay ‘Scared and Calm’

4 min read

“Stay scared — but stay calm,” too.

Ingo Money CEO Drew Edwards made the observation to PYMNTS’ Karen Webster that tech companies of all sizes and across all verticals — but especially in payments — face an uncertain operating environment that demands a startup’s mentality, nimbleness and flexibility.

Some judicious day-to-day management of expenses should also be thrown into the mix. After all, private equity and Wall Street are not as forthcoming with the funding dollars as they once were.

Edwards and i2c President Jim McCarthy said that the recent staff-wide e-mail from Google CEO Sundar Pichai illustrates the shift that even the most successful, marquee names — the biggest of Big Tech firms — must mull.

As has been widely reported, the Google CEO exhorted employees in an email to “be more entrepreneurial” and display “more hunger” as they work.

The macro environment is uncertain, noted the tech behemoth’s executive, and consolidation looms, internally, where “investments overlap.”

The initial take seems to be that tech firms are not immune to the pressures of inflation, of supply chain snarls and souring consumer sentiment. The specter of layoffs looms in the e-mail verbiage, or at least a slowdown in hiring (Apple became the latest 800-lb. gorilla, as reported on Monday, to join the “throttling back on hiring” ranks).

Related: Inflation Takes a Bite Out of Apple’s Hiring Plans

A Sense of Urgency 

It may seem counter-intuitive, noted Edwards and McCarthy, that Google might be underlining a sense of urgency and a sharpened focus.

After all, as Edwards noted, “It’s such a great company — and it’s so much bigger than ours. But we’re all facing the same things, and the same choices right now.”

He continued that at a high level, access to capital is going to tighten for all players, and less available capital might inhibit revenue growth down the line. For companies such as Ingo, he said, “We’re thinking three times before we hire someone these days — and we’re in a ‘hot spot’ of the cycle” for disbursements and money movement.

Indeed, the payments market is by no means slowing down — the fundamentals still apply and the great digital shift demands that enterprises and financial institutions (FIs) set sights on payments choice, partnerships and whether they want to do everything in-house.

The demands of 2022 are different than they were at the beginning of the millennium, and product and development cycles have been truncated (no one has time to wait three years for innovation anymore or 10 years to get a return on investment).

See also: FinTechs Win When Money-In, Money-Out Systems Are Synced

Simply put, as McCarthy said, it’s no sure bet that tech firms will see hockey stick growth, where there’s been a relentless trend up and to the right for top lines, and, eventually, profits to fund all that innovation.

McCarthy stated that the days of Mary Meeker and Henry Blodget, Wall Street analysts and darlings of two decades ago that predicted growth as far as the eye can see … well, that is long ago and far away.

We’re on the cusp of, or in, a recession, McCarthy and Edwards said — and the firms that have gotten idealistically (and operationally!) out of shape and have gotten used to tapping capital markets several times a year have some soul-searching to do.

All of this is healthy, Edwards chimed in (and tongue in cheek, noted that i2c’s own metaverse initiatives would be drastically scaled back). Fiscal discipline is always a good strategy to exercise, as it can help foster a business model that scales.

There are at least some standouts here when it comes to scale, where banks, as McCarthy said, have been on the vanguard of new services and have striven to build fortress-like balance sheets, laying strong foundations in the wake of the Great Recession.

“They’re going to play where they are comfortable,” said McCarthy, as they pursue a balance of risk versus innovation. That’s a more prudent strategy than simply chasing growth at all costs.

Read more: 2022’s Great FinTech Refocus Will Usher in New Names and Priorities

“For every Google, there are thousands of companies that have not made it at all,” Edwards said.

In what we might term the “Great Re-examination,” companies need to see which initiatives are in the works or in the planning stage that won’t bear fruit for a long period of time. Those new and special projects, said McCarthy, need to be shelved or at least paused. Core competencies are what matter now, he posited, as businesses navigate the cycles ahead and avoid complacency.

Looking ahead, we’ll see some retooling in the crypto space, McCarthy predicted. The frenzy of everyone and their proverbial brother building out crypto platforms and non-fungible tokens (NFTs) has subsided, but the fundamentals of crypto and blockchain still remain attractive, McCarthy noted.

“This is a space where we will see a flight to quality,” he added.

We’ll likely see mergers and acquisitions across many sectors of financial services, payments included, as larger firms “scoop up” the smaller players and even some platforms that may not be over the “hump” of revenue and profitability needed to sustain operations. McCarthy likened them to “ingredients” that can help older, larger commercial institutions move more fully into the digital age.

As for Google’s shot across the bow — via Pichai’s email — McCarthy told Webster that “to do more with less … well, I think that it’s a positive message and any real entrepreneur aspires to that.”

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NEW PYMNTS SURVEY FINDS 3 IN 4 CONSUMERS WITH STRONG DEMAND FOR SUPER APPS

About: The findings in PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed the responses from 9,904 consumers in Australia, Germany, the U.K. and the U.S. and showed strong demand for a single multifunctional super apps rather than using dozens of individuals ones.