Understanding fintech’s ‘second generation’: What sets the new wave of innovators apart

Understanding fintech’s ‘second generation’: What sets the new wave of innovators apart

Written by Lena Hackelöer (pictured), Founder & CEO of Brite Payments.


Over the last ten years or so, an exciting and ever-evolving wave of innovation has been reshaping the shores of our financial landscape. Smartphones, online banking and shiny new payment methods have truly revolutionised the ways in which we interact with our money. And riding the wave of this fintech boom has been a cohort of tech players that have pushed the market forward with a very clear focus on harnessing an abundance of market opportunities.

Despite this movement, 2022 was the year in which we all were catapulted into a new economic reality – one that is much less hospitable to businesses where growth has been pursued at the expense of other key business fundamentals. There is now a growing appetite amongst investors for those companies that are well-adapted to succeed in this new, more challenging environment. As a result, the economic turbulence has helped bring so-called “second generation” fintechs to the fore.

Often founded by “young industry veterans”, fintech’s younger cohort is leveraging the lessons of the sector’s first wave. In this article, I want to explore how the fintech landscape has changed – and what sets second generation fintechs apart.


In many ways, fintech’s first wave was something of a land grab, where businesses were incentivised to amass market share to get ahead of the pack. Spurred by greenfield opportunities, and ready access to venture capital, some first generation fintechs grew very large, very quickly. However, this model often relied upon continued capital investment, which in turn, brought investor demands for further growth.

Market conditions at the time suited this approach. Low interest rates made generous financing rounds possible. What’s more, pandemic-induced changes in consumer behaviour further fuelled the boom period. However, post-pandemic, the world has continued to change. Businesses face a new reality underpinned by a radically different global economic outlook. This has forced fintech businesses to reassess priorities and to work with prudence, strategy, and sustainable growth in mind.

Here are five key areas where second generation fintechs are pursuing a different path:  


Much like the world around us, the dynamics of the fintech market have changed in recent times. In the past, companies in the sector benefited from changing consumer behaviours, which sent more people towards tech-first solutions. The shift from the analog to the digital world created abundant opportunity – online banking and ecommerce being obvious examples. It was a case of a rising tide lifting all boats, but that tide has receded somewhat. Second generation fintechs exist in a market that isn’t growing as rapidly, and as a result, they have to act more efficiently and strategically when looking to grow.


Many first generation fintechs built technology from the ground up. However, in 2023, technology itself is no longer a unique selling proposition. We now live in the age of out-of-the-box technology solutions, which means that second generation fintechs can scale their businesses much more quickly. But this also means many basic technological components are widely available, theoretically allowing competitors to “assemble” similar solutions.

This is why the new wave of fintechs has focussed less on the more basic technology elements, which are already widespread, and instead has concentrated on solutions that offer customers real added value. As a result, there is more focus on improving outcomes in the here and now.


Crucially, second generation fintechs have been able to draw important conclusions from the evolution of the business models of their predecessors. Unlike first generation fintechs operating in a completely new market, it’s now possible to learn from what’s come before. The paths to success are far more visible, and it’s easier for newcomers to outline a clear vision for the future and target investors with these blueprints.


Growth is no longer the only relevant figure when determining what “success” looks like in the fintech start-up scene. Nowadays, the market and investors need proof that a company’s business model is economically viable – maybe not today, but with a line of sight towards a profitable future. There’s also recognition that rapid growth can cause growing pains, with profitability suffering as a result.


More mature markets often dictate higher wage demands, and this is more of an issue for second generation fintechs than it was for those in the first wave. However, it is now much easier to find skilled professionals, including at senior levels, with deep expertise and industry knowledge. What’s more, job roles and positions within the fintech sector are now far better defined, as well as the skills and personalities required to engender success.

Against this backdrop, second generation fintechs can focus more on building a stable work culture with a view to retaining staff long term and preserving the collective knowledge of its workforce. By building a positive culture, fintechs can articulate what makes them special far more easily, helping to improve their standing in front of customers, investors, and potential new employees.


If you look around, it’s evident that upheaval is happening across the fintech sector right now, while a new generation of fintechs is emerging. While the market is very different to the one that existed a decade ago, sentiment remains strong that fintechs can and will be a catalyst for good, inspiring change and improving the lives of everyday people – as well as helping the businesses that serve them. Personally, I’m looking forward to seeing how this new wave of pioneering companies develops and continues to differentiate themselves from what’s come before.