Burning Cash Too Fast? Why Most Fintechs Collapse Within 3 Years
In this episode of The Curiosity Code podcast, host Alex Khomyakov sits down with Stephane Malgay, an experienced board advisor to fintech companies and a former senior executive at leading banks. Stephane brings a wealth of knowledge from his extensive career in innovation and digital transformation within the finance industry, having played critical roles at institutions like J.P. Morgan and Société Générale. They delve into the intricacies of why many fintech startups struggle to survive beyond three years, exploring the pitfalls of rapid growth, such as cash burn and execution challenges. Stephane discusses the signals that indicate whether a startup has the potential to become a sustainable business, emphasizing the importance of team dynamics and execution skills. The conversation also turns to the challenges fintechs face as they scale, particularly in managing client relationships and company culture as they rapidly expand. Stephane shares his insights on the importance of balancing internal instincts with external advice during periods of growth, and how to effectively integrate into the financial ecosystem of legacy banking systems. Further, they discuss digital transformation failures, offering strategies for successful project management and stakeholder alignment. Stephane also touches on the potential of AI and GenAI in finance, highlighting its disruptive capabilities and urging financial institutions to embrace these technologies to avoid falling behind competitors. This episode offers a deep dive into the hurdles fintechs face, from startup to scaling and the crucial role of innovation and strategic risk-taking in navigating the rapidly evolving finance landscape.

Alex: Hello to all listeners. We’re here in London, kicking off the new season of The Curiosity Code podcast. Today, we’re diving into the real challenges behind growing fintechs, why so many digital transformations miss the mark, and what happens when messy data and GenAI collide inside financial markets.

Alex: With us is Stephane Malgay, board advisor to fintechs like TransFICC and Neptune Networks, and former senior executive at J.P. Morgan, Société Générale, and ING, where he led innovation, trading, market structure, and digital transformation. Stephane’s seen it all—how fintechs scale smart, how bad data can kill a strategy, and how GenAI is already shaking up the future of finance. Stephane, welcome to The Curiosity Code. It’s great to have you here in London.

Stephane: Thank you, Alex. Thank you for inviting me. I’m glad to be here with you today.

Alex: Let’s dive in. I have so many interesting questions I’d like to explore. Let’s start with your role as an investor and board member. What internal signals—not seen on pitch decks—tell you whether a startup is building a true company or just a clever feature?

Stephane: That’s a great place to start. From a banking investment perspective, we often see founders who have great ideas. Maybe they’ve spotted a gap based on their experience and want to solve it. The question becomes: how do we support them? Sometimes we invest capital. Other times, we give them data to validate their hypothesis. And often, we become their first client. In many cases, it’s all three. That’s the difference—we’re not just backing an idea, we’re helping it grow.

Stephane: But having a good idea is not enough. That’s just the first box we check. We’ve seen this mistake often, even within the bank. So we also look at the team. Who are the founders? Do they bring the right expertise? You might have a CEO from a banking background who knows what’s broken and how to fix it. A great CTO with scalable tech solutions. And someone in marketing or business development to shape the company externally.

Stephane: The third critical factor is execution. Even if the idea and the team are solid—can they execute? That’s where many fail. A former managing director may have run teams of hundreds, but in a startup, there’s no one to delegate to. It’s about hard decisions, failing, recovering, and pivoting fast. So the three things we evaluate: the idea, the team, and the ability to execute. If they have all three, that’s a green light. But often, they only have two. Then it’s a risk call.

Alex: That’s a great framework. Now, on to something you mentioned elsewhere—that most fintechs burn too much money too quickly. Why is this such a common issue?

Stephane: That’s one of the most repeated patterns we’ve seen. Founders raise their first big round—say, $3 to $5 million—and think they need to scale immediately. They hire sales teams, marketing, even a chief of staff. But they haven’t validated their product yet. They haven’t reached product-market fit. So they’re building this large organization, burning through capital, and not getting the results.

Stephane: Especially in capital markets, fintechs are B2B. They deal with large financial institutions with slow sales cycles. It might take 18 months to close a deal. So if you scale the team before validating the use case or proving the ROI, you end up with a huge burn and no runway. Most fintechs die not because the product doesn’t work, but because they run out of money before it gets adopted.

Alex: So true. I’ve seen this myself—pressure from VCs, hiring ahead of revenue, and suddenly the money’s gone. Let’s flip the lens. What about incumbents—banks and asset managers—trying to innovate internally? Why do so many digital transformation projects fail?

Stephane: There are many reasons, but let’s highlight a few. First, the scale. Large institutions are fragmented, siloed, and political. Innovation often starts as a side project, disconnected from core operations. So you might see a great proof of concept in a lab, but it never scales because it’s not aligned with real business goals or incentives.

Stephane: Second, legacy infrastructure. Tech debt is real. You can’t just plug in a new AI engine if your data architecture is from 1995. Most banks are still running critical systems on COBOL. You need to modernize the plumbing before layering on new tech. But that takes budget, leadership, and years of commitment.

Stephane: Third, incentives. Innovation should save money, improve compliance, or increase revenue. But if those outcomes don’t translate to better KPIs for the team, people won’t support it. That’s why transformation has to come with governance change, not just tech rollout.

Alex: Let’s talk about data—your point on legacy systems resonates. Everyone wants to use GenAI, but the real challenge is data quality. Can you expand on that?

Stephane: Absolutely. Garbage in, garbage out. Everyone wants to build large language model-based tools or decision engines. But the truth is, most financial institutions don’t have clean, structured data. You’ve got 20 different systems recording trades, risk, compliance—none of them talking to each other. You end up with data swamps instead of data lakes.

Stephane: Before applying GenAI, you need to invest in data governance—define what “good” looks like, clean your inputs, build APIs, and create a data catalog. Without that, any AI you build will just reinforce bad decisions faster. The most forward-thinking institutions are spending 60–70% of their AI budget on foundational data work. It’s not sexy, but it’s what makes GenAI actually deliver value.

Alex: Spot on. Let’s pivot to the human side. You’ve advised dozens of founders and execs. What mindset shifts are required to succeed in this environment?

Stephane: Great question. I think humility is key. Whether you’re a fintech founder or a bank executive, the market will teach you hard lessons. You need to be ready to adapt—quickly. I’ve seen founders fall in love with a product that no one wants, and execs push a transformation agenda that the front office ignores.

Stephane: The winners are the ones who listen—to customers, to regulators, to their teams. They take feedback seriously and move fast to adjust. That’s what resilience looks like. Not just raising another round or hiring a flashy CMO, but constantly improving the core value proposition and removing friction from delivery.

Alex: Couldn’t agree more. As we wrap, what advice would you give fintechs or financial leaders navigating the next wave of transformation?

Stephane: Don’t chase buzzwords—solve real problems. Focus on ROI, not just innovation theatre. If GenAI helps you speed up compliance checks or lower onboarding costs, great. But if it’s just a chatbot no one uses, it’s noise. Build trust with your users. Get your data right. And if you’re a startup—validate before you scale. Survive first, then grow.

Alex: Brilliant takeaways. Stephane, thank you for joining us and sharing your perspective from both the startup trenches and the corporate boardroom.

Stephane: Thank you, Alex. It’s been a pleasure.

Alex: And for our listeners—thanks for tuning in. Don’t forget to subscribe and share. See you in the next episode of The Curiosity Code.