Many financial technology companies are in a tight spot. High interest rates have knocked their valuations, while a slowing economy threatens to trim once-heady growth rates.

The KBW Nasdaq Financial Technology Index has dropped roughly 30% since its peak in October 2021, as tighter monetary policy dented investors’ enthusiasm for racy growth stocks and results are predictably getting worse at some of the sector’s darlings.

Analysts reckon gross profit at $47 billion Block market cap, formerly known as Square, will only increase by a fifth this year, which is less than half the three-year compound annual growth rate up to October 2022. Buy-now-pay-later specialists like Klarna and Affirm are suffering too.

One way to keep the party going is to try new complementary business lines that can shore up revenues. And it appears that Jack Dorsey’s Block, Klarna and other rivals are about to add Advertising space to achieve this.

There are two things that these firms have going for them: strong relationships with retailers, and a vast hoard of young users. That combination points to an opportunity already being applied by London-based pay-later group Zilch, valued at $2 billion in 2022.

The Goldman Sachs-backed startup is turning its app into something resembling an advertising platform. Retailers like Nike and Adidas pay Zilch to show their products to plausible buyers, and typically nudge customers to make a purchase by offering rewards like cashback.

Dorsey’s Block is building a similar feature for its popular Cash App payments service, while PayPal’s Honey operates on a similar principle.

It’s all part of a wider trend where advertisers are becoming more convinced that they need to target customers as close as possible to the moment of purchase.

Amazon.com and Walmart have benefited from this movement: eMarketer analysts expect the duo’s ad revenue to grow by 30% on average this year, outpacing Meta Platforms’ Facebook and Alphabet’s Google.

The idea is that ads are more effective if the viewer is already in shopping mode, rather than browsing social media or doing a web search.

In theory, fintech and payments groups could make a similar argument: they know customers’ spending habits and have a good idea of their disposable income. Zilch could, for example, allow a supermarket to send a targeted ad to the customer of another store on the day that they usually buy groceries.

The beauty of Amazon’s ad business is that so many people already shop there. Zilch is a fraction of that. Meanwhile, bigger players like Block might be wary of muddying their apps with ads, which could deter users.

One question is whether consumers, and regulators, will be happy with FinTech’s using customer data in this way. Another is whether the upstarts have enough users to make it worthwhile for merchants.

None of those dangers undermine the basic appeal, though. Some consumer-focused FinTech’s are sitting on a theoretical gold mine of insights about users’ spending habits. On that basis alone, it’s certainly worth exploring how to get more value out of it.