Future Trends in the Fintech Ecosystem

Rather than offer predictions, I thought I might offer a brief discussion of some likely trends (and the implications) to elicit some feedback on how to better understand those trends and anticipate departures from the current trajectory. I’ll start close to home in terms of my work at Klaros, with a focus on bank and fintech partnerships. Banking-as-a-service will continue to receive regulatory scrutiny. This much is obvious, but how that plays out will determine who wins and loses, and ultimately the pace of innovation in financial services. What is likely to happen (no surprises here for those who follow Klaros): 🚨 Every significant sponsor bank will have issues to remediate (“matters requiring attention” in the regulatory lingo). Those who don’t already should not be lulled into complacency.  📓 Take notes: Those enforcement actions will be the primary way banks achieve more clarity regarding regulatory expectations, with recent enforcement actions highlighting the need for rigorous risk assessments of new programs and the very active role regulators expect boards to play in assessing and approving new programs. 📏 Regulators will also provide more formal and informal guidance in 2024, as they continue to develop a deeper understanding of bank partnerships and begin to differentiate among them. The Fed and OCC’s supervisory programs for “novel” activities will help to bring both expertise and consistency to the supervisory process for fintech partnerships. Will the FDIC, as the primary federal regulator for the majority of sponsor banks, adopt a similar approach? What it means: 💰 The upshot is that fintech programs will take longer to onboard, will require a more direct (contractual and operational) relationship between the bank and the fintech, even when a BaaS platform is involved, and the fixed costs of supporting those programs (which historically were often ignored) will be passed on to the fintechs in the form of much higher monthly fees. Fintechs and VCs will have to take those fixed costs into account.  ❓ The biggest question mark is how all this will impact the fintech startup ecosystem. The fixed cost of offering products through bank partners is going up, so presumably the number of new fintechs coming to market will go down. Recognizing the costs necessary to run these programs responsibly is a good thing, but a major overcorrection could significantly stifle innovation. Ultimately, banks need to be able to support nascent programs without taking on VC-like risk (because they do not have VC-like upside). What did I miss? What might lead to significantly better (or worse) outcomes than I am anticipating?

🔮 What lies ahead for fintech in 2024? 🔮 In a recent interview with Callum Burroughs from Business Insider, I had the privilege to join a discussion with six industry leaders about the future of fintech. Here's a glimpse into what we foresee for the sector this year: • Generative AI and automation take the lead: The fintech landscape is set for a transformation driven by AI, impacting areas such as banking, anti-money laundering, SME lending, accountancy, and wealth management. Embracing automation and agile AI solutions will be crucial for staying competitive and compliant. • B2B fintechs in the spotlight: In 2024, B2B fintechs are poised for success. Generative AI is revolutionizing SME financing, enabling more accurate and efficient automation. Accountants, tax advisors, and wealth managers will witness increased commoditization thanks to AI technology. • Market challenges and consolidation: The year ahead may bring market challenges and consolidation, but those who adapt will emerge stronger in a less competitive post-2024 environment. It's a time to persevere and innovate. • Acquisitions and a customer-centric focus: Established fintech firms and traditional financial institutions will actively seek opportunities for acquisitions. This marks a shift towards a more customer-centric and resilient fintech ecosystem. Check out Callum’s article – link is in the comments! Ante Spittler (Moss | Spend smarter), Levent Altunel (bunch), Patrick Stäuble (Teylor AG), Raffael Johnen (auxmoney), Denise Johansson (Enfuce), Marit Rødevand (Strise) #Fintech #2024Predictions

2023 has been an interesting year for fintech, with many developments shaping the ecosystem. Payment accessibility has increased significantly, with users embracing digital wallets, QR codes, and mobile money, thus making payments integral to e-commerce, finance, and platforms. According to Boston Consulting Group (BCG)'s Global Payments Report 2023, there's an anticipated slowdown in revenue growth over the next 5 years. To navigate this evolving landscape, let's explore key trends in the fintech industry for 2024.   1) 𝐑𝐢𝐬𝐞 𝐨𝐟 𝐒𝐮𝐩𝐞𝐫 𝐀𝐩𝐩𝐬: Super Apps offer multiple services in one platform and is expected to reach an estimated $887.3 billion by 2033.   Platforms like WeChat and Alipay are leading this. Even though Elon Musk has expressed turning X into an “everything app,” we are yet to see that. Maybe it will change in 2024.   2) 𝐀𝐈 𝐢𝐧 𝐅𝐢𝐧𝐭𝐞𝐜𝐡: With the rise of AI comes the enabling of personalized financial services. There will be a rise in personalized investment portfolios, better risk management, enhanced efficiency, and tailored fraud detection and prevention.   3) 𝐂𝐞𝐧𝐭𝐫𝐚𝐥 𝐁𝐚𝐧𝐤 𝐃𝐢𝐠𝐢𝐭𝐚𝐥 𝐂𝐮𝐫𝐫𝐞𝐧𝐜𝐢𝐞𝐬 (𝐂𝐁𝐃𝐂𝐬): With China conducting trials, other countries like Sweden, Bahamas, and the US exploring CBDCs, there will be further developments. Private companies are also involved, either through developing digital wallets or platforms to facilitate CBDC transactions.   4) 𝐄𝐦𝐛𝐞𝐝𝐝𝐞𝐝 𝐅𝐢𝐧𝐚𝐧𝐜𝐞: Platforms offering loans, introducing payment functionalities, and payment facilitators like PayPal embedding into everyday payment experiences characterize the surge of embedded finance in 2024. Generative AI & data analytics may drive advancements, leading to personalized financial products and specialized services tailored to specific industries.   5) 𝐁𝐚𝐧𝐤𝐢𝐧𝐠-𝐚𝐬-𝐚-𝐒𝐞𝐫𝐯𝐢𝐜𝐞 (𝐁𝐚𝐚𝐒): Collaborations in BaaS will continue as banks integrate digitalization and API partnerships. API adoption will continue to expand, benefiting fintechs specializing in APIs, as well as those striving to become integral parts of banking services.   6) 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐄𝐱𝐩𝐚𝐧𝐬𝐢𝐨𝐧: Open banking is evolving globally, driven by regulatory measures. However, there are still integration challenges for legacy systems, despite widespread smartphone penetration. It will stay at the forefront in 2024 and lead to more developments.   7) 𝐂𝐫𝐲𝐩𝐭𝐨 𝐚𝐧𝐝 𝐃𝐞𝐅𝐢: DeFi may offer more secure decentralized applications (dApps). Lending and borrowing protocols will be refined further; decentralized exchanges are set to introduce innovative features; and decentralized insurance platforms might expand coverage and introduce more customised products. Crypto will also experience some developments with the SEC looking at spot ETFs, as well as other regulatory hurdles. Expect it to dominate the headlines in 2024. #fintech #investments #growth Graphics: Courtesy of BCG

I’m excited to share The Artemis Fund 2024 Fintech Outlook! We’re watching key trends that underscore the dynamic nature of the fintech industry and the exciting opportunities that lie ahead. ♦ B2B Solutions: With VCs shifting away from DTC fintech, there's a growing emphasis on B2B solutions. We're seeing increased interest in tools that not only cut costs but also drive revenue for businesses. ♦ Rise of AI in Financial Workflows: Fintech companies are leveraging AI, including traditional ML and Gen AI, to enhance financial workflows and detect fraud more effectively. Solutions addressing data privacy, regulatory compliance, and cybersecurity are gaining traction. ♦ Innovation in Treasury & Deposit Management: Companies like Modern Treasury are offering high-interest banking accounts to businesses, optimizing cash management in high-interest rate environments. This trend reflects a growing demand for efficient treasury and deposit solutions. ♦ Advancements in Real-time & Cross-border Payments: The introduction of the FedNow Service is revolutionizing payment speed and efficiency. However, it also poses increased risks of fraud and cybercrime, driving the need for advanced fraud detection and prevention solutions. ♦ Personal Finance App Evolution: Following the closure of Mint, there's been a surge in innovation, especially in integrating personal finance management experiences. This presents significant opportunities for both B2C and B2B2C models in the financial wellness space. ♦ Senior Finance & Generational Wealth Transfer: As wealth transitions to younger generations, there's an increased focus on financial planning for seniors and effective wealth transfer strategies. This includes estate planning, trust management, and tax optimization. You can check out the entire 2024 Fintech Outlook here: https://lnkd.in/d_wDGDEB Keep up with all the latest Artemis insights here: https://lnkd.in/g4NaEdti If you're a founder innovating in fintech, commerce, or care, we want to meet you! Pitch us here: https://lnkd.in/ghsDZArm #FintechTrends #Innovation

My 2024 FinTech Predictions: 1. Monetizing B2B Spend Management: Get ready for a shift in the FinTech pricing model thanks to the lack of late-stage VC funding and impending IPOs! Like their SaaS counterparts, FinTech companies like Navan and Ramp are likely to start charging a broader percentage of their users for spend management. Transaction fees, akin to those imposed by traditional banks, may also become more prevalent among neobanks if interest rates decline. 2. Service and Implementation as Upgrades: Given CX remains a huge cost center, I wouldn't be surprised to see Fintech firms start to tier their customer support, offering enhanced customer service (i.e., phone support, 24-7) and implementation as premium add-ons. 3. Entry of Big Banks into Spend Management: Brace yourselves for a significant shift as big banks with heavy credit portfolios (Amex, Capital One) make their foray into B2B and even B2C spend management. This could occur through in-house development or strategic acquisitions, marking a pivotal moment in the convergence of traditional banking and new financial technology. 4. Market Consolidation in Startups/SME B2B Fintech: 2023 was filled with interesting moves among new market entrants touting banking services for small/growing businesses. Grasshopper Bank announced partnership with Ramp in October, Rho acquired Capital/PartyRound this year, and Divvy is now fully integrated into BILL. I think we'll continue to witness consolidation through acquisitions or exits. This could lead to a streamlined and more mature market with a handful of major players dominating the space. 5. The Ubiquity of Banking Card-first providers like Ramp and Parker that don't have banking today are likely to launch products this year to take advantage of low-interest rates. The emergence of Banking as a Service partners make this easier than ever with fast speed to market, low upfront development costs, and a more competitive fee structure. 6. Consumer-Centric Solutions: With the departure of Mint, there's a golden opportunity for FinTech companies to address consumer needs in spend management and budgeting. Expect a surge in innovative solutions that leverage technology already prevalent in B2B to empower individuals in managing their finances more effectively. 7. Expanded Investment Options: Both B2B and consumers can anticipate an increased variety and availability of money market funds and fixed investments as their popularity grows. Meanwhile, Fintechs that already offer banking services may introduce tiered banking or investment opportunities with different minimums and more favorable interest rates, catering to a diverse range of customer needs. #FinTech #2024Predictions #FinanceInnovation Disclaimer: The opinions expressed in this post are solely my own and do not reflect the official stance or plans of my affiliated company.

Is fintech over? It's a question we've been hearing more frequently. Our take is no. We are entering a new era of fintech. While many of the innovations that defined the past era (think Open Banking and the API-ification of financial services) are now commonplace, we are seeing the emergence of four new "waves" that will define the next era of the industry. 1) Wave 1: Economic Stability to Economic Volatility. This will have implications on everything from capital inflows into the US, to how incumbents manage their businesses to the best business models for founders. 2) Wave 2: Regulatory Innovation to Regulatory Control. The regulatory environment is poised to get a lot less comfortable for startups. Regulators will focus much more attention on a few big banks, leaving space for both broad bank consolidation and more white space for startups that can navigate complex compliance requirements. 3) Wave 3: Generational and consumption trends moving from Optimization to Empowerment. We're seeing consumer relationships with brands move towards more empowerment and authenticity, with customers in greater control than ever. This creates new models of commerce, brand discovery, and engagement. 4) Wave 4: Technology moving from Data Access to Data Manipulation. This next phase of technology - from AI to federation to quantum - is about better manipulation, delivery, and customization of information. We're so excited to invest in the next generation of companies riding these waves. Check out our paper (link in the comments) that contains a lot more detail and implications for anyone building or investing in this new environment!