The news would have you believe fintech is down and out. But fintech’s annual pilgrimage to Las Vegas for Money2020, the industry’s largest event, reminds us how much the industry has grown over the last few decades. Over 10,000 people attended from over 80 countries.
Like I do every year, I wanted to share a round-up of key trends – driven by my own reflections and conversations with CEOs, founders, venture capitalists and other industry insiders, in and around the event.
1. The Expanding Role of AI in Fintech
Artificial intelligence (AI) was front and center at Money 2020, as it has been in the venture capital arena more broadly. Many panels considered both the promise and challenges it will bring to every corner of the financial services ecosystem.
Scott Sanborn, CEO of Lending Club, emphasized AI’s transformative role and simultaneously the need for caution. “While the hype cycle is clearly running way ahead of actual implementations and benefits, the potential here is very real.” He pointed out low-risk AI applications like call summarization, fraud prevention, and compliance automation, which offer meaningful efficiency improvements without overstepping regulatory boundaries.
AI’s greater promise may be serving the underbanked, in underserved ecosystems. Melissa Frackman of EM.VC, an India-focused VC fund, expressed excitement for AI in emerging markets where it can benefit consumers, businesses, and capital markets alike. “Despite the clear hype cycle, there remain so many exciting use cases for AI across fintech.” Similarly, Miguel Armaza of Gilgamesh Ventures, which invests meaningfully in Latam Fintech, told me: As AI in financial services grows, so does the sophistication of fraud, making fraud prevention more essential than ever.”
But caution is needed. As Ethan Austin of Outside VC reminds: “Without a doubt AI is going to be transformational and will forever change civilization. But the winners will be concentrated and almost everyone else will end up losing money betting on the space.”
What is clear: AI applications in fintech are maturing rapidly. Real applications, with real revenue, are being deployed across fraud prevention, compliance, customer experience and product development. I expect next year’s show will include a number of new infrastructure players for the ecosystem.
2. Embedded Finance
Last year, one of the key trends I highlighted was the rise of embedded finance. One particular application of embedded finance s around so-called vertical operating systems, which power the entire workflow for particular customers or businesses. The reason: vertical software as a financial services distribution platform enjoys all 3 Fintech Ds. They already have distribution through existing customers. They have a data advantage because of usage on the platform. And of course, they have a delivery advantage, to serve customers where they already are, in a way that is natural to their workflow.
No surprise there was continued enthusiasm for this strategy. For example, as Sandy Kimura, the President of Money Forward told me: “I’m closely following trends like embedded finance, where financial services are seamlessly integrated into non-financial products, and the growing focus on lending within industry-specific (vertical) in sectors like construction and transportation are thriving by tailoring GTM strategies to address unique, industry-specific pain points. Simplicity is so important.”
Like AI, investors stressed the potential of embedded fintech in driving financial inclusion. Herston Powers of 1982 VC, a South East Asia focused fintech investor, highlighted how embedded finance integrates financial products directly into non-financial platforms. “Case studies like Credilinq.AI and GoZayaan showcase the power of embedding lending and remittances into platforms such as Amazon and TikTok, making finance seamlessly accessible to the end-user,” Powers explained.
3. Digital asset infrastructure and Stablecoins in Fintech
One of the biggest stories coming into Money2020 was the 1.1b acquisition of Bridge by Stripe. Bridge is a stablecoin provider here in the US.
According to Rob Hadick of Dragonfly a crypto and fintech VC fund, “Stablecoins are going to transcend crypto in 2025, if they haven’t already.” He added that stablecoins are uniquely valuable for accessing the US dollar in emerging markets and represent a significant improvement in cross-border payments. Stablecoins, in particular, have been widely discussed as a viable payment solution, especially in cross-border transactions. Rob Hadick predicts that stablecoins could outgrow crypto, as companies increasingly integrate them into their payment networks for greater speed and lower costs.
Powers also shared his conviction on the development of institutional-grade platforms for cryptocurrency and real-world assets and the tokenization of assets.
4. Climate fintech:
Sustainability is moving to the forefront of fintech innovation. Ethan from Outside noted the rising popularity of “climate fintech,” where companies create financial solutions that address environmental challenges. As consumers and investors alike prioritize sustainable business practices, climate-conscious fintech models are emerging as an important sector.
The rise of major climate events has also driven new models in insurance, scoring, and prevention. We are still early days, but I expect this will continue to be a growing theme in years to come.
5. Cooling Sectors:
If AI and embedded fintech continue their inevitable march forward towards new ways of serving customers in more unified offerings, single purpose businesses continue to struggle. For example, as Kimura told me, “Generic lending platforms are increasingly struggling to capture customer attention.”
To win in this space, financial services providers need a strong, differentiated value-proposition. “It’s why companies that are features instead of businesses are failing and we’ll see more of that consolidation as the market corrects.” As Sanbord told me.
Carlos Alonso of Fintech Collective noted that while certain capital intensive models like credit providers are unfavorable today, he predicts this is temporary and “investors understand these models will eventually be seen more favorably again, as they represent the main need (access to credit) for the majority of the population – both consumer and SMB.”
Beyond fintech sectors, what has also cooled is the notion of blitzscaling fintechs. As Frakman notes: “It’s an interesting moment in fintech, where the most exciting companies to watch today aren’t necessarily the most innovative ones but the ones that are emerging from the recent challenging market environment—and new post-zero interest rates era—with strengthened operational capabilities and deeper customer focus.”
Indeed, the winners seem to be Camels. As Powers reflected, “Fintechs are prioritizing sustainable business models over hyper-growth. The survivors of the VC funding winter and fintech correction over the past two years have emerged stronger and ready to scale.”
The oil on the fintech fire: exits
One of the buzziest topics was who would be the most likely next IPO. As Simon Khalaf, the CEO of Marqueta told me: “We’re seeing a shift in 2024 compared to the last couple of years where many sizable companies are now thinking about going public” – noting that many across AI, spend management, payments and beyond were gearing up. Scott Sanborn predicted Stripe and Chime (which received a few other votes) as likely candidates, while Kimura suggested Klarna and Plaid. However, Powers noted that in Southeast Asia, the fintech IPO landscape might be led by firms like Kredivo or Akulaku, which would set the stage for more technology listings in the region (Note: Chime and Kredivo are former portfolio companies of mine at previous firms).
Conclusion: A Fintech Future Full of Promise
This year’s Money 2020 showcased an industry that had not withered. New sectors like AI and stable coins, and continued focus on existing applications in new geographies or to new customers continue to show potential. Looking ahead, it is clear that the fintech ecosystem is primed for significant growth. With IPOs on the horizon and innovative technologies pushing boundaries.
What do you think 2025 be like?
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