2023 wasn’t a smooth run for the fintech community. From the collapse of SEB and the significant reduction in VC funding (a YoY drop of 49% in H1), to reduced rates of customer acquisition, many fintech leaders face a difficult environment going into the new year.
Yet, some areas saw growth and offer even greater potential as we look forward. Indeed, despite the FTX scandal, 2023 was a strong year for Bitcoin and digital currencies are becoming an increasingly popular asset class. The rapid adoption of AI also promises to revolutionise the sector by enabling fintechs to reduce fraud, drive operational efficiencies, and improve customer service. And the challenges faced by those in the fintech startup ecosystem are now fostering greater innovation; both at an operational level within existing startups, for example with increasing adoption of alternative financing models, and by spurring on the next generation of founders to solve today’s market challenges.
So, this complex environment begs the question: what does 2024 have in store for fintech? To find out, four experts offer their learnings from the past year and suggest what the next will bring.
Gareth Jefferies, Partner at RTP Global
The last few years have been interesting, to say the least in fintech, both in consumer and in B2B. The public fintech companies with tried and tested business models have weathered the storm better than those that had prioritised growth at all costs over solid economic foundations, and there is a growing appreciation in both public and private markets for the nuances around business model quality. I believe this will continue into 2024 as some of the at-scale fintech winners — Stripe, Revolut, Klarna, Checkout, Plaid and the like — start to prepare for and launch IPOs.
Here in Europe, there is a huge amount of talent now fully vested and leaving some of these at-scale success stories and that is heralding a new generation of early-stage companies with experienced founders at the helm. I expect the continued recent commercial success of Zopa, Monzo, Klarna and others to also play its part in fanning the flames of European fintech in 2024 and beyond.
Paul Rossini, Co-founder and CEO at AssetPass
While the conversation around the cryptocurrency market in 2023 has been shrouded by the news of FTX, financial advisors and wealth managers cannot overlook the growing importance of digital assets in their clients’ portfolios. The price of Bitcoin has surged by over 100% since the start of 2023 and the tokenization of real-world assets has exploded exponentially; hence many high-net-worth individuals (HNWI) are diversifying their wealth into these asset classes.
However, what they and many of their financial advisors are unaware of and have overlooked is the perfect storm approaching. Significant sums are being invested without due consideration to the digital legacy succession process and it’s a fact HNWIs are getting older. As a result, some beneficiaries of digital wealth face being locked out of their inheritance because secure processes were not put in place to enable the transfer of these digital assets. This is also the case for corporate digital succession. Family businesses have for years relied on traditional paper-based methods for succession, which do not work in today’s digital landscape, and a digital solution is key to the continuation and survival of these long-running businesses. These new asset classes, together with new digital IDs and wallets, will undoubtedly play a more prominent role in wealth management in 2024, so it’s essential that financial advisors take the time to understand this relatively new but critical issue and put the steps in place to ensure they and their clients don’t get caught in the storm.
Suki Dhuphar, Head of International Business at Tamr
As fraudsters become more sophisticated, financial services providers need to evolve their fraud detection strategies. In 2024, the adoption of AI-powered data products will accelerate as a part of fraud detection strategies. Data products are a consumption-ready set of high-quality, clean, curated and accessible data that can be used across an organisation to solve business challenges. Importantly for financial crime, they can analyse vast amounts of data to identify subtle anomalies and unusual patterns indicative of potential fraud, that traditional rule-based master data management systems might miss.
Data products leverage AI’s speed and scale, and when paired with human expertise to verify AI’s outputs, they provide the most trusted, accurate insights. Human feedback refines and evolves machine learning models, ensuring that AI is trained on trustworthy data. This process enables AI to offer the strongest and most accurate results possible, ultimately creating more robust and comprehensive fraud detection systems.
Embracing the synergy between AI-powered data products and human expertise delivers the most precise fraud detection tool, safeguarding financial service providers, protecting their customers, and maintaining trust in the financial ecosystem in 2024, and beyond.
Zahra Alubudi, COO & Co-Founder at Levenue
Funding for European technology companies will plunge by nearly half this year, and this has catalysed a shift in startup growth trajectories. With VC funding drying up, there is no longer as much pressure on founders to pursue hyper-growth strategies, with their demands for rapid expansion. Instead, most companies are now focusing on becoming more capital efficient and on their profitability. That’s not to say that startups won’t be pursuing growth in 2024; most are still aiming to grow their products and offerings to stay competitive. But they are shunning “growth at all costs”, which became a common strategy between 2019 and 2021.
As a result, many are looking at more sustainable financing models to support their ongoing product development and enhancement. That’s why I anticipate we’re going to see a bigger shift towards the adoption of alternative financing models in 2024, such as revenue-based financing, where SaaS and subscription-based companies can leverage against their forecasted revenue. These alternative financing models will enable founders to continually support their organisation’s growth without having to meet the hyper-growth expectations typical of equity investors.
