There has been something around certain fintech areas that have been hyped by venture capitalists last year, such as crypto and “buy now, pay later” and move into less evocative areas. more sensitive, focus on creating stable income streams.
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Fintech is the hottest investment area for venture capitalists – $1 per $5 capital flows to fintech startups in 2021.
But with a recession possible, investors are writing fewer — and smaller — checks. And they’re being more selective about the kind of companies they want to return to.
According to CB Insights, global venture investment in fintech companies fell 18% in the first quarter of 2022.
That led to something pivoting out of certain fintech pockets that were hyped by venture capitalists last year, such as cryptocurrencies and “buy now, pay later,” and into other less sexy areas, focusing on creating stable income streams, like digitizing outsourced payments for businesses.
So what’s hot in fintech today? And what not? I went to the Money 20/20 Europe event in Amsterdam in June to speak with some of the region’s top startup investors, entrepreneurs and analysts. Here’s what they had to say.
What’s hot?
Investors are still haunted with the idea of making and accepting payments less daunting for businesses and consumers. Stripes can be face some questions past its $95 billion valuation. But that hasn’t stopped VCs from looking for the next winners in the digital payments space.
“I think we will see a next generation of fintech emerge,” said Ricardo Schafer, partner at German venture capital firm Target Global. “It’s a lot easier to make tools.”
Industry buzzwords like “open banking,” “banking as a service” and “embedded finance” are all the rage right now, with a flurry of new fintech firms hoping to eat away at numbers. playing incumbent.
Open banking makes it easier for unlicensed companies to develop financial services by linking it directly to people’s bank accounts. Something that caught the attention of investors was the use of this technology to facilitate payments. It’s a particularly hot area right now, with several startups hoping to disrupt the credit cards that charge merchants.
Companies like Passport, Master Card and even Apple are paying close attention to the trend. Visa acquires Sweden’s Tink for more than $2 billion, while Apple catches up Credit Kudoa company that relies on consumers’ banking information to help underwrite loans, driving expansion into “Buy now, pay later“loan.
“Open banking in general has gone from being a huge hit to being seamlessly integrated in processes that nobody really cares about anymore, like paying bills,” said Daniel Kjellen, CEO of Tink. or recharge”.
Kjellen says Tink is now so popular in its home market of Sweden, that it is used by about 60 percent of the adult population each month. “This is a serious number,” he said.
Embedded finance is all about integrating financial services products into companies that have nothing to do with finance. Imagine Disney offers separate bank accounts that you can use online or at its theme parks. But all the work to make that happen will be handled by named third-party companies that you may never come across.
Banking services are part of this trend. It allows companies outside of the traditional financial world to piggyback on a regulated organization to offer their own payment cards, loans, and digital wallets.
Iana Dimitrova, CEO of OpenPayd said: “You can start building the technology yourself and get the license yourself, which will take years and possibly tens of millions of dollars, or you can find partners,” said Iana Dimitrova, CEO of OpenPayd.
What not?
Do you have an idea for a new cryptocurrency exchange that you are looking to pitch? Or think you might be on the next Klarna? You may have a harder time raising capital.
“Tokenization and the coin side of things we want to stay away from right now,” said Farhan Lalji, managing director at venture fund Anthemis Capital.
However, the infrastructure that powers cryptocurrencies – whether it’s software that analyzes data on the blockchain or keeps digital assets safe from attack – is a trend he thinks will be the next big thing. stand the test of time.
“Infrastructure is not dependent on a particular currency rising or falling,” he said.
Investors see more potential in companies that make it easier for people to access digital assets without knowing a single person trades cryptocurrencies and non-daily tokens. – part of a broader trend known as “Web3”.
When it comes to cryptocurrencies, “the areas we are most interested in right now are areas where we have similar experience in classic industries,” said Rana Yared, a partner at the investment firm. Balderton Ventures said.
For BNPL, there has been a change in the business model that VCs are aiming for. While those who like Klarna and Confirm have seen their valuations plummet, BNPL startups focus on settling transactions between businesses gain a lot of traction.
“Growth in B2C [business-to-consumer] BNPL is slowing… and regulatory concerns could limit growth,” said Philip Benton, fintech analyst at market research firm Omdia.
On the other hand, business-to-business BNPL is “from a very low starting point” and therefore has “huge potential”, he added.
