Silverflow, a leading cloud platform for global card processing, has today released findings from a survey of fintech leaders that reports 91% of them believe that fintech investment will grow again next year.
The survey was completed at Money 20/20 Europe in Amsterdam, The Netherlands, in June 2024 and respondents included market-leading companies such as Visa, Mastercard, American Express, Adyen, Worldpay, Barclays and Lloyds Bank Group, as well as numerous smaller, start-up and scale-up companies showing incredible optimism about the future of the industry.
Fintech Investment is returning
FinTech investment grew explosively in the late 2010s, more than doubling between 2017 and 2018 to $148bn USD. It reached as high as $225bn USD in 2021 after a significant drop during the pandemic, but continued to do well until 2023 when investment fell to $113bn USD, a 42% decline on the previous year. The reason for this has largely been attributed to a rise in interest rates making borrowing more costly – the era of ‘cheap money’ is over. The decline was mirrored in a lacklustre year for startup funding in general, with smaller companies across all sectors receiving less funding than they had in the past five years.
Although interest rates are still high, it looks as though the industry itself believes that things are turning around, as Robert Kraal, Co-founder and CBDO, Silverflow, commented: “This seems to be because investors are adjusting their strategy from investing in large numbers of companies in the hope or expectation, that some will become ‘unicorns’ to finding a smaller number of companies who are likely to turn a sustainable profit rather than chase infinite growth.”
He added: “This was our experience at Silverflow when we secured €15 Million investment in 2023 at the height of the FinTech downturn. This came on the strength of our solution, overall proposititon and the experience of our management team. Our investors saw the value we provide to our customers and how we continue to operate as a profitable business.”
AI: the key trend but not the full story
The survey findings also addressed major trends for the industry in the coming year: instant payments, open banking and artificial intelligence (AI). The last trend is easy to predict: AI has been a major story in the press for over a year now, largely because of the growth of OpenAI’s ChatGPT generative AI product. A recent report by Goldman Sachs cast doubt on whether this technology had the transformative potential that its evangelists suggest, but as Silverflow’s co-founder and CEO, Anne Willem de Vries, said: “In the FinTech space not only has AI and machine learning been used for decades, it has important applications in optimisation and anti-fraud operations. This is particularly true in the payments space, in which machine learning is used to identify fraudulent behaviour. For instant payments this becomes even more important as there is no possibility to correct the transaction after the fact.”
Costs dominate the payment processing challenges
The topics addressed in the findings explored the challenges that companies face, and here the results were unambiguous: high fees and associated costs are far and away the most common problem that companies face in the payments space, with 39% of respondents citing it. Lack of data and poor customer experience were relatively close, with 26% of the vote each, and other factors like difficulty to use and a lack of functionality came in far behind.
Kraal added: “The survey results show an industry that has taken some blows but is far from out. Companies that solve real problems and do so in a way that is profitable are going to come to the fore, and it looks like the industry is recognizing that. The near future should be full of some very exciting companies, some of whom we have met, and we would like to count ourselves among their number.”