Our global fintech team covers all sectors — from infrastructure, to enterprise application layer, to consumer across India, China, South East Asia, Europe, Israel, and the Americas.

As we collected our thoughts on what’s ahead, the world is experiencing rising interest rates, falling equities, and rampant inflation. It’s clear the global financial system is more interconnected now than ever. Our team’s belief in a world where finances are a seamless part of everyone’s lives, not a frustration, is stronger than ever.

We see fintech leading the way toward a financial ecosystem that is accessible, affordable, transparent, data driven, frictionless, cross-border, and convenient. Below are key areas we’re watching in 2023 that advance this vision:

Global Payments Infrastructure

B2B Cross-border payments & money movement

Shuvi Shrivastava & Anuvrat Jain
The global transfer of funds between businesses, known as B2B cross-border payments and money movement, is a vital component of international trade. Despite the advancements in technology that have facilitated the ease of cross-border payments for individual consumers, B2B payments remain plagued by issues such as low transparency, prolonged latency, and exorbitant fees.

The B2B cross-border payments industry, which excludes government flows, accounts for over $25 trillion in total payment volume and represents a potential revenue pool of $100 billion+. Fintech firms are striving to address these pain points by providing real-time, cost-effective, and transparent payment solutions for businesses solving a very large real-world need. For example in India, manufacturing exports have crossed $400B+, benefiting from government incentives and the global push to diversify sourcing outside China.

Real-time payments: Brazil enters Pix 2.0 era

Mercedes Bent & Connor Love
Pix has been one of the world’s most successful real time payment systems in the last few years. Brazil introduced Pix in 2020 and within 2 years it reached 70%+ adoption (214M population) and high usage by Brazilians. Yet in Brazil, there is still a 20–30% unbanked business and consumer rate while internet penetration is quite high.

So where do we go from here? In the world of Pix 2.0, Pix has leveled the playing field for instant payment rails and increased competition between merchants. This makes value-added services on top of basic payments even more important and timely. We’re interested in vertical saas, treasury management, spend management, and P2P consumer plays built on top of Pix.

Real-time payments: SEA’s regional integration

Pinn Lawjindakul
Across Southeast Asia, individual countries are rolling out real-time payment rails and standardized QR: Paynow in Singapore, Promptpay in Thailand, QRIS in Indonesia, NAPAS in Vietnam. These national payment and money transfer infrastructure revamps are not only gaining massive adoption (70%+ adoption in Thailand with similarly rapid adoption in other countries) but has also ushered in innovation in both consumer and business application layers.

What’s even more exciting is how individual governments are also pushing to have these rails connected to one another (a Singaporean on Paynow can do a direct Thai Baht transfer to a Thai on Promptpay).This will enable people across the regional economic bloc to make and receive payments with ease, significantly increasing the surface area for ambitious fintech startups in the region.

At the metal: The return of elegant, simple APIs

Adrian Radu & Justin Overdorff
API players have become focused on elegant primitives and very opinionated abstractions — at the expense of making their off-the-shelf products not easily usable at scale. As such, sophisticated users and enterprise customers building complex financial products have strong demand for money movement products that are at the metal, elegant and easy to use, but more importantly, are modular and flexible. These payment primitives at the absolute base level will give developers maximum control in building their products.

And there is a big prize to win if a player can take share with this approach. The total US payment volume market is worth $50T today (spanning ACH, cash & check and card). It is only getting bigger as more and more payments digitize, moving off an antiquated payment infrastructure that was built piecemeal with new rules and methods throughout the 20th century and pre-internet. Replacing these legacy technologies, automating away these archaic formats with a single API, will dramatically increase the velocity of money.

Open Finance Continues to Transform Financial Services

Adrian Radu
Open banking adoption continues to grow steadily, broadly in line with that of mobile payments adoption. In 2021, some 15% of UK adults have utilized AIS or PIS. The winners of Open Banking 1.0 competed on breadth of coverage (bank connections across geographies) and value-added services (loyalty, subscriptions (direct debit replacement), credit and front-facing apps).

Open banking 2.0, also referred to as Open finance, goes further in delivering customized and personalized consumer products across banking, wealth management and insurance. Within Open Banking 2.0, we’ve seen a rebuilding of services around account-to-account (A2A) payments. Within Open Insurance, entrants are driving a paradigm shift in data access, making insurance more fluid by reshaping the data value chain. We’ll continue to see consumer expectations shift on open standards.

Cross border aggregation of middle office layer

Alexander Schmitt
National regulations force fintechs to adopt costly core infrastructure and products as they internationalize. Especially in Europe, where many startups are building cross-country from day one, this is a major impediment to early growth.

While payment infrastructure providers like Adyen and Stripe have already built a first iteration of aggregation, major areas such as onboarding, KYC / KYB, or AIS remain unsolved. To counteract local regulatory requirements, we expect infrastructure providers emerging that will aggregate regional technology and providers to enable quicker go-to-market and avoid vendor lock-ins.

B2B Application Layer Fintech

Rise of the “Forgotten” Industries: Re-Imagining Vertical Fintechs

Shan Shan & Tal Morgenstern
While human society is advancing with bleeding-edge technologies such as AI, Blockchain, etc., many verticals still run day-to-day operations on pen and paper and settle monthly through physical checks. Sectors such as the food supply chain ($218B grocery wholesale), chemical materials ($765B US chemical sales), trucking & fuel (30B global fleet transactions), moving & logistics ($150B US mover expenditures), freelancers, tutors, and real-estate agents amongst more, move some of the most massive volumes annually but traditionally have been underserved by tech companies due to individual business owners’ low willingness to pay and inertia. We believe this will change in the coming years with the rise of vertical-serving fintech.

These SaaS products are able to capture value by digitizing the transaction layer through core money movement, AR/AP workflow optimization, embedded working capital loan / factoring / instant deposit — the next-gen vertical fintech will scale SMBs through modular offerings and high flexibility towards specialized industry workflows.

Working on top of systems of record or becoming the system of record themselves, these businesses will become integral parts of each vertical’s daily operations and capture larger shares of wallets.

Tooling for the CFO suite

Tal Morgenstern, Sam Eisler, & Anuvrat Jain
The so-called “CFO Suite” is still dominated by Microsoft, but the CFO role has faced a dramatic shift in scope over the last few years as it inherited most of the new job functions that data proliferation created. CFOs now oversee interconnected product, data and financial flow solutions in FP&A, ERP, payroll, tax, cash, lending, etc.

The modern day CFO is experiencing a mindset shift from a quarterly cadence of reporting, budgeting forecasting and accounting, to real time decision making. Yet, they still tend to spend 2.2 hours per day juggling across spreadsheets and old banking systems with hundreds of different app integrations. While there’s been a wealth of startups and more mature companies innovating within the CFO tech stack, few can support the modern day CFO from end to end.

Tools and services that unify data streams and workflows across operations, data, and finance teams present a tremendous opportunity to empower this new age of CFO and balance the increasingly cross-functional role. This becomes especially true in a recessionary environment, where C-levels are placing an added emphasis on efficiencies across the business. This will require active collaboration amongst software, banks, governments and regulators at a regional level.

Anchor led supply chain financing

Priyal Motwani
Out of the $150B+ worth of short term financing needs in Indian manufacturing/ trade, only 40% is currently financed by formal sources. Informal penetration remains high, driven by lack of documentation (KYC / GST return invoices), limited acceptable collateral, and longer disbursement period. Fintechs have tried to address these challenges head on by lending based on payment flow (i.e. invoices/ bills) and anchors. Financing to Tier 2/3 suppliers of an anchor leveraging their creditworthiness assessment has proven to be a scalable yet secure approach to MSME lending for fintechs. We see this as an opportunity for fintechs to have a sector specific approach with anchor-led financing, especially in sectors with high COGS and overreliance on a series of Tier 1/2 suppliers.

B2B cross border lending for MSMEs

Priyal Motwani
Out of the $400B+ manufacturing exports in India, about 50% is handled via MSMEs, which are deprived of financing by traditional banks / NBFCs. Driven by unstable demand, lack of documentation/ collateral for underwriting, <10% of these payment flows are financed formally in India. For the MSMEs that do receive pre/post shipment financing, they are plagued with issues of heavy collateral, low credit limit, high cost of financing (10–15% APY) and lengthy approval processes (<15% get approval with 20+ days of waiting). We see this as an opportunity for fintechs to provide trade / invoice factories solutions on the back of payment/ treasury as an entry wedge.

Climate

The green shift: climate’s effect on finance

Connor Love
Last year the SEC surfaced sweeping requirements for businesses to disclose their emissions and other “climate related disclosures.” While congress and lobbying firms are still fighting it out to see if the regulation is enacted, climate reporting and mitigation will be a staple for all publicly listed businesses in the near future. Over 2/3rds of Americans believe corporations have an obligation to report and reduce their climate footprint.

We believe opportunities exist for software and fintech companies to assist regulators and businesses in this green shift. We are actively excited about companies building in the carbon credit, supply chain environmental efficiency, and climate affected reinsurance space.

Financing the transition: “Voting with your euros”

Antoine Moyroud
European consumers are increasingly aware of the effect the financial sector has on climate change. We are keeping a close eye on founders building at the intersection of finance, climate and community. We believe that the strongest green fintech brands will emerge with a strong community or education angle.

We expect that new financial products with a strong focus on sustainability and traceability of capital commitments will attract a growing share of the ≈1.4 trillion euros of European household savings and be an interesting entry point for new consumer financial platforms.

Insuretech

Proven Insurtech 2.0 business models

Connor Love
Insurtech wave 1.0 was about distribution innovation. The next wave of insurtech will innovate around larger commercial and secondary insurance products. Large ticket commercial insurance products (especially those in the secondary/wholesale market) present the opportunity for healthier unit economics and overall better books of business. Furthermore, insurance as an asset class, performs well during times of economic recession.

We believe during this recession more hedge funds, banks and capital providers will shift capital away from public equities to reinsurance and insurance vehicles. This influx of cash to the insurance industry paired with healthy insurance underwriting can lead to large growth in 2023 and beyond for insuretech businesses.

Wealth Management

Wealth management still needs a human in the loop

Sam Eisler & Alexander Schmitt
Consumers today have an almost overwhelming number of choices to make when it comes to managing their money. The shakeup across traditional brick and mortar wealth management institutions vs robo advisors over the last few years left many fearing for the future of the financial advisor.

However in 2020, the number of clients served by SEC-registered investment advisory firms increased by 17.2%, reaching a record high of 60.8 million. The bulk of these clients (~70%) were non-high net worth individuals. Even though the industry is shifting to a digital first experience, there’s still a heavy demand for personalized, human-led, financial advice.

Financial advisors supporting these clients need better tools to manage their client base, construct portfolios, and monitor/report performance of assets. Where traditional advisors fail to adapt, a chance for new wealth managers emerges — addressing the younger generations and digital natives.

India’s mass affluent wealth needs

Shuvi Shrivastava
There is nearly $1T in financial savings that lies in low-yield savings and term deposit accounts. This is driven by a lack of adequate alternatives and a lack of trusted advisors to guide the rising mass affluent segment to manage their money better. In light of rising inflation and uncertain public markets, we see an opportunity for companies to build trust and create differentiated investment offerings for retail investors, becoming smarter stewards of their wealth.

Social security is dying. Wealth products in the USA need to be reborn.

Mercedes Bent & Connor Love
Retirement savings is a multi generational issue: people are living longer, 40% of households aged 55–70 lack sufficient resources to maintain their living standard, and social security will run out by 2037. Lawmakers are paying attention. In December, Congress passed Secure 2.0, upgrading older rules around retirement for the challenges modern generations are facing.

Combining this with the fact that the capital markets have not seen material innovation in the last 50 years, we believe now is the time for innovation in 401k products, private market products, mortgage products and reinsurance products. John Bogle invented the modern day index fund in 1976 and brokerage institutions founded over 100 years ago still hold the vast majority of retail wealth in the nation. Newer generations lead increasingly complex financial lives and need new wealth products to match the complexity and longevity of their lives.

Neobanks

Neobanks and Neobrokers Go Dark: Who Survives the Slump?

Mercedes Bent & Shan Shan
In the zero interest rate environment, money flowed freely. Neobroker and neobank entrants undercut incumbents with low or no commission/fees and acquired users fast, fueled by equity capital. But that era is over. Robinhood’s monthly active users declined from a peak of 21M MAU in Q2 ’21 to 12M in Q3’22. In the higher interest rate world, tech stocks that fueled trading are down, the bar for capital access is higher, and incumbents have caught up to providing mobile-first, digital savvy experiences.

The playbook for neobanks and neobrokers is to find a strong wedge with an initial product with strong consumer/secular tailwinds, ride that first product’s success for several years to $50M+ revenue scale, use that time to acquire licenses, allowing the company to expand into multi product offerings, thus increasing ARPU to new heights and become a primary account for users. Those that survive to 2025 will have mastered this playbook and engaged users across all parts of their wallets.

Expanding Financial Tools & Services for Aging Americans

Justin Overdorff
The number of Americans ages 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group’s share of the total population will rise from 16 percent to 23 percent. Additionally, aging Americans are living longer and working longer to generate the income needed to support their increased expectancy. It is however a story of polar extremes. Nearly one-third of Baby Boomers have nothing saved in retirement plans; for those with positive balances, the median amount saved is approximately $200,000, in contrast to the estimated $1 million to $1.5 million nest egg needed to afford daily living and healthcare expenses throughout a thirty-year retirement.

On the other hand, Americans aged 55 and older own 54% of all US homes and Baby Boomers are set to pass on $68B of accumulated wealth in the next 20 years. Finding ways to put technology tools and services in aging Americans’ hands that helps them navigate their financial lives and well-being will continue to be an opportunity for founders.

Risk & Regulation

Fraud is a Big Business, FIs need help!

Justin Overdorff
With the increasing growth of digital financial tools, services, and records, fraud has ballooned into a $130 billion global financial problem. A wide variety of types of fraud continues to plague the financial industry, from synthetic ID fraud to embezzlement, fraud will continue to be a major challenge across financial services, both incumbents and fintechs.

With this increased digitization of financial data and banks’ outdated fraud fighting tactics, there is a re-energized role and demand for emerging technologies to help combat financial crime. While FIs will leverage more machine learning/ artificial intelligence models and biometrics data to improve their fraud controls, we think there is an ongoing opportunity to build more advanced tools and services to help both consumers and businesses fight financial fraud.

Automation in compliance: skill shortages aren’t helping

Antoine Moyroud
As the regulatory bodies across the world require more diligence to remain compliant, companies are forced to increase costs to manage the ever-increasing complexity of sensitive financial information flows. Tools for compliance professionals are starting to converge with the broader security industry as continuous monitoring and data management of regulatory intelligence flows become a prerequisite for day-to-day operations.

This is exacerbated by skill shortages in compliance: 20% of fintechs surveyed in a recent Thomson Reuters survey cited “availability of skills” as their number one technological challenge in the year to come. The lack of in-house skills and expertise is an even higher burden for SMBs.

Combining this trend with the growth of embedded finance, SMBs with historically little financial knowledge will need to level up their processes and look for tools able to answer a wide range of compliance needs (financial, data protection, regulatory audits).

SEA: More regulatory clarity and focus on monetization

Pinn Lawjindakul
Regulations for fintech in Southeast Asia will become clearer as governments across the region work to bring regulations up to date with fintech innovations in web 2.0 and web 3.0. Companies that have traded unit economics for high growth are likely to come under pressure due to the capital crunch at later stages in the region and compressed multiples for SEA-based public companies.

Those that prevail will need to demonstrate their ability to comply quickly with new regulatory guidelines, and capture an increasing share of their users’ wallet with use cases beyond their main initial wedge use-case.