Five themes shaping fintech from three VCs globally

The future of innovation is global. We discuss it here.

With Dall-E

Is this the year of FinTech resurgence? With a handful of large-ticket fundraises announced over the last several days (DailyPay’s $175M capital raise on January 18th; Digital Onboarding’s $58M raise on January 18th; Kashable’s $25.6M Series B on January 18th), there are signs that we may be headed to a resurgence in FinTech venture activity in 2024. FinTech’s recent record low of fundraise activity, could soon be comfortably in the rearview mirror. So what does this mean for the industry? Is there hope? What lies ahead?

To dive into the core FinTech lessons of 2023 and predictions of 2024, The Pnyx reached out to three global experts in the FinTech and venture worlds to get their opinions on the past and future 12 months of the industry (you can listen to these episodes here). Here’s 5 key takeaways from our friends Tamer Azer (Partner at Shorooq Partners), Victoria Cheng (Partner at PruVen Capital), and Ganesh Rengaswamy (Managing Partner at Quona Capital).

The Macro Environment:

The FinTech landscape faced unprecedented macro challenges in 2023, with record lows in FinTech investing driven by higher interest rates and more volatility. Seed and early-stage startups saw a significant decline in capital raising. Despite macroeconomic uncertainties and investor pullback, optimism prevails for 2024 according to our experts. Tamer from Shorooq Partners highlights the potential for risk-takers stating, "Capital is coward. People are sitting and waiting, but there's tremendous opportunity for those who have a greater risk appetite." Victoria from PruVen Capital sees new opportunities, stating, "Even in some mature and developed markets, I think tough macro leads to the exploration of creative options."

The role of AI in FinTech:

The bullish sentiment towards AI in FinTech might signify a transformative shift in 2024. Tamer underscores AI's pivotal role, stating, "AI is unquestionably a new pillar in the dynamic area and the infrastructure area for our entire industry." Victoria highlights potential cost reductions, saying, "Our industries, whether it's financial planning, insurance, brokerage, life insurance… all these are high human cost industries, and I think AI is going to substantially decrease those costs." Ganesh adds to the optimism, stating, "AI is obviously getting refined over time, and that improvement leads to a strong competitive advantage and efficiency for these companies."

The ESG (Environmental, Social, Governance) Question:

While ESG is growing ubiquitous, its impact on FinTech will continue to evolve. Tamer stresses conscious investing, stating, "The difference between impact investing and conscious investing is actually thinking of the impact and the implications of what my company is doing beyond the immediate." Ganesh acknowledges ESG's possibilities but highlights the challenge of differentiation, saying, "There's certainly a deluge of creative things going on in ESG, but it’s unclear which is a feature versus product versus a real enough need to be a company."

For or against BNPL (Buy Now Pay Later):

Buy Now Pay Later (BNPL) emerges as a complex yet potentially powerful credit product. Ganesh provides insight into BNPL's diverse use cases, stating, "Even in terms of use cases, BNPL probably serves very different use cases in the West versus emerging markets, especially in Asia, Africa, Middle East." Tamer cautions about social risks, stating, "There is a huge risk that [those in emerging markets] are using the service without fully understanding its implications to live beyond their means." Victoria emphasizes understanding BNPL's impact, saying, "The thing that we always try to ask is, what does BNPL enable the customer to do that they couldn't do before? And is that net beneficial to their financial condition?" We dove into BNPL particularly in a previous piece here.

The end of Remote Work?:

Remote work reshapes the FinTech landscape, offering flexibility and inclusivity. Tamer predicts an increase in remote work leveraging talent from emerging markets, stating, "Remote work, leveraging arbitrage and getting talent from emerging markets, is going to increase. This is an inevitable norm for doing business globally." Victoria acknowledges the diversity it brings, stating, "I do believe socially, that remote work enables the US to have a far more inclusive labor market. It is providing more opportunities to a far more diverse population of individuals who otherwise might not have access to those opportunities." Ganesh cautions that every situation is different, saying that “the answer truly is it depends on the nature of one's profession or specific function or work.”

There’s no question Fintech is at a critical juncture. What are your thoughts on FinTech’s past, presence, or future? Let us know!

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Here are the three episodes: