2022’s Fintech Trends and What 2023 Has to Offer, Restive Ventures Industry Report Reveals

As investment falls, regulation and partnerships to increase, fintech fund revealed in pre-seed and seed stage Restive Ventures. The fintech fund covers the current state and what can be expected of the fintech industry, especially in the US, in 2023.

To produce the 2023 fintech report, Restive Ventures surveyed peer investors, industry partners and regulators. The fintech fund presented its report which looks at three key parts of the fintech industry: investors, regulators and partnerships.

Fintech investment

The Restive Ventures’State of FintechThe report explained that both the volume of capital and the number of deals have significantly decreased since 2021. The fund found that less than 25 percent of investors planned to participate in a financing event after Series A. The results follow a significant decline in public market valuations.

Valuations also seem to have decreased recently. The report reveals that the average pre-seed value among survey respondents is around $9 million. Estimates for early 2023 placed seed rounds around 50 percent higher than this valuation.

While the news for fintech investment ultimately looks negative, with not much indication of an upturn on the horizon, Restive Ventures’ survey found that investors were still looking to invest in the sector.

B2B payments; climate technology; retch; embedded financial infrastructure; vertical SaaS and “Web3 with good use cases” were all areas that investors said they were focused on investing in through 2023.

Fintech regulation

As fintech investment fell, fintech regulation appears to be significantly on the rise. Restive explains that banking-as-a-service (BaaS) providers could see increased regulation in 2023. The fintech fund cited companies’ ability to scale quickly as the main reason for greater attention from regulators. BaaS providers can pose risks including money laundering, consumer protection and compliance gray areas.

Much improved regulation is also expected in an effort to make consumer data safer. The 2023 Fintech Report explained that the largest technology companies will experience the most pressure in the coming months, although smaller firms may begin to see an increased need for privacy requirements.

Restive also expects a formal regulatory interpretation of section 1033 of the Dodd-Frank Act. The law was originally introduced to reform Wall Street to prevent the risk-taking that ultimately led to the financial crisis. This specific section provides the legal framework for consumers to access banking information via intermediaries and aggregators.

The Consumer Financial Protection Bureau (CFPB) may adjust consumers’ right to access their information through a third party. This means that fintechs that rely on consumer banking information may need to quickly act accordingly.

Increased crypto regulation has been expected for some time, but the situation involves FTX has potentially brought crypto more into the spotlight. Despite more attention on the space, the Restive report suggests that meaningful changes in regulation may take so long that we may not see laws passed until 2024 or beyond.

Fintech Partnerships

Of a number of Restive industry partners surveyed for the report, eighty percent expect their partnerships to increase in 2023. Seventy percent of respondents claimed they were interested in working with fintechs specifically on data and AI. 60 percent of respondents were also interested in working with fintechs to cover both fraud and payments.

Mergers and acquisitions are also expected to increase in 2023, according to the fintech report. Restive’s survey found that 90 percent of respondents said there is a strong interest in buying fintech companies in the next twelve months.