What do financial experts say about the future of fintech?

With IPOs on hold, a number of fintechs declaring insolvency and fewer investment opportunities, the current economic climate has become challenging for fintechs to scale.

Inflation means lenders are dealing with high interest rates and repayments, while companies that rely on raising capital to survive are hard pressed to generate funding.

The current marketplace is an environment that will drive resilience and innovation – and it will also change the shape of some fintech trends that seemed to lead the industry just a year ago.

We asked eight fintech leaders their views on the following questions:

What does the future of fintech look like to you?

Dima Katsmanaging director i Clear intersection:

“Across all markets, the threat of recession is forcing many business leaders to become more efficient in terms of spending and budgeting – with the view that adopting a ‘leaner’ operation in these tough times will lead to a more resilient organisation.

“Just like other industries, for players in the payment landscape, the recession is also a challenge. This is because a recession in the core affects real consumption, which is the base layer for growth in the payments industry.

“But there is still quite a lot of investment money available and opportunity for growth, but the reality is that during a recession investors take less risk and take longer to make investment decisions.

“I think the payments industry has a more nuanced outlook than current valuations suggest. In my view, there are many aspects of payments that could be more resilient in a downturn than many investors expect, creating the potential for huge investment opportunities.”

Patrick KavanaghAngel Investor and co-founder of Atlantic money:

“It is likely that public market valuations, and the poor performance of recent IPOs, are dampening the optimism that drove valuations during Covid-19. These markets will likely need to recover somewhat for VCs to continue investing aggressively. At the same time, most investors have 7-10 year investment horizon and are comfortable with this uncertainty; they can only adjust the prices they are willing to pay downward for now.”

Rohit BhosaleDigital banking specialist at Persistent systems:

Fintech has seen overwhelming contributions from investors, and therefore the sector is booming, but at the same time, maintaining this growth has always been a challenge. What I think we will see happen is that some of the new startups will perish and others will be acquired by larger institutions.

“This cycle is not new. Having overwhelming investor support allows start-ups to grow and establish themselves, resulting in a perceived boom in the industry overall.

“It’s not a bad reflection on the industry when new companies fold, get acquired or even merge with other start-ups to come up with a better proposition – it’s an expected outcome.”

Vivi Friedgutfounder and managing director at Blackbullion:

“The market is getting super-disrupted – unicorn status has lost its luster, and with bigger players losing jobs in a high-profile way, there’s clearly a loss of confidence. I think we’re going to see more consolidation as well with the current flow of panic selling along with more US and foreign start-up takeovers, as UK companies appear ‘cheaper’ as takeover targets with pound crashing.

“I hope that in response to the cost of living crisis we will see fintech emerge stronger. Right now we’re not doing enough to provide particularly effective services to young people, and that’s something we want to tackle with Blackbullion, every day.”

Daniel Harmanco-founder of Dark Square Capital

“As a general trend I think people want more control over their finances, we’ve seen that happen in the banking space with the likes of Revolut and Monzo taking significant market share. I think uptake is still skewed towards younger generations, but as the fintech space which as a whole gains more trust and experience, we should hopefully see more uptake among older generations.

“Openness is also an important trend for the future. I think the likes of Revolut have been so successful because it allows you to see exactly how much money you have in your account, track spending per transaction, analyze spending trends, etc. Even traditional banks have gotten pretty good at providing real-time transaction/balance information. So I think it makes sense for other financial sectors to follow this trend, especially in the investment space.”

Rajat AgarwalCredit manager at Cleo:

For me, the future of fintech is a world where financial services are more affordable and accessible to most people. The traditional financial system is slow, complex to understand and designed for the 1%. Fintech companies have the potential to simplify that and reduce costs, increase speed and expand accessibility by leveraging technologies like AI to drive more financial inclusion. This is one of Cleo’s core philosophies – we want to help turn the complexities of a person’s financial life into a conversation that engages and will make a positive change.

Rich Bayer, Clearpays Country manager in the UK and the EU:

Fintechs that are seen as disruptive now will become ‘business as usual’ within a generation. My prediction is that the payments and credit sector will undergo a paradigm shift, thanks in part to millennials who

saw their parents struggle during the global financial crisis of 2008. This risk-averse generation wants to avoid falling into rolling debt and has an overwhelming preference for debit as a result.

At current growth rates, BNPL payments are expected to account for 10% of all UK e-commerce spend by 2024. The UK needs a financial sector where innovation thrives and consumers are financially empowered and safeguarded by strong industry protection. This is where the future of fintech will lead us.

Meeri Savolainenco-founder and CEO of INZMO:

“Fintech will continue to evolve with accelerating innovations. As a result, customers will continue to benefit from: faster services and lower costs as most transactions will be automated. Currently, fintech is focused on merging digital trends with customer expectations – saves time, travel costs and inconvenience.

“The pandemic has led to skyrocketing demand for fully digital services with integrated experiences that are now standard for customers. This trend continues and forces the industry to look for fast, robust and flexible solutions to solve consumer problems while reducing internal inefficiencies. We will also see increased use of data and massive use of AI, chatbots and robo-advisors in the near future.

“I also expect to see a new wave of insurtech: although startup activity in insurance has slowed, insurtech will continue to play a massive role in shaping the future of the entire financial industry. We will see many successful partnerships between startups and established companies that will accelerate innovation and digital transformation, and more insurtechs will become licensed carriers themselves.”

Michele Tuccimanaging director i Credolab

“Fintech is here to stay. I saw CVs where candidates claimed to work in the Fintech sector even before the term was created. “At the end of the day”, argued one candidate, “a bank is just a technology company with a banking licence”. As technology improves and becomes even more ingrained in people’s everyday lives, there will be more embedded finance (payments and lending) and more embedded insurance than ever before. Regardless of how centralized or not these solutions are or will be, the future looks bright.”