After a difficult 2023, fintech has rebounded this year. Last quarter, fintechs in Europe raised $3.2bn in equity funding according to Dealroom — the most funding in a quarter since Q3 2022.
That total was topped up by some banner fundraises, including UK neobank Monzo’s $190m round in May and business planning platform Pigment’s $145m Series D in April.
Most of Europe’s major fintech players — Klarna, Starling, Revolut and Monzo — have also grown up and are now operating in the black. There’s also talk that some of them could make their public market debuts next year.
Even so, there’s still room for disruption, particularly in the B2B vertical, seven VCs tell Sifted. Here are the ideas and pitches they want to see more of as we head into the final quarter of 2024.
Next generation pipes and plumbing
Heiko Schwender, general partner at CommerzVentures:
I’m particularly excited about modern startups that are replacing the existing infrastructure supporting financial services systems. The financial services industry is in a transformative phase, yet much of it still runs on outdated infrastructure, with systems being often 20, or even 50 years old.
For consumers, this means frustratingly slow processes, limited product flexibility and innovation and inconsistent digital experiences. That translates into them waiting days for transactions to clear, paying high fees for a simple payment or navigating clunky online banking systems.
For industry players, the challenges are even greater. Legacy systems are deeply embedded, making transitions costly and time-consuming. Regulatory compliance, data security and operational stability add further layers of complexity. It’s difficult for financial institutions to innovate and deliver state of the art products and services.
This tension has resulted in a new breed of startups offering solutions right across the value chain. Whether focused on core banking, payments and lending, investment management platforms or insurance claims and pricing software, each presents huge opportunities for outsized returns due to the scale of difficulties being solved and size of the markets.
Sahar Meghani, partner at Visionaries Club:
Speaking to senior finance execs in our industrial and enterprise network, it is clear that despite having access to very mature software and adequate budgets, they’re still struggling with heavily manual and inefficient processes that are burdensome and inflexible. They have to build custom tooling on top of legacy systems and are still not getting to the outcome they should expect; they have little real-time visibility into cash balances, little automation when it comes to reconciliation, inflexible workflows around procurement and little aggregation of multiple bank accounts. We are seeing a similar theme in the banking sector.
What I’d love to see more of is true financial software innovation for large enterprises, as well as more software innovation aimed at extending the shelf life of and modernising the traditional banking stack.
It is a complex and challenging segment to build for, and the long sales cycles make it difficult for seed-stage companies to sign their first customers. However, for the companies that can solve this — and genuinely understand the pain points and preferences of large enterprises — the rewards will be massive.
Automating back office workflows
Yvonne Bajela, partner at LocalGlobe:
The back office across investment banking, asset management, insurance and wealth management is ripe for disruption as legacy systems are holding these sectors back from fully reaping the benefits of digitisation. Historically, these have been labour-intensive functions, but automating some of these work flows will significantly reduce staffing costs and finally replace dated legacy software, enabling greater quality work.
We’re already seeing verticalised solutions and interesting pockets emerge across all areas including compliance, insurance administration and customer. In the wealth management space, for example, regulatory changes have significantly increased the back office workload. We’ve seen companies such as Synthex automating this with the potential to deliver a huge increase in productivity.
Savings, pensions and health insurance
Kevin Chong, cofounder at Outward VC:
AI’s rising generative capabilities and the evolution of open banking into open data are set to give us the next level of dynamic personalisation. I’m excited to see what this brings to consumer areas such as financial advice, insurance and credit assessments. The biggest challenge will be delivering value for consumers while maintaining trust and safety.
I would like to see more fintech founders focus on savings and pensions. There are huge opportunities here, from giving the public better communications and choices to helping pension trustees make better decisions with better data.
I would also like to see fintech founders think more widely about the intersection of fintech with major societal challenges in areas like healthcare, particularly as private medical insurance becomes more prevalent and employers assume greater responsibility for employee wellbeing.
Beyond traditional fintechs
Nitya Gupta, fintech principal at 13books capital:
For a long time now, fintech has been focused on penetrating traditional financial services — neobanks, banking-as-a-service, cross-border payments, P2P transfers, to name a few. This has been huge. Most leading B2B and consumer fintech names were built during this time.
While I believe there is still more innovation to come in these traditional fintech sectors, fintech has expanded beyond its traditional realm. It’s horizontal and present in every tech stack, now used to power businesses building in other sectors.
In addition to the continued evolution of traditional fintech, I am keen to meet great founders building at the intersection of fintech and other sectors such as healthcare, net-zero transition, gaming, tech-enabled services, cyber, verticalised software and more. More than half of the deployments from our second fund have been at this intersection.
The new generation of wealthtechs
Kyle Ukho, cofounder and general partner at Roosh Ventures:
One of the fundamental roles of money is to store value, and the fintech sector is poised to capture a significant share of the wealthtech market. With an estimated $83tn in wealth transfer expected over the next 20-25 years, I’d like to see an increase in digital-first, modern wealth management solutions from fintech founders.
I want companies to offer a boutique, personalised experience combined with a seamless, user-friendly interface. The new generation of wealth holders won’t want lengthy 30+ page reports arriving quarterly — they’ll prefer real-time, concise updates at the click of a button. The level of personalisation will increase with the integration of RAG (Retrieval Augmented Generation) and other AI technologies, enabling tailored asset allocation and tax optimization.
I think we’re likely to see the rise of companies that provide faster onboarding, intuitive digital UX/UI, and a diverse range of investable assets — all while minimising the need for traditional, face-to-face interactions with financial advisors.
The tokenisation revolution
Juliette Souliman, principal at Portage:
One area I’ve been focusing on is fund tokenisation solutions (the process of turning fund ownership into digital tokens on the blockchain). Fund tokenisation has the potential to streamline processes associated with fund management, subscription, redemption and administration. It’s one of the leading technological solutions addressing the increasing pressure on fees and the need for greater operational agility in the wealth management industry.
Fintech disruptors continue to reshape the landscape, with newer investors gradually moving away from traditional distribution channels, and cost pressures remain relentless. Traditional fund managers are still managing assets on legacy monolithic registers and outdated systems of record. These systems, created before the internet, were widely adopted to service customers via phone, fax, paper and cheque. Incumbent firms are now actively seeking solutions to reduce costs and modernise their infrastructure.
I’m exploring solutions positioned at the intersection of a growing wealth management market that urgently needs modernised infrastructure, ultimately enabling better, cheaper and more efficient operations. While we’ve seen the first wave of tokenisation platforms, the ecosystem still lacks key infrastructure players needed to gain momentum and traction. Specifically, I’m deep diving into areas like liquidity provisioning, real-world asset underwriting and asset origination.
Read the orginal article: https://sifted.eu/articles/seven-fintech-ideas-vcs-pitch/
