Pulse of the industry: A look at emerging trends in fintech

Fintech brands run the perpetual risk of falling by the wayside if they don’t evolve.

With funding peaking in 2021 and global fintech venture capital funding seeing a 38% year-over-year decrease in the second half of 2023, the fintech industry has tightened financially. Investors are looking at different metrics to evaluate, shifting from growth to profitability and favoring late-stage deals.

To keep pace, consider the trends below.

Shifting to sustainable business models

The future for fintech companies is portfolio optimization and customer activation.

Many fintech companies have been hyper-focused on attracting consumers who want a new approach to meeting their financial needs. But acquiring as many untapped audiences as possible will only last so long. Once that novelty wears off, competition will intensify as the lines between traditional banks and fintech companies blur. The focus for fintech companies will start to turn to nurturing and retaining customers to reach profitability and remain competitive.

Fintech companies aren’t quite there yet. A recent analysis of neobanks, a subsegment of fintech companies, revealed that only 5% of the world’s 400 neobanks are actually

Today’s decreases in early-stage funding have led to a demand for more sustainable models to achieve better revenue. Facing depleting pools of new customers, fintech companies will soon need to activate their current customer bases through engagement and cross-selling, ultimately allowing them to derive the most value from each customer relationship.

APIs open doors to even more

Fintech companies see potential with new verticals and specialization.

​Banking as a Service (BaaS) is a recent buzzword in the anything “as a service” trend, but the concept is not new. White-label partnerships between traditional banks and established retailers, car dealerships or airline brands go back more than a decade, but they were uncommon and expensive to deploy. APIs changed all that by giving rise to embedded finance. Initial BaaS partnerships were between banks and API-first fintech companies, which could offer enhanced financial services more efficiently when embedded. More recently, API-first tech companies outside of the financial space, such as e-commerce marketplaces or rideshare apps, are benefitting from embedded finance. These partnerships will potentially extend to all companies in the future that adopt API-based business models. Now, as more and more companies start adopting APIs, the customer base for fintech companies as distributors can not only potentially expand to any brand out there, but also increase profitability though specialization in specific market segments.

Embracing and adopting

Being first adopters of new technologies is driving businesses.

The fintech sector knows it can’t just rest on its laurels, so it is continually monitoring and developing alongside the progression of technology. Intrinsically, traditional needs — like lending and payments — present new opportunities for fintech companies to be supporting partners of other players.

And with new technologies like DeFi, Web3, generative AI and blockchain, the potential for fintech companies quick to market is massive. Mastercard is working with several blockchain startups through its Start Path Digital Assets program to grow and scale their businesses, which focus on digital assets, cryptocurrencies, blockchain value-added services and the metaverse.

The fintech startups are working on everything from empowering merchants to pay, receive and transfer funds, including card, cash and crypto to providing vendors and creators with tools to create Web3-based customer loyalty schemes.

One of the newest entrants to the program include Coala Pay, a blockchain-based payment gateway that enables merchants to accept cryptocurrency payments. Another company, Qonbay, is a decentralized marketplace for tokenized assets. Suberra is enabling the acceptance of cryptocurrency payments for recurring subscriptions, metaverse commerce and marketplaces.

These technologies will continue to evolve, allowing fintech companies to adopt and expand their offerings.

by Mastercard Advisors Consulting