Fintech 2024 shows green shoots with backing from Alphabet and Uber

Sarah Kocianski, CEO of FinTech Wales, explains why she remains cautiously optimistic about the growth potential of fintech companies.

As the fintech industry continues to evolve at a rapid pace, experts are closely monitoring the forecast for the sector in the coming months and years. With significant investments being made so early into 2024, I’m optimistic about the year ahead, but I also recognise the challenges that lie in store.

With technological advancements, changing consumer behaviours, and regulatory changes on the horizon, the fintech industry is poised for both opportunities and obstacles in the near future. In this article, we will delve into the forecast for the fintech industry and explore the factors that will shape its trajectory over the next 12 months.

2024 versus 2023

The global fintech industry struggled in 2023 as VC funding dropped 43% year over year, according to one measure, and many companies including giants like Klarna and Stripe carried out significant layoffs. Now the question on many people’s minds, as we’re nearly a quarter into 2024 is, will this year be brighter? 

The picture so far is mixed. We have seen some notable funding rounds — the UK’s Monzo, a digital-only bank, secured £346 million in February from significant investors including Google parent company Alphabet’s independent venture fund. Another example is Nigerian mobility fintech Moove, which raised £100 million in March in a round participated in by Uber. 

These positive stories highlight a couple of encouraging trends, one being that fintech funding continues and that significantly sized rounds are still available to later-stage companies.

Another is that funding is geographically spread out — further evidence of this comes from other examples of successful rounds from Q1 2024 including companies from the Netherlands, India, Czechia and the UAE.

In Wales, we saw Mazuma, a Bridgend-based online accountancy firm, announce a multi-million-pound investment in January 2024. 

Related article: Top ten breakthrough fintech companies of 2023

Some positives, some negatives

There’s further positive news in the fact that at least 28 new VC funds with a European focus have been closed in Q1 2024 alone. In Wales, we saw the British Business Bank’s £130 million Investment Fund for Wales announced at the end of last year, alongside Cardiff Capital Region as host of a £160 million investment zone.

One area to watch – arguably not a trend yet, but it could develop into one – is that the names Uber and Alphabet appearing as participants in significant rounds could be a signifier that the venture arms of large corporates are going to be more active this year. That would be good news for fintechs looking for funding, as, despite the plethora of new rounds, VCs still seem cautious to spend their dry powder.

However, there are also less encouraging patterns that need to be examined. The most obvious one is that fintech companies shutting down or being forced to downsize continues  — for example, UK-based circular economy app Twig, founded in 2020, closed its doors in January.

Another case is US-headquartered Brex, a business account provider and expense management platform that attracted significant inflows of both customers and deposits following Silicon Valley Bank’s collapse, which laid off around 20% of staff, also in January.

Fintech’s prospects for the rest of 2024

What plays out over the next three quarters remains to be seen. On the one hand, fintech funding has by no means come to a halt, and arguably both round sizes and company valuations needed a reset after the heady heights achieved in 2021 and 2022. On the other, there will inevitably be more sad stories of companies that just didn’t have enough runway to survive such a drastic change in the wider economic environment. 

That said, hopefully, any low points will be outweighed by success stories in terms of companies that re-assessed their plans if necessary, focused on sustainability and thrived. Additionally, there’s reason to hope for a repeat of 2008/9 when difficult times resulted in greater innovation.

In that case, new types of lending companies came to the fore to help individuals and businesses cope with banks’ tightening of lending criteria. Today, we’re seeing increased focus on debt management and affordability criteria from fintechs like IE Hub, Credit Canary, Smart Money Cymru and AperiData.

We’re also seeing a rethinking of car ownership models based on changed living and working patterns with the likes of Wagonex and Voltric, and insurance solutions designed to help those who struggle to get cover elsewhere from pH Innovate Group and Driverly.  

In Wales, we remain optimistic about the future of fintech, particularly when it comes to innovation that helps people and companies better manage their money and adapt to uncertainty. This is an area many of FinTech Wales’ members are focused on and we look forward to seeing what they and others achieve through the course of 2024. 

Over the next three months, TechFinitive will feature interviews with 25+ fintechs from around the world – including the best that Wales has to offer. Follow us on Facebook, X and LinkedIn for the latest updates.