Fintech executives and investors at the recent Money20/20 event in Amsterdam shared with CNBC that industry valuations have corrected from the unsustainable highs of 2020 and 2021.
Iana Dimitrova, CEO of embedded finance startup OpenPayd, remarked that the market has “recalibrated.” The impact of higher interest rates has made funding challenging even for the fastest-growing companies, often resulting in lower valuations.
The fintech sector is adjusting to a new reality, with some believing it has reached its lowest point. Executives and investors at Money20/20 told CNBC that valuations have normalized from the inflated levels seen during the industry’s peak years.
Gone are the days of abundant venture capital flowing into startups with bold ideas but lacking solid business metrics. Dimitrova noted that current market conditions reward businesses with proven use cases and robust business models, contrasting with the speculative frenzy of past years.
Around the show floor of the RAI conference venue, banks, payment companies, and tech firms showcased their offerings, aiming to rekindle discussions with potential clients after a challenging period for the sector. However, many attendees mentioned that the conference felt less crowded, with significant conversations happening on the fringes—at bars, restaurants, and boat parties around Amsterdam after the main event.
In 2021, global fintech funding peaked at $238.9 billion, according to KPMG. Companies like Block, Affirm, Klarna, and Revolut reached multi-billion-dollar valuations. By 2022, investment levels dropped sharply, with fintechs raising $164.1 billion, and in 2023, funding fell further to $113.7 billion, a five-year low.
Despite the growth of many companies, the impact of higher interest rates has made funding difficult to secure, often at lower valuations. Singaporean payments unicorn Nium recently announced its valuation had fallen to $1.4 billion in a new $50 million funding round. CEO Prajit Nanu noted that investors are now heavily focused on artificial intelligence, diverting attention from fintech innovations.
Nanu believes the fintech market has hit its lowest point and that this is an opportune time to excel in the industry. He emphasized the importance of consolidation moving forward, with Nium eyeing several startups for acquisition.
Dimitrova mentioned that OpenPayd is not currently seeking external funding but would consider venture capital investment to accelerate its annual recurring revenue past the $100 million mark.
At the event, cryptocurrency also regained some hype and interest. Major players like Ripple, Fireblocks, Token8, and BVNK had prominent booths, and CoinW, a crypto exchange endorsed by Italian soccer star Andrea Pirlo, had significant advertising presence.
Fintech executives and investors at Money20/20 noted a growing recognition of the real use cases for cryptocurrencies. Despite the excitement around AI’s potential to transform financial management, James Black, partner at VC firm IVP, pointed out that AI is not revolutionizing the infrastructure behind payments. However, stablecoins—tokens tied to real-world assets like the U.S. dollar—are gaining traction.
ClearBank, a U.K. embedded finance startup, is developing a stablecoin backed by the British pound, with provisional approval from the Bank of England expected soon. CEO Emma Hagen and Chair Charles McManus highlighted their focus on building trust and safety with their stablecoin issuance. ClearBank is also collaborating with other crypto companies to offer high yield on uninvested cash, though specific partners were not disclosed.
Source: cnbc.com
