Pulse of Fintech: Top trends for 2024

2023 was a difficult year for the fintech market globally, with both total fintech investment and the number of fintech deals experiencing their weakest results since 2017.

Given the level of uncertainty in the market in 2023, it was no surprise to see fintech investment back off substantially from the levels seen over the last two years. While H1’24 is likely to start off in a very subdued fashion, any downward movement in interest rates could spur some renewal of deals activity. The exit environment will also be critical to watch as the extended lack of exits has made investors globally particularly hesitant to make large deals.

1. M&A activity will pick-up in the payments space and for distressed assets
As valuation expectations stabilize and the gap closes between buyer and seller expectations, there will likely be a rebound in M&A activity. This will likely be most noticeable in the payments space where consolidation at the local, regional, and global levels is already underway. There will likely also be a pick-up driven by investors looking for opportunities related to distressed assets.

2. AI will be a critical priority
The enormous interest in AI and generative AI across sectors will likely permeate the fintech market, with accelerating interest in finding ways to leverage AI opportunities to their fullest extent. This interest may not translate into direct investment as fintech market participants embrace AI through alliances and product spend. Key direct investment opportunities will likely focus around the cybersecurity and regtech spaces.

3. Enterprise solutions will remain a critical focus for fintechs
Globally, a growing number of fintechs will likely prioritize enterprise solutions — aiming to support or enhance the activities of various financial institutions and their ecosystems rather than targeting end customers directly.

4. Evolving regulatory environment will keep pushing investment towards regtech
The regulatory environment will likely continue to evolve within and across regions. Europe will likely remain a clear leader as it relates to data security and privacy, while the ASPAC region will likely see jurisdictions establishing clean regulatory frameworks for digital assets and digital money. The increasing complexity of regulatory requirements may keep investment in regtech relatively resilient.

5. ESG will continue to create fintech opportunities
ESG and global, regional, and national climate change commitments will likely continue to support both the emergence of new fintechs focused on a broad range of ESG-related opportunities, such as lending for alternative energy and climate change projects, carbon tracking and accounting, supply chain tracking, and property and energy management. Given climate change commitments, investment in green fintech will likely be an area of investment for the long-term.

6. Fintechs will increasingly target the SME market
The SME market is expected to increasingly become a target for fintechs and corporates looking to grow their business or extend their value to new market segments. Given the size of the SME market segment in many jurisdictions, related solutions will likely gain significant attention from investors.

7. Asset tokenization will continue to attract attention
Asset tokenization will likely continue to gain ground as an area of investment within crypto and blockchain, with a growing focus on using tokenization as a means to provide new investment opportunities to investors. Regulated stable coins may also continue to attract attention from investors.

8. Real economy partnerships and alliances will help drive renewed interest in fintech
The embedded finance space will likely be a key priority with partnerships and alliances forming to provide stronger and more integrated value propositions to customers. Fintech data, infrastructure and platform providers may scale to meet the demand from the real economy for their distribution of financial services.

9. Developing markets will establish as fintech hubs
In Southeast Asia, the Middle East and Africa, global south-south governments will likely increasingly invest to grow their fintech ecosystems in order to support their digital economic development.