The focus of discussions at this week's Money 20/20 in Amsterdam was on business-oriented fintechs such as Airwallex, Payoneer, and ClearBank, whereas consumer apps such as Revolut were not part of the conversation. The most popular topic among the fintech and banking attendees was Artificial Intelligence, and its possibilities and drawbacks were discussed in depth. Many of the fintech representatives interviewed by CNBC indicated that they had no plans to develop products related to cryptocurrencies, as the need for them among their clients wasn't detected.
At Money 20/20 - Europe's main event for the financial technology arena - conversations among investors and industry players last year focused on embedded finance, open banking, and banking-as-a-service. These terms represent a real push from tech startups, including global leaders such as Stripe and Starling Bank, to enable different companies to build their own financial services or incorporate other companies' offerings within their systems.This year, with fintechs and their mainly venture capital and private-equity backers contending with a dramatic deterioration in tech valuations and weakened consumer spending, the discourse revolving what's "trending" in fintech has not changed much.Investors still have a preference for organizations that provide services to business entities rather than consumers. In some cases, they have been willing to make investments in these firms at values that remain unchanged from their prior funding rounds. The introduction of generative AI, however, has become a noteworthy point of interest.CNBC reached out to some of the top industry experts at Money 20/20 Amsterdam to learn more about what's currently hot and what's not in the fintech realm. Here's what they had to say.
Scoping out Money 20/20 this past week, it was evident that a pattern was forming. Companies catering to businesses, such as Airwallex, Payoneer, and ClearBank, seemed to reign supreme, whereas consumer-oriented applications including Revolut, Starling, and N26 were absent.
Richard Davies, CEO of U.K. startup lender Allica Bank, told CNBC that a lot of fintechs have turned to enterprise sales, primarily because obtaining customers in the consumer sphere is economically challenging and cost-prohibitive. "To make it worthwhile to attend an event like M2020, you need to be selling to other attendees," he noted. According to Davies, the B2B space is thriving, especially for SME and enterprise SaaS (software-as-a-service) products, if they can be effectively demonstrated, have detectable customer demand, and yield sufficient unit economics. He asserted that the area of embedded finance is only getting started and still has a ways to go.
Niklas Guske, whose job is operating Taktile, a fintech dedicated to simplifying underwriting decisions for its enterprise customers, noted that the sector is undergoing a renewal for B2B payments and financing. He remarked that lessons from B2C fintechs can be leveraged to upgrade the B2B user experience and provide better solutions to the underserved SME market. Guske then pointed to one of the most noteworthy advancements that is drawing fintech interest as of late: industry-altering online checkout tools. David Singleton, CTO of payments technology provider Stripe, revealed that a newer version of their checkout solution has boosted customer revenue by as much as 10.5%, a figure that he labeled as "incredible".
At Money 20/20, a theme among companies is that of tightening their belts. An employee from a notable firm that typically attends the event revealed that they had reduced the number of participants and haven't purchased a stand. This individual was not authorized to speak to the media. In this new climate, fintechs are striving to optimize their risk management in order to remain profitable. Guske suggested that in the past, when funds were more easily obtainable, fintechs were able to counteract inadequate risk assessments with investor money. However, he believes that in the present, data sources and advanced risk modelling give fintechs the opportunity to better identify and acquire the right customers. He remarked that Y Combinator and Tiger Global had invested more than $24 million in such endeavours.
Attendees at Money 20/20 were the most enthusiastic about artificial intelligence. OpenAI's ChatGPT, a generative AI software that creates responses similar to humans, enthralled those in the fintech and banking businesses who wanted to know its possibilities. At a private gathering on Wednesday discussing the incorporation of fintech and AI, one startup executive described how his company uses the technology for imaginative customer communication, such as adding memes to the chatbot and even allowing it to “roast” clients about their spending habits. Callan Carvey, the global head of operations at Cleo, explained how their AI connects to customers’ banks to have a deeper comprehension of their finance conduct. She indicated it facilitates transaction comprehension and personalised advice, as well as utilising AI and predictive steps to help clients dodge potential economic misfortunes like costly bank fees.
Teo Blidarus, CEO and co-founder of financial infrastructure firm FintechOS, stated that generative AI has been a great benefit to their platform, allowing companies to create their own financial services with minimal technical experience. Blidarus highlighted the challenges that low code and no code AI solutions are attempting to address, which is simplifying the complexity of the overall infrastructure. He went on to emphasize how job that would typically take a week or two can now be completed in 30 minutes, though there may still be some touching up required afterwards. In his opinion, generative AI permits people to shift their attention to more productive and creative endeavours rather than tedious integration work.
Businesses have been harnessing revenue and finance automation products to do more with less, as both tech-savvy and established companies attempt to optimize efficiency. Taktile's Guske says the need to grow quickly while keeping costs down has led many fintechs to embrace automation and abandon manual processes, especially when it comes to onboarding and underwriting. According to Guske, the most prominent use of generative AI is to construct cues from raw transaction and accounting data.
It is certain that consumer-oriented services have not been earning the approval of investors. Valuations for digital banking and payment groups have taken a hit this year as shareholders reassessed their strategies due to the rising inflation and elevated interest rates. Schroders Capital revealed a 46% devaluation of Revolut, a British fx services heavyweight, bringing it down to a $15 billion market capitalization from the previous $33 billion level. Atom Bank, a U.K. challenger bank, also had its market value diminished by 31% by Schroders.Atomic venture capital firm uncovered a decrease in investment to European tech startups in 2023 estimated at 39%, with $83 billion in 2022 and $51 billion this year. Hiroki Takeuchi, CEO of GoCardless, stated to CNBC, "No one comes to these events to open like a new bank account, right? Therefore, if I am Revolut, or the like, my primary concentration is on how I obtain customers and make them content. How do I get more of them? How do I increase them? I don't believe Money 20/20 aids there. Therefore, the shift towards B2B stuff does not astonish me."
Layoffs have caused severe distress in the industry, with Zepz, the U.K. money transfer firm, downsizing by 26% of its staff last month. Even tech-oriented fintechs that had previously been highly valued have been affected, with Stripe completing a $6.5 billion financing with a $50 billion valuation - a decrease of 50% compared to its previous round - and Checkout.com witnessing a 15% reduction of its internal valuation to $9 billion, as mentioned by startup news portal Sifted.
At the start of Money 20/20, the U.S. Securities and Exchange Commission (SEC) charged crypto exchange Binance and its founder Changpeng Zhao for breaching securities regulations. Almost immediately afterwards, the SEC accused U.S. firm Coinbase of running without the requisite registration as a broker and exchange.
After a challenging year in the crypto industry, with bankrupt projects and companies, it was no surprise that few crypto firms took part in this year's Money 20/20 expo in Amsterdam. Conference organizers inform CNBC that only 6% of revenue was derived from crypto-affiliated companies, in comparison to the last bull run, where lots of digital asset companies and KYC providers were in the hall. The demand for investments in digital asset integrations has lessened due to the decreased liquidity in the crypto market, alongside the U.S. regulatory clampdown on firms and banks associated with the crypto sector. Several fintech CEOs interviewed by CNBC said they had no plans to roll out crypto goods due to the lack of customer interest. Airwallex CEO, Jack Zhang, made it clear that there are no plans to offer cryptocurrency support in the near future, as they must adhere to a high level of compliance and regulation, which can be difficult right now for crypto. Nium CEO, Prajit Nanu, reported that there has been a decline in interest for their crypto-enabled financial product. Banks today are skeptical when it comes to crypto, and since the whole sector is going through a difficult time, they are being more attentive when considering it.
No longer a buzzword in fintech, blockchain technology was once garnering the attention of big banks, who were optimistic about its capabilities to boost efficiency. While blockchain made few appearances at Money 20/20, JPMorgan is continuing to develop blockchain applications through its Onyx arm, creating various new products. Part of this includes JPM Coin, which facilitates transfers between some of the bank's institutional clients. However, Basak Toprak, executive director of EMEA and head of coin systems at JPMorgan, reminded attendees that practical usage of the technology in banking is still quite limited. To create commercially viable products while still upholding customer confidence and regulations, Toprak urged collaboration between regulators, as well.
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