Fintech under construction

Fintech, a Space Under Construction

From raised funds to self-regulation, from understanding its history to looking into what's coming, fintech is still deeply in hyper-change mode. Here are three recent notable fintech stories and how they all tell that story from different angles

Growth isn’t linear. Focus is sometimes off. Trends come and go. Basically, fintech isn’t that much different than a child with ADHD. But that’s what all of us – finance pros, fintech enthusiasts – are here for: to follow it closely so we never miss the important, shifting moments. And, yes, we also do what we can to keep it on course occasionally.

Because that’s what, for the most part, fintech still needs from us. And here’s a quick rundown of a few recent headlines that tell that story from a few different angles.

Fintech Funding: It’s About Foundations

This piece from Crunchbase – “Fintech Funding Halved Last Year, But VCs Are Excited About These Areas And Deals In 2024” – is, of course, trying to balance the down with the up. So,
despite a notable decline in funding compared to previous years, it stresses an underlying excitement among venture capitalists. Why, you ask?

Well, Mark Fiorentino, a partner at Index Ventures, shares his insights on where fintech is heading. He highlights three key investment areas poised to shape 2024: the next generation of fintech infrastructure, finance tech for underserved industries, and the CFO software stack.

The way we see it, there’s a line connecting all three: they’re all about building better foundations for the entire industry.

Fiorentino draws attention to the need for better liquidity and trading infrastructure within the banking sector. Just as Robinhood revolutionized equity brokerage, there’s potential for fintech to breathe new life into the archaic debt market.

But it doesn’t stop there. Fintech is branching out into the “forgotten industries” like supply chain logistics, insurance, and manufacturing, where legacy systems still hold sway. It’s time to streamline processes, eliminate outdated practices, and bring efficiency to these sectors.

Another exciting focus area for 2024 is at the intersection of the CFO and CTO. Fintech tools aim to boost revenue opportunities and enhance spending management. It’s about optimizing workflows, billing models, and the overall software ecosystem.

In these endeavors, it’s not just the payment process itself that sets businesses apart—it’s the software workflow built around payments that truly differentiates them.

And, when everyone’s focus is on profitability – such advancements can play a major role in developing a more sound fintech future.

Self-Regulation is Welcome

The landscape of fintech regulation has been evolving, and Reserve Bank of India (RBI) Deputy Governor T. Rabi Sankar now suggests that self-regulation is the path forward for fintech companies. It’s a noteworthy departure from the earlier stance that fintech firms required stringent regulatory oversight.

Sankar argues that fintech, being more than just financial entities, calls for a different approach to regulation. Regulators are now looking to fintech firms to take a proactive role in governing their own practices. It’s an evolution driven by collaboration, with Self-Regulatory Organizations (SROs) emerging as key players.

SROs play a pivotal role in promoting responsible practices and ethical standards in fintech. They establish guidelines, codes of conduct, and compliance mechanisms that create a sustainable and reputable fintech ecosystem. In a rapidly evolving sector like fintech, industry participants are best suited to set common rules and enforce them.

By addressing issues such as market integrity, data privacy, cybersecurity, and risk management, SROs help build trust among consumers, investors, and regulators alike.

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“What is Fintech?”

Now, obviously, if you read this far, you know what fintech is. But, still, it’s nice to have someone like McKinsey chiming in with a piece that puts things into order.

This new article from the consulting firm provides an overview of fintech, including its history, impact, trends, and technologies shaping its future.

According to this piece, three key trends shaping the future of fintech growth:

  • Continued growth due to digital transformation and e-commerce worldwide, especially in developing countries.
  • Expansion of fintechs, particularly in emerging markets like Africa, Asia-Pacific, Latin America, and the Middle East.
  • Resilience of fintechs during market corrections, with different stages and sectors showing varying degrees of sensitivity.

In our eyes, this analysis further contributes to the discourse according to which fintech’s future is more about sustainable, responsible, infrastructure-focused innovation than it probably ever was.

As we don our hard hats and realize this space is under construction, remembering that fintech’s future is being built on a foundation of collaboration and regulation will help all of us make safer choices when venturing deeper into this galaxy.