Fintech is one of the most capital-intensive areas of the startup world. Where neobanks, neobrokers, crypto unicorns, and BNPL providers previously dominated events, the framework conditions are constantly changing. 2024 is expected to be different once again than previous years. This article looks at the most important trends of the year that will shape the fintech industry.
1. LLMs in Finance
It’s obvious, of course, but the breakthrough of generative AI in 2023 will continue in 2024 and will be seen particularly in the fintech space.
- BloombergGPT: With 50 billion parameters, the LLM from the leading financial intelligence service is intended to do things like sentiment analysis, entity recognition, news classification, and question-answering.
- DocLLM: JPMorgan Chase, the most valuable bank in the world, announced the development of DocLLM with 1 billion parameters in early 2024. The in-house JPMorgan AI Research department designs the Large Language Model so that it can specifically read financial documents that come with rich content, column layouts, etc.
- FinGPT: And of course, there is also an answer to these proprietary AI models in the financial sector from the open source world. For example, FinGPT was published – an LLM from the AI4Finance community that, in principle, anyone can use and fine-tune for their own purposes
Fintechs have always strived to go public – and because a new IPO window could open in 2024, there are already several candidates making their initial public offering this year. Here is an overview of possible IPO candidates:
- Klarna: Payment unicorn from Sweden
- Stripe: The payment giant from the USA
- Revolut: Neobank from UK
- Chime: Neobank from the USA
- Bitpanda: Crypto unicorn from Austria
- Circle: Stablecoin maker from the USA
- Zilch: BNPL provider from UK
They will pop up wherever customers have questions about financial services: ChatGPT-style chatbots that specialize in answering questions about all financial matters. There are already a few examples of banks and fintechs that have published something similar or are working on it. Here are some examples:
- JPMorgan: IndexGPT
- Bitpanda AI
- Klarna and the ChatGPT integration
- First Bank AI
4. They are sarcastic
4 percent interest rates and more, “Save Now Buy Later” instead of BNPL, and savings platforms instead of investment apps – these are all children of the interest rate turnaround that will hit the financial world in the USA and the EU as a result of the Corona crisis with high inflation from 2022 after a decade of zero interest rates. But how long will it stay that way? In the USA, but also in the Eurozone, there are increasing signs that the Federal Reserve and the ECB could initiate a downward turn in interest rates. However, it cannot be assumed that interest rates will go back to zero and borrowed money will become cheap again as before. Nevertheless, a turnaround in interest rates will be an important signal for the further development of fintech. At Trade Republic, which positioned itself strongly as a savings platform in 2023, it is once again said that the core product of investing has priority.
5. Biometric authentication without password
123456, HasiBärli69 or just – yes, the password is obsolete, according to Google, among others. Biometric procedures with facial recognition such as Apple Pay have long been on the rise. But there are also other systems to make the (easily hackable) password unnecessary – for example with the one-time codes that Klarna sends via email to log in. Such innovations will continue to be seen more and more often in 2024, especially in the financial sector. Rising cybercrime rates make controlling access to our digital finances even more important than ever before. Biometrics could also play an increasingly important role in the POS area when purchasing goods or services on-site.
6. Embedded Finance
Are e-car subscription companies mobility companies – or actually financial companies? After all, they specialize in pre-financing electric cars in order to then lend them out to their customers as a monthly subscription as a package with insurance, service, etc. Here, too, one can speak of embedded finance – i.e. when products already come with integrated financing and you no longer need a bank or other financial service. Embedded finance will also play a major role in 2024 – even if you think about PropTech, ClimateTech or even your own payroll.
7. Banks are opening up to Bitcoin
The approval of Bitcoin Spot ETFs in the USA is an important signal – also to the banking world, which has so far been hesitant or even hostile towards crypto assets. But BTC is becoming more and more mainstream, and bank customers also expect their financial institutions to be able to buy and store crypto assets there. An Austrian startup called 21bitcoin even received investment from a German bank at the end of 2023 – it is quite possible that such initiatives will increasingly follow in 2024. Bitpanda, which also offers trading technology for crypto assets to banks, is also relying on this trend in 2024.
They are particularly in demand in Europe, the world champion of regulation: providers of RegTech – i.e. technologies that support compliance with increasingly complex regulatory requirements. This is extremely important, especially in the strictly regulated financial sector, in order to remain competitive. The following new regulations will affect the fintech industry in the near future:
- MICA (Markets in Crypto Assets) to regulate crypto assets and crypto companies in the EU
- EU consumer credit directive with stricter rules for BNPL
- Ban on Payment for Order Flow in the EU
- Crypto Travel Rule
- Corporate Sustainability Reporting Directive (CSRD) in the EU
- Digital Operational Resilience Act (DORA) in the EU
9. Crypto Spring
You can already tell: Crypto companies are coming out from behind the stove again, getting louder, and making plans and deals: After two tough years for Bitcoin and Co, the signs point to a bull run again in 2024. After the enablement of Bitcoin spot ETFs, the next major event in the industry is the Bitcoin halving in April. In order to prepare for a possible new high, many players are positioning themselves on the market – for example, Bitpanda as a sponsor of FC Bayern or Circle as the next stock market candidate.
10. A2A Payments
A2A stands for “Account to Account” and in the payment area it means that transactions take place directly from one account to another without an intermediary – such as a credit card network. In the private sector, for example, when you transfer money to friends, something like this is common practice, but not yet in the B2C sector. There are now a number of startups there that are working on A2A. The trend comes from emerging countries where credit cards are not so widespread, but is also gaining ground in western countries through Klarna, for example.
11. B2B BNPL
According to Juniper Research, “Buy Now Pay Later” will also become established in the B2B sector in 2024. In the B2C sector, installment payments and Co via Klarna or Affirm are already widespread, but in 2024 companies, especially SMEs, are also expected to increasingly jump on this trend. The principle of leasing is already known for company cars, but it can be applied to many other areas – and this is exactly where startups could play a role.
Why buy a machine if you only need it occasionally (e.g. during the harvest season)? New financing models that run under the slogan Pay per Use can be used here. Equipment, machines and the like could be paid for per use instead of purchasing them completely. In Austria alone there are two startups, linx4, and Findustrial, that want to implement pay-per-use in the industrial sector.