Fintech & Advanced Payments Report 2024

Transition: finance
Fintech gears up for a new era
Global Experts in
Fintech Consulting
Edgar, Dunn & Company (EDC) is an independent global financial services and payments
consultancy. Founded in 1978, the firm is widely regarded as a trusted advisor to its clients,
providing a full range of strategy consulting services, expertise, market insights, and M&A support.
From offices in San Francisco, London, Paris, Frankfurt, Dubai, and Sydney, EDC delivers actionable
strategies, measurable results and a unique global perspective for clients in more than 45
countries on six continents.

For more information contact Tue To

Samee Zafar Head of Advanced Payments
Director and Fintech for North America
[email protected] [email protected]

FR ANK FURT • DUBAI • LONDON • PARIS • SAN FR ANCISCO • SYDNE Y

 Transition: finance | Fintech gears up for a new era

Contents

Introduction 4

Executive summary 5

Transition to a new era: Back to earth with a bump 6

High impact: How is fintech reshaping the economy? 16

Moving on: Accelerating the great (fin)tech transfer 26

Conclusion 33

Findexable assisted Edgar, Dunn & Company

in the preparation of this report.

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 Transition: finance | Fintech gears up for a new era

Introduction
A year of transition?
Welcome to the 2024 edition of our Fintech report! Here, you will find insights
from discussions with thought leaders and practitioners, and findings from an industry-wide
survey, to capture the perspectives of payments professionals on current market dynamics.

2023 was undeniably eventful and characterized by shifting global landscapes—among them the receding
impact of COVID-19, political conflict, natural disasters, and a banking crisis that led to the collapse of
multiple regional banks in the United States. At the same time, the continued rise of generative AI models
added to this whirlwind of surprises.

While the current technological evolution brings forth exciting possibilities, striking a balance between
innovation and responsibility towards consumers and the environment while maintaining a viable business
is now more important than ever.

In this year’s report, we explore fintech’s responses to the post-pandemic world, its dedication to
environmental and social responsibility, and its leverage of technologies like Artificial Intelligence
and Machine Learning to drive efficiency and scale. The report covers three key themes:

Operational Efficiency
1 This section explores how fintech companies are strategically gearing up for a new economic era,
leveraging technological advancements and innovative strategies to enhance operational efficiency.

Climate and Impact

2 This section highlights the rise and potential impact of climate and impact fintechs, shedding light on
their efforts to integrate sustainability into the financial landscape.

Technology Transfer
3 Here, we delve into the horizon of promising opportunities and potential risks entwined with AI and ML
advancements in the payments industry. We discuss how these technologies are reshaping the future
of financial services, heralding a new era of possibilities.

Despite market pullback, fintech is poised to maintain its robustness in the coming years, brimming with
abundant opportunities for innovation, especially with the recent leap forward in Generative AI.

Success however will favour the disciplined; and those who can adeptly harness technology to streamline
operations and expand through strategic product adjacencies. Staying agile, responding proactively to
financial challenges, prioritizing sustainability, embracing social responsibility, and safeguarding customers
against potential fraud and data breaches will be crucial aspects of thriving in this latest tech-driven
(transition) era.

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 Transition: finance | Fintech gears up for a new era

Executive summary
Transition: finance
Fintech gears up for a new era
Money supply - or the lack of it - is a great accelerator of change. Just as the 2008 Global
Financial Crisis pushed the fintech agenda, today’s post-pandemic pullback is forcing a
hard reset on fintech firms everywhere.

In that sense, the post-pandemic market pullback This year we talked to innovators, investors and
is to fintech what the 2008 financial crisis was to incumbents at yet another time of upheaval. In the
global banking: both events forced scale players to wake of the downturn and the market pullback in
rethink how they operate and adapt to a new reality venture funding we’ve included the results from an
to stay relevant. industry-wide survey to identify market priorities for
the year ahead.
If it’s still too early to explain the full impact of the
downturn on fintech and financial markets, there’s Although challenges remain after a year of
little doubt that 2023 will mark a turning point. correction with firms urgently reassessing their path
to profit, fintech’s fundamentals are as solid as ever.
It may even become the jumping off point for the Despite the slowdown, fintech investment in 2022 was
great (fin)tech transition: where the imperatives of still markedly higher than 2019 - the last year before
operational efficiency, technological advancement in the pandemic1.
the form of generative AI and data, and managing the
impact of climate change started to come together. For firms that can blend a sense of mission with
excellence in orchestration while using data and AI
These three themes are the focus of this review to drive efficiencies or create new scalable services
of fintech and advanced payments into 2024. the new era is wide open.

The themes driving fintech in 2024

Climate Operational
& Impact efficiency

Tech transfer

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Transition to a new era

Back to earth with a bump
The pandemic was a catalyst for fintech innovation - accelerating adoption of digital
technologies and making funding available for experimentation on an unprecedented
scale. One year on and with the prospect of a recession how are fintech firms adapting
to the new market dynamics? And how are they getting ready for a new economic era?

Fintech’s GFC moment

In this section
If 2021 was the year fintech took off, 2023 felt
Drop in venture investment is refocusing priorities very much like the year it fell back to earth.
for scaling and startup fintech firms
In some ways 2023 was fintech’s Global Financial
Orchestration is becoming a key capability on the Crisis moment. At least psychologically. The end
path to profitability of the heady days of the digital finance boom of
the pandemic, after a decade of seemingly endless
Despite the pullback significant opportunities
venture growth has sharpened minds, forcing firms
remain to digitise the ‘full stack’ of financial services to double down on operational efficiency and a
path to profitability. Something that for many firms
(much like the internet boom of the early 2000s)
seemed a remote prospect, much less a priority.

Where all lights were flashing green during and

in the immediate aftermath of the pandemic,
in a sharp ‘about turn’ the last year has been
characterized by warning signs everywhere.

Venture funding across all stages and geographies

crashed. By up to 75% in Europe, Middle East and
Africa and 85% in Latin America (see
chart, Fintech funding 2022-23).

Not surprisingly this has impacted fintech firms

across the spectrum. With hiring scaled back and
some of fintech’s biggest successes from Klarna
and Pleo in Europe to Chime and Stripe in the US
announcing hiring freezes or revenue warnings.

$87 trillion
Global mobile wallet market size by 2028
Source: Edgar Dunn & Company

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Chart 1: Going the wrong way: Fintech funding 2022-23

17.6 H1’22
17.0
H1’23

12.4
Amount raised ($B)

7.0
5.7
4.3
2.9

0.5

North America EMEA APAC Latin America

Source: S&P Global2

Back to basics
While the taming of the fintech lion has been a Opportunities knock
wake up call, in some circles it has also drawn
a certain amount of schadenfreude - often with
a degree of moralising about a long overdue Potential to digitise the full stack of financial
end to the ‘growth-at-any-cost’ model of fintech services means there’s no shortage of opportunities
growth and a much-needed return to building for innovation despite the market pullback.
businesses with a clear path to profitability. Employee & spend management
On the surface it feels like a switch has been A fragmented market for HR and employee
flicked - from a world of capital abundance to management means firms often use multiple services
creating a need for providers that can orchestrate
one of capital scarcity - and the beginning of a
integration of employee rewards, spending and staff
new era potentially more closely aligned to the
management.
pre-2008 economic reality than that of the last Examples: Ceridian, Coverflex, Gusto
decade.
Orchestration & B2B SaaS
While elements of this are true, the reality is The move away from consumer focused fintech
less binary. The slowdown in venture markets is benefiting firms focused on payments and
accelerated by changing macroeconomic operations automation for enterprise and business
conditions might have contributed to a sea- customers with rising valuations for fintechs that can
change, and a move away from consumer-facing demonstrate subscription revenue streams.
financial services, but the fundamentals for Examples: Integiro, Ramp, Stripe
fintech remain. Accounting & finance operations
Despite the downturn total fintech funding in As belts tighten businesses everywhere are looking for
2022 was still almost double what it was before ways to improve efficiencies and reduce costs, while
the pandemic3. accounts integration is filling funding gaps for SMEs.
Examples: Mimo, MamoPay, Payable
Opportunities to fill gaps in provision or
Automating the full finance stack
automate operations across the full stack of
AI and the trend to embedded finance is making end-
financial services - from cash flow management
to-end process automation a reality. The ‘software-
to lending, wealth and payments (see box: isation’ of the full finance stack is likely to be an
Opportunities knock) - can be found everywhere enduring theme in fintech’s next era.
for firms with the right approach or ability to Examples: Numarics, Trillion, Vic.ai
orchestrate.

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And as might be expected from a sector that has Despite the downturn total fintech funding
matured over the last decade not all fintech firms
are equal. in 2022 was still almost double what it was

before the pandemic.

As a result, the fallout from the downturn is not
evenly distributed. The impact on fintech firms is Fintech 2022 recap, Dealroom
now more correlated to their stage of development,
their segment or business model than simply
their membership of the fintech sector (see box:
Directions, please?).

Directions, please?
How firms at different stages and business models are responding
to the downturn

Stage Impact Business model Response

Early stage Increased investor Banking • Focus on profitability

interest in firms
• Offer subscription services
with a focus on
path to profit • Examples: Monzo, Starling

Growth or Lower valuations, Payments • Target enterprise,

Late stage focus on cost merchant customers
discipline & path
• Focus on customer
to profitability
experience & product set

• Examples: Klarna, Nubank

Scaled Cost discipline, Infrastructure • Focus on orchestration

focus on
• Expand BaaS offering
profitability, slow
exit or IPO plans • Examples: OakNorth, Stripe

Source: findexable

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How firms are responding to the changing climate Pandemic push

is similarly nuanced. With fintech firms large
and small adjusting their strategy, refocusing From the explosion in contactless payments,
priorities, or identifying cost efficiencies to reduction in the use of cash and the forced
and product adjacencies accordingly. digitisation of paper or in-person processes, the
list of services and business models pushed
Some are more equal forward by the pandemic is almost too long to
The transition year is easier for some firms to believe (see box: Pandemic push, below).
adjust to than others. For fintechs with a model Indeed the acceleration in adoption of digital financial
predicated on getting to profitability through low services created by the pandemic is probably best
margin transactions at scale, planning how to viewed as a once-in-a-generation opportunity to
layer on services such as lending or insurance experiment and prove demand for new services.
as volumes grow - and how to ensure customers
know what you’re offering - could make the Massive growth doesn’t guarantee it’s any easier
difference between success and failure. to build profitable businesses. “It’s been the
case for a long time in the payments industry
that you need to start with the fundamentals.
Get the foundations and the strategy right - you
can’t just compete on price,” says Gary Prince,
“Layering additional services onto a simpler, payments entrepreneur and chief executive
officer of The Payment Firm, based in the UK.
scalable transaction product will continue to be
“What’s different today is that payment transactions
an important route to building scaled fintect
have become a commodity - the opportunity is
businesses, but fintech firms need to make sure in getting the data so that you can offer more
they have the capabilities training in place so services aligned directly with what your customers
or counterparties need,” adds Mr Prince.
customers understand how to use these new
Think first
products what you offer to stay relevant.”
As the market for innovation and finding gaps
in provision gets tighter, today’s founders
In South East Asia we worked with women garment and innovators also need to think about the
structural direction of the market - especially
factory workers that were given a digital wallet given the recent leap forward in Generative AI.
where their salary was paid. The wallet offered lots “Applying a clear thesis to the kind of business model
of functionality the customers weren’t aware of.” we’re looking for means segments like money transfer
- where revenues are fairly consistent - less interesting
Mary-Ellen Iskenderian, Women’s World Banking for us. In areas like wealth management however the

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“In this market we need to be very disciplined

in deciding which opportunities to go for.

We take time to size the market for the opportunity

and assess time to revenue before taking the leap.”

Iana Dimitrova, OpenPayd

potential is dramatically different. Not only can you Not that that’s putting them beyond risk. “Our
take a position on the assets under your management impact focus, selling crop-protection insurance
but you also take a fee for delivering the service - and our distribution model selling to insurance
usually over multiple years for firms that are trusted aggregators instead of direct to farmers, is
and are great relationship managers,” says Ale definitely helping us attract investor interest
Vigilante, former head of innovation at fund manager for follow-on finance should we need it,” says
Fidelity in the United States, and founding partner Rose Goslinga, Co-founder and President of
of Novirian, a Silicon Valley-based venture fund. Pula, a scaling insurtech based in East Africa.
“We’re really looking for founders building businesses “Nevertheless it’s a highly challenging environment
where the marginal cost to serve falls to zero once so you have to fight hard to build and maintain
the platform or service is up and running while the relationships so that we continue to
revenues grow continuously,” adds Mr Vigilante. meet our revenue targets,” she adds.
Big but less bold As the first full year after the pandemic, 2023 is
proving to be another pivotal year for fintech globally,
If the changing economic tide has sharpened
one that will simultaneously herald the next cohort
or shifted focus for early or ideation-stage
of fintech successes, and highlight the direction
firms, it has re-set priorities for growth and
of financial innovation over the next decade.
later stage firms even more urgently.
Opportunities or hiring plans that sounded realistic
just a year ago have been shelved or a different
perspective applied before deciding to go ahead.
“In this market we need to be very disciplined in
deciding which opportunities to go for,” says Iana
Dimitrova, chief executive of OpenPayd, a UK-based
embedded finance provider, “we take time to size
the market for the opportunity and assess time to
revenue before taking the leap,” Ms Dimitrova adds.
Increasingly, it’s also about identifying safe-
harbour customer opportunities in a climate
that has made consumer propositions riskier
and much less attractive to investors.
As a result, firms focused on business-to-
business activities - from embedded finance
to payment orchestration or financial services
infrastructure and enablement - are finding
themselves ahead of the curve, in terms of both
investor attractiveness and customer viability.

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Business models: A pandemic push

The two years of the pandemic accelerated fintech in a way that is
now hard to comprehend. Below are some areas of innovation that
accelerated at scale during the pandemic.

Contactless Payments & Services E-commerce Expansion

To avoid unnecessary contact with As an increased number of traditional
people and cash, digital payments brick-and-mortar businesses shifted
soared during the pandemic. Many or expanded their online services
businesses introduced or expanded during the two years of the pandemic.
contactless services to minimise Businesses use online marketplaces
physical interactions including or developed their own e-commerce
contactless delivery options, curbside platforms and optimised logistics to
pickup, and mobile payments - a trend meet the surge in online shopping. A
that has outlived the pandemic. Over trend that is expected to continue in
90% of survey respondents think the rest of the decade. Over half of
mobile payments and contactless survey respondents believe in-store
payments will continue to increase shopping will continue to shift online.
in a post COVID world. The majority EDC estimates global e-commerce
believe mobile payments is an market size will grow at a CAGR
essential winning solution in today’s of 9% from 2023 to 2028 reaching
market. EDC estimates global $10T by the end of 2028. About two
mobile wallet market size will grow thirds of online spend is expected
at a CAGR of 11% from 2023 to 2028 to occur via digital marketplaces
reaching $87T by the end of 2028. with around 20% of all purchases
involving cross border transactions.

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 Transition: finance | Fintech gears up for a new era

Business models: A pandemic push

Continued

Digital Transformation brands, to name a few are just some

Businesses digitised their of the sectors that have transitioned to
operations to reduce costs, improve subscription-based business models.
efficiency, and respond to shifts
in demand. For example, physical Outsourcing & collaborative
retail stores implemented online partnerships
ordering systems and e-commerce Service outsourcing, especially of
platforms, restaurants introduced non-core activities, has experienced
online ordering and delivery services, significant growth in recent years.
service-oriented businesses External service providers often have
transitioned to virtual consultations expertise and experience in specific
or teleconferencing, manufacturers domains, allowing companies to
implemented automation and allocate resources more efficiently,
robotics to reduce the reliance on improve productivity, enter new
human labour, businesses leveraged markets more easily, and more easily
chatbots and AI-powered customer scale their operations according to
service tools to handle customer changing market demand. As a result
inquiries, financial institutions partner selection and management has
enhanced online banking and mobile become an essential competency for
app services among other areas. fintech innovators to ensure the quality
of service and experience is maintained.
Subscription-based models
The rise of subscription-based Software as a Service comes of age
businesses has been significant The pandemic accelerated the adoption
in recent years, transforming how of digital technologies and contactless
companies monetize their products payments - training consumers to use
and services, offering benefits such their devices for authentication and
as predictable revenue, improved getting them used to the convenience
customer relationships, and of mobile wallets, contactless cards,
opportunities for growth and innovation. and digital payment platforms. The
With enhanced data analytics, outcome has been a generation of
businesses can offer personalised customers that expects payment
pricing or subscription tiers tailored flexibility wherever they shop, and
to individual needs. Personalization which inadvertently has put pressure
plays a key role in driving customer on smaller businesses who were
satisfaction and retention. Dynamic not ready for the digital switch - as
pricing and subscription plans - once a result creating a large opportunity
reserved for gym memberships, for Software as a Service (SaaS)
streaming services and the travel platforms to offer one-stop shop
industry have proliferated also - payment and finance solutions for
businesses ranging from software small & medium size businesses.
companies to healthcare and luxury car

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The post-pandemic imperative

How are fintech and payment firms adjusting
to the new environment?

In an uncertain climate the agile survive. And so do those that take

an active response to their financial management. This year’s survey
highlights the actions fintech leaders are taking to adjust.

Conserving cash Keep changing

Managing cash flow and financial In a bid to identify new revenue streams,
risk (62% of survey respondents). fintechs are actively addressing
Businesses need to maintain adequate changes in customer behaviour (56% of
liquidity to cover operational expenses, those surveyed). As customers adjust
debt obligations, and other financial their spending priorities during the
commitments to ensure their survival downturn, fintech providers, and the
during challenging times. By carefully merchants they support, need to adapt
managing financial risks, businesses in ways that meet emerging needs. A
can maintain stakeholder confidence process that in the long term can help
putting them in a better position to stay relevant and build loyalty and
secure follow-on funding, lines of credit, reduce customer churn.
or other forms of support.

Cutting costs
Unsurprisingly reducing operating
costs (at 61%) came second highest
in this year’s survey. Businesses are
taking action to preserve financial
stability and maintain sufficient cash
flow to cover essential expenses to
‘keep the lights on’ in uncertain times.

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Fintech Survey 2024

Chart 2: Shifting sands of finance

Mobile payments 94% 4% 2

Contactless payments 92% 7% 1

Introduction of regulatory rules to ensure consumer protection 77% 22% 1

Emergence of new technologies 72% 27% 1

Emergence of climate / impact fintechs 70% 28% 2

Cross-border e-commerce transactions 69% 29% 2

Focus on customer centricity 65% 33% 2

In-store shopping shift towards e-commerce 53% 37% 10%

Adoption of
cryptocurrencies 21% 41% 35%

Increase Stay the same Decrease

Question: The payments industry has undergone significant changes as a result of the COVID-19 pandemic.
Do you think the following activities will increase, stay the same, or decrease in a post COVID world?

Chart 3: Upwardly mobile

Mobile payments 87%

Open Banking 66%

AI and Machine Learning 58%

Banking as a Service 48%

AR management technology 17%

Internet of Things 16%

Blockchain 13%

Question: Which technologies are the essential winning payment solutions in today’s market?

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750 million6
Women excluded from financial system
Source: Global Findex Database, World Bank 2021

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High impact
How is fintech reshaping the
economy?
Climate and sustainability are increasingly top of the list of priorities for
customers. But is impact fintech a standalone segment? Or is it simply a
question of values that fintechs need to ‘bake in’ to their strategy?

Social and environmental impact-focused fintech

In this section is not a new phenomenon. Mohammad Yunus’
Grameen Bank that first drew global attention to
Mission-driven finance gaining importance the commercial potential for serving poor and
low income customers turned 40 this year.
Climate fintech at an early stage but growing
quickly The combination of the climate emergency,
accelerated digitalisation from the pandemic and
Efficient orchestration key to serving customers widening gaps between rich and poor across the
at scale and building scaled fintech firms advanced and emerging world however have put
financial services with societal or environmental
goals firmly on top of the pile in the last year.
Indeed climate and impact fintech is one of the
few areas - alongside the investment boom in AI -
where venture investment grew over the last year.
“Our impact focus means we’re still very much
of interest to investors and able to attract
fresh investment if we need it,” says Rose
Goslinga at Kenya-based insurtech firm Pula.

Chart 4: European climate fintech investment (to May 2023)

United Kingdom €64m 6

Denmark €45m 1

Germany
€14m 5

Belgium
€6m 1

Switzerland €3m 2 x Number of deals

Funding (€m)

Data: Dealroom

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 Transition: finance | Fintech gears up for a new era

$5.2 trillion
Annual funding gap for SMEs4
Source: International Finance Corporation

Rightly so. Gaps in funding and provision of financial

services to low-income consumers, access to finance
for SMEs, nearly a billion women still excluded from
the formal financial system and a financing shortfall
for the energy transition in emerging regions are just
some of the problem areas that fintech should be able
to help solve.

Defining green fintech taxonomy

Climate-focused fintech is in the early stages with a wide range
of applications

Category What the ‘green’ means

Green digital payment Technology using payment data to calculate the carbon footprint of purchases
and account solutions or help make purchase decisions with lower carbon impact

Green digital investment Robo advisors focussing on investments that prioritise ESG
solutions and sustainability goals

Digital ESG-data and

Data and analytics focusing on ESG metrics and company ratings
analytics solutions

Green digital crowdfunding Digital platforms connecting funds and funders to finance green ventures
and syndication platforms or projects

Green digital risk analysis

Insurance for climate-related risks using sensors or data capturing technology
and insuretech

Green digital deposit Savings accounts investing in environmentally friendly projects or lending linked
and lending solutions to green behaviour

Green digital asset Tokens such as green utility tokens that reward companies for lowering emissions
solutions of offsetting

Source: findexable 2022

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$3.8 trillion
Climate finance funding gap5
Source: Boston Consulting Group 2022

Defying definition that you can’t mend what you can’t measure holds
true. Lack of a clear definition also opens the
Despite the clear need for it however ‘impact door to impact or greenwashing - put simply, does
fintech’ remains a segment that defies a clear offering a credit card made of recycled bamboo
definition, tending instead to be carved up make me a climate-friendly fintech? And should it?
between traditional financial services segments
including lending or banking or bracketed Building clear categorisation would also help
loosely within the ESG investing arena. channel funds and investment in the right direction.
Shortening the time to fix some of the bigger societal
Does this matter? Maybe not. But the old cliché or environmental challenges in the process.

Race to the bottom

How is financial services redirecting consumer behaviour
to lower emissions?

Carbon offsetting ESG investing Carbon footprint monitoring

When consumers deposit Financial services providers Fintech companies monitor

funds, make purchases, or use capital deposited by consumers’ purchases to
complete other financial customers to provide loans determine the environmental
tasks, their financial services for various projects. Fintech impact of their transactions.
providers donate to carbon companies strategically
offsetting projects (e.g., invest in initiatives
tree-planting, carbon prioritizing environmental,
capture, or alternative energy social, or governance (ESG)
infrastructure development) responsibility.
on their customers’ behalf.

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Closing the data gap

The fintech diversity scorecard - collecting data on women in fintech

Source: findexable, Women’s World Banking & Money 2020

Clearer categorisation would certainly help

the climate fintech sector where around three “Over 240 million women were brought into the
quarters of all firms in the space are early stage financial system during the pandemic, the
firms7. Organisations like the Green Digital Finance
challenge post pandemic is to make sure we have
Alliance, findexable and Women’s World Banking
are trying to build consensus around definitions the proper tools in place to keep these new
for climate fintech (see Race to the bottom) or
accounts relevant to the women that hold them.”
close data gaps around the role of women in
fintech or their access to financial services. Mary-Ellen Iskenderian, Women’s World Banking
It’s not just about good sense or doing the right
thing. It’s also good business, “because there’s
nothing micro about a billion women,” says Mary-
Ellen Iskenderian, president and chief executive of
Women’s World Banking, a US-based gender
lens investor not for profit organisation - also the
title of her book highlighting why women’s financial
exclusion needs to be taken seriously at all levels
and not consigned to a microfinance footnote8.
data and analytics - to inform or redirect customer
It takes a village
buying decisions or support policy change.
Any financial product is only as good as the
While gaps in data availability to track spending
ecosystem that supports it. What good is a
habits or monitor energy efficiency are slowly
payment account if I can’t use it to make
being plugged, particularly in Europe, the
daily payments for essential services?
infrastructure to adapt pricing according to
It’s a similar dilemma in the climate fintech space carbon emissions or incentivise energy efficient
where most startup activity so far is focused on buying decisions still feels a long way off.

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“Energy performance certificates have become a

standard across the EU providing the basis of

understanding energy performance and emissions

from property.”

Nikoletta Kovacs, Raiffeisen Bank

“Data is the most important asset for transparent While progress is good. It will need to
sustainability management. ESG data helps financial accelerate during the year ahead to meet
institutions and companies to identify and mitigate what customers are coming to expect of their
potential risks associated with unsustainable financial providers (see chart 7 from survey).
business practices. But it’s also our biggest concern
Sizing, seizing the prize
because of its availability, especially related to
emissions or energy sources used by property,” says Significantly, a focus on sustainability is not
Nikoletta Kovacs, leader of sustainability business just about meeting existing customer demand.
strategy at Raiffeisen Bank International in Austria. Many fintech firms also feel environment goals
present an opportunity to win market share - or
It’s also a layered problem: “The EU has made good
serve customers in new ways. In much the
progress on agreeing definitions for essentials of
same way as it’s making impact fintech firms
green financing, and developed a very precious
more appealing to investors. Over a third of
EU taxonomy. Yet, the taxonomy for social loans
respondents were confident enough to say that
is still to come and there is no clear definition
customers would switch providers to companies
of them at an EU-wide level. Retrieving data to
that are committed to environmental goals.
track certain economic behaviours of customers
is also limited due to data protection regulations, Given the scale of market potential for closing
meaning some solutions, like carbon emissions funding gaps - whether for small businesses,
trackers can only be used where robust data financially excluded customers or the climate
regulation is in place,” adds Ms Kovacs. transition (see flag above) and rapidly expanding
customer demand for financial services
But there are some ‘green shoots’ of progress.
with impact goals, it’s hard to believe the
Particularly in Europe, the region that currently
opportunities are still there for the taking.
dominates the climate fintech sector by
funding and number of startups9 and where an “We estimate that around $700 billion in annual
ecosystem is gradually falling into place. revenue is being left on the table by the financial
services industry. And not because of the excluded
“Energy performance certificates have become
population, but because women and men are not
a standard across the EU providing the basis of
being served at parity,” says Ms Iskenderian.
understanding energy performance and emissions
from property. [At Raiffeisen] we’ve launched green And here’s the biggest obstacle to accelerating
mortgage loans group-wide for retail customers progress at pace. The transition era is challenging
based on well defined frameworks, and EU support not just because firms need to adapt but
for the green transition is incentivising customers because it requires whole ecosystems to
and banks. Participation in state-subsidized come together with the mindset to solve - or
programs also means we can stay competitive by incentivise solutions to - common problems.
offering lower long-term interest rates, including “This includes governments at national, and
mortgages in selected markets,” says Ms Kovacs. sometimes regional or global levels in the case

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 Transition: finance | Fintech gears up for a new era

Image: Raiffeisen’s “carbon calculator”

Source: Raiffeisen Bank International

of climate change. Member states must be solutions. Our aim was to support customers through
behind the green transition to help create win- their green transition and at the same time to help the
win scenarios,” says Raiffeisen’s Ms Kovacs. businesses reduce their operating costs,” she adds.
“With rising costs for small businesses due to the Increasingly, as the global economy moves into
energy crisis in 2022, we have created ecosystems its next phase no fintech is an island. Despite
to help our customers. For example, in Romania we the potential goldmine, unlocking the ‘transition
developed a one-stop solution where we pictured finance’ prize will need a web of policies, products
an overview of governmental subsidies for small and agreement on best practice to accelerate the
businesses, photovoltaic partners and our green loan switch to a more sustainable, inclusive economy.

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 Transition: finance | Fintech gears up for a new era

Climate fintech firms

Still a new segment - with the majority of firms founded in
the last five years - investment in climate fintech doubled in
2022 to $2.9 billion.

Aspiration CNote

Offers customers the ability to track their Impact investment opportunities for individuals
carbon footprint and offset their emissions and institutions. Invests in community
and invests in clean energy projects and development financial institutions that provide
sustainable companies. financing to underserved communities and
promote economic development.

Doconomy Lendahand

Carbon calculators for consumers and Crowdfunding for sustainable projects in

businesses. The company has expanded emerging markets. Connects investors with
to provide digital tools to educate and SMEs in developing countries that are working
drive behaviour change. Bought Sweden- on sustainable solutions including renewable
based Dreams technology in 2023 to offer energy and clean water.
wealth and financial wellness solutions.

MioTech Miris

AI to solve climate change and social Created the Green Finance Framework - a
responsibility issues. MioTech provides ESG method for selecting, tracking, and reporting
data to financial institutions, to help them the flows of funds in various financial projects.
make decisions on ESG reporting and energy The framework is built around components
efficiency. of the Green Bond Principles from the
International Capital Market Association. The
platform locates funds and invests in them.

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 Transition: finance | Fintech gears up for a new era

Climate fintech firms

Powerledger

Blockchain-enabled energy and environmental

commodity trading platform. Powerledger
helps to transact energy, trade environmental
commodities and invest in renewables. The
firm has also created software that enables
peer-to-peer (P2P) energy trading from solar
rooftop panels.

Stripe Climate

A new service launched by global payments

firm Stripe where businesses can finance
projects dedicated to carbon removal.
Customers commit a fraction of their revenue
to the cause with the money used to fund
climate neutral technologies and Contributing
companies get a green badge to highlight to
their clients.

Tomorrow

A sustainable banking app that allows

customers to track their spending and
carbon footprint, and invests in sustainable
companies and projects. Tomorrow also
offers a debit card made from recycled
plastic.

TreeCard

A wooden credit card aimed at eliminating

plastic and reforestation. The project is based
on fees that merchants pay for accepting card
payments. 80% of the fee goes to tree-planting
initiatives. Users can track spending and see
how many trees were planted through their
spending.

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 Transition: finance | Fintech gears up for a new era

Fintech Survey 2024

Chart 5: Green is good (business)

Very significant 15%

Somewhat significant 32%

Neutral 27%

Not very significant 21%

Not at all 5%
significant

Question: In your opinion, do payment services that prioritise environmental sustainability

or reducing carbon footprint represent significant commercial opportunity?

Source: Edgar Dunn & Company 2023

Chart 6: ESG gains importance

Very important 17%

Somewhat important 30%

Neutral 13%

Not important now but we’re thinking seriously about it 27%

Not at all important 12%

Question: In your opinion, are ESG and climate change-related features

important to your commercial, business or product development strategy?

Source: Edgar Dunn & Company 2023

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 Transition: finance | Fintech gears up for a new era

Chart 7: Customers leading the way

26%
No

37% 36%
Not sure Yes

Question: Do you think consumers or businesses would switch service providers

that are committed to environmental sustainability and reducing carbon footprint?

Source: Edgar Dunn & Company 2023

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 Transition: finance | Fintech gears up for a new era

Moving on
Accelerating the great
(fin)tech transfer
If 2023 saw the sunset of fintech’s first wave, it also saw the dawn of AI.
Advances in technology - particularly generative AI - and exponential increases
in data availability will dictate the direction of financial services to 2030.

The jury’s out though on whether the gains stop there

In this section - or if AI technologies can be anything more than a
driver of operational efficiencies for financial firms.
The ‘AI wave’ is about more than hype
While payment firms operating at scale have
Automated financial services moves up a gear managed to capitalise on the datasets created by
building large transaction businesses (such as
Productivity and efficiency savings in financial
Klarna or Stripe’s moves into new product areas from
services dominate opportunities for innovators lending to banking as a service), so far uses of AI
have been confined to more mundane operational
processes such as fraud detection and risk
management (see: Thinking inside the box, below).
If the global economy and climate change have Supporting cast
provoked some soul-searching or recalibration
Investors have certainly woken up to the hype AI
in the last year, the success of chatGPT has
has had on firms and valuations. “AI is central to the
woken the fintech market up to the potential
core business in some companies, and in others it is
to automate the full stack of financial services
simply a supporting character,” remarked Hans Tung,
operations - everything from customer onboarding
managing partner of GGV Capital, a silicon valley-
to lending and transaction monitoring.
based AI investor speaking to Tech Crunch in August.
And in a neat twist, it could also be the
Adding: “We value domain knowledge and
defining element of the transition to the
information on how to best apply technical solutions
next generation of financial services.
to solve customer pain points, be it consumers or
A perfect circle enterprises.”Something that survey respondents
largely seem to agree with. More than 9 out of 10
If deployed effectively Generative AI has the
respondents felt AI and machine learning is currently
potential to accelerate operational efficiency
best applied to fraud detection (see chart 11, below).
savings across financial services and, by
enabling the analysis of massive datasets at Not that the AI’s role as a supporting actor should
scale, to support the zero-carbon transition. be dismissed. IBM, a technology company, thinks
financial firms could reduce fraud losses by up to
AI has been one of the few bright spots in an
50% over the next decade. Adyen, a payments firm,
otherwise gloomy year for venture and startup
estimates that by using AI its Risk Engine service
investment. In the first 6 months of 2023, investment
reduces transaction review time by up to a third11.
in AI firms was over five times higher than the
A significant improvement as operational efficiency
whole of 2022 says CB Insights, a research firm,
moves to the top of the boardroom agenda.
and birthed 18 unicorns. Investment growth can be
expected to continue. 80% of startups in the space “Where AI and machine learning could really come
are early stage firms, around a quarter of which into their own is in helping fintech firms to speed up
have yet to raise any funding, adds the report10. lending or credit decisioning,” says Gary Prince at

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 Transition: finance | Fintech gears up for a new era

The Payment Firm, “especially in the SME sector. If Trillion dollar prize
you can get that decision made in real time then you
can start to build real value while creating a truly Whichever way you cut it, the size of the AI in financial
innovative proposition to customers,” he adds. services pie is big. Research estimates savings from
use of AI by the global financial services industry
over the next decade could top $1 trillion12, driven by
explosive growth in the number of smart computing
devices (which already outnumber humans by three to
one) as much by an accelerated need for operational
efficiency.

“AI is central to the core business in It’s all very good news for startups building AI models
or AI-powered software and cloud infrastructure - the
some companies, and in others it is simply areas that will attract the largest share of investment
a supporting character.” through 2030 (see chart: Heating Up, below). An
amount that could top $200 billion by 2025 says
Hans Tung, GGV Capital Goldman Sachs, an investment bank13.

Chart 8: Heating up
Investment in AI by financial services to 2030
$ invested
$ $$$

Hardware Enterprise users

Model building Software
Running AI queries Cloud infrastructure
services

Infrastructure Software development

Data centres to run AI-enabled tools
applications

Source: Goldman Sachs, findexable

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 Transition: finance | Fintech gears up for a new era

“Once you’ve built your platform, if you’re able to

offer services like those typically executed by a

financial or a fund manager, the revenues from

your service are correlated to the volume of assets

under management, while your cost base can

operate at near-zero marginal cost.”

Venture fund, Silicon Valley

Thinking inside the box

Global uses of AI and deployments in financial services

Klarna Alaan, Brex Douugh, OnFinance, Plum

Personalised shopping Real-time insights on Financial literacy using

recommendations powered corporate spending chatGPT powered chatbots
by chatGPT

BloombergGPT JPMorgan Chase Microsoft

Building large language Building proprietary service Launched Security Copilot

model for Natural Language to automate investment - AI powered cybersecurity
Processing tasks selection and response

Google

Security AI Workbench -
helping B2B cybersecurity
firms use AI

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 Transition: finance | Fintech gears up for a new era

“One of the advantages of AI powered investing is

the ability for investors to make tailored decisions

much more easily - and using a wider range of

metrics perhaps than is now available as datasets

get larger.”

Venture fund, Silicon Valley

Sleeping giants says the founder of a new fintech focused venture

fund based in silicon valley. “Once you’ve built your
While opportunities for a giant leap in productivity platform, if you’re able to offer services like those
might be taking up most of the AI oxygen at the typically executed by a financial or a fund manager,
moment, one area of financial services where the then the revenues from your service are correlated to
value chain could be completely transformed is the volume of assets under management or the value
wealth management. of the task you’re performing, while your cost base
Wealth management provision as a segment is still can operate at near-zero marginal cost.”
relatively untouched by technology and dominated by Unresolved issues
incumbent giants employing large teams of (human)
wealth managers despite the success of robo As with any new or unproven technology delivering on
advisors focusing on mass affluent customers like the potential will require the industry and innovators
Nutmeg or Wealthify in fintech’s first wave. to wrestle with some thorny issues - from privacy and
transparency to data availability and reliability.
It’s also growing rapidly. Growth in wealth (stock of
liquid and fixed assets) was four times the size of Potential for unforced bias and lack of transparency
global economic output between 2000 and 2020 - in AI models and the datasets they’re accessing are
with up to $100 trillion forecast to be added to the front of mind for the industry (see chart 10, below).
stock of global wealth by 203014. It’s also caught the attention of regulators. The EU’s
Ready to revolutionise AI Act is currently being debated in a bid to develop
the world’s first AI law while financial regulators
The opportunity to revolutionise the wealth like the UK’s FCA are expanding their sandbox
management industry has not gone unnoticed by programme to encourage innovation and identify
incumbents or entrepreneurs. While the concept of undetected risks from new technology deployment
‘robo advisors’ is already old news, AI is waking up such as a heightened potential risk of asset bubbles.
innovators and incumbents to the potential for AI to
dramatically enhance capabilities and personalisation Despite the challenges, the future of AI in finance
and to automate the entire wealth management value - turbocharged by ever-increasing availability of
chain. data as embedded financial services become the
norm - seems assured. “One of the advantages of AI
Global banking firm JPMorgan Chase bought UK robo powered investing is the ability for investors to make
advisor Nutmeg during the height of the pandemic tailored decisions much more easily - and using a
and announced plans to build a proprietary chatGPT wider range of metrics perhaps than is now available
service to automate investment decisions early in as datasets get larger,” says the fund manager.
2023. And research by findexable has identified
more than 100 tech firms globally with a focus on “Does it mean AI replaces the index for stock
automating everything from onboarding and KYC to selection? I don’t know but neither do I think an
custody and investment planning. increase in AI use automatically means an increase in
asset bubbles,” he adds.
“The reason we’re interested in wealth management is
the opportunity to maintain a flat cost base at scale,” The transition to fully automated financial services is
just getting started.

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 Transition: finance | Fintech gears up for a new era

Chart 9: Escalating investment

Venture investment in AI startups (2022)

$52 billion

$22 billion

$9.5 billion*

Global AI investment AI in fintech AI for smart devices

(all sectors) * 2021

How to save a trillion

How AI will save financial services $1 trillion by 2030

Department Potential savings Examples

Front office $490 billion Up to half of total from

reductions in branch
networks, cybersecurity
and distribution staff

Middle office $350 billion Applying AI to compliance,

KYC, authentication and
data processing

Back office $200 billion Underwriting, collections

automation

Source: Autonomous

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 Transition: finance | Fintech gears up for a new era

Risk off (and on)

How AI and ML is being used by payments firms -
and what are the trade-offs?

Growth in AI and machine learning is having

a revolutionary impact on payments - from
fraud detection, to customer experience, and PERSONALISATION
optimising payment processes. Despite the Trade Up
gains from trading up, though there are some Merchants are using AI and ML to give
trade-offs to the early-stage technology. customers a more personalised experience by
offering tailored product recommendations and
targeted promotions to build loyalty.

Trade-off?
Collection and analysis of customer data raises
privacy and data security concerns.

FRAUD DETECTION
Trade Up
Traditional fraud detection systems rely on
predefined rules, with AI, the system can learn RISK MANAGEMENT & COMPLIANCE
from historical data and adapt to new fraud Trade Up
patterns as they emerge to assess the risk of a AI driven analytics has empowered payment
transaction based on factors such as location or providers to assess credit risk, predicting the
customer behaviour to identify anomalies and likelihood of default and enabling lenders to
stop fraudulent transactions. make faster lending decisions.

Trade-off? Trade-off?
Increased risk of false positives where genuine Algorithms using smaller datasets could lead to
transactions are flagged as fraudulent. undetected bias in decision-making.

CUSTOMER SERVICE PAYMENT OPTIMIZATION

Trade Up Trade Up
AI tools for 24 hour customer support are Payment processors are using AI and ML to
being used by firms to reduce operational costs. optimize routing decisions, minimize transaction
failures, and reduce processing times to save
costs and provide a smoother experience.

Trade-off? Trade-off?
May not be suitable for more complex situations Over reliance on AI for payment processing
where human empathy is required. could lead to system vulnerabilities meaning a
cyberattack could disrupt payment services on
a massive scale.

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Chart 10: See-through technology

Lack of transparency or clarity on decision making process 77%

Algorithmic bias 60%

Data privacy 55%

Reduction in human oversight 54%

Programmatic errors 46%

Potential risks to corporate identity / brand trust 28%

Ability to assess uncertainty 25%

Question: What do you think are the risks associated with AI and machine learning adoption?

Source: Edgar Dunn & Company, 2023

Chart 11: AI: What’s the use case?

Improve fraud detection 94%

Personalise customer service 67%

Chatbot and virtual assistant 65%

Risk management and compliance 59%

Automate payment processing 44%

Debt collection 30%

Question: In your opinion, what are the growing use cases of AI and machine learning in payments?

Source: Edgar Dunn & Company, 2023

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 Transition: finance | Fintech gears up for a new era

Conclusion
A time of transition

If 2023 was a year of ‘cleaning house,’ caused by a recalibration in financial markets

and venture capital investment that brought the first wave of fintech to a close, it
doesn’t mark the end of the fintech story. Or the range of challenges and opportunities
that financial innovation still needs to tackle.

As interviewees and survey respondents to this year’s survey underline however, while there’s no
shortage of opportunity, the new market dynamics have raised the stakes.
With the era of growth at any costs consigned to history - innovators and institutions need to take
a back to basics approach: building businesses with a clear path to profitability and identifying how
technology can improve efficiency and increase productivity.
To that end, this year’s report explores three mutually-reinforcing themes that will direct and inform the
development of financial services and innovation to the end of the decade. Collectively they form the
defining themes of the ‘transition finance’ era:

1 Fundamentals support strategy

Innovators and institutions need to balance needs for shorter-term financial performance or show
a clear path to profitability against the potential for longer-term value creation. For example, while
demand for payments will continue to grow, particularly in emerging regions, competitive pressure on
margins means payment providers need to think of payments as a gateway to a broader product set
rather than the end in itself.
Mission matters
2
Climate and ESG expectations are increasingly important ‘pull’ factors for consumers and business
customers. And they will force financial services organisations to remake themselves in their image.
Although climate fintech and progress in embedding ESG metrics into the industry are at an early stage
their importance should not be underestimated as better data and analytics and customer demand
comes to dictate the terms of doing business. At the same time, opportunities for innovation - to close
gaps in inclusion, access to climate finance or finance the energy transition - mean mission-powered
financial services will dominate venture investment in the year ahead.
Next tech, now
3
AI investment was one of the few, perhaps only, investment bright spots of the year. And despite the
hype, the potential for wholesale automation of the ‘full stack’ of financial services moved closer in
2023. But while AI will dominate discussions in the boardroom, it won’t be the only show in town in the
year ahead. Accelerated digital adoption and the widening range of technologies and channels that
financial services operators need to support means that those firms that can ‘orchestrate,’ by deploying
technology to improve the customer experience, integrate data and analytics to improve product lines
or smooth process flows across and through the organisation stand the best chance of winning in the
next era of financial innovation.

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Footnotes

1
Pulse of Fintech, KPMG 2019
2
Chart 1: Going the wrong way: Fintech funding 2022-23
3
Fintech 2022 recap, Dealroom
4
IFC 2023
5
NDC 2023
6
Women’s World Banking 2023
7
New Energy Nexus Climate Fintech Report 2021
8
There’s Nothing Micro About a Billion Women, MIT 2023
9
Tenacity Climate Fintech Report, June 2023
10
The generative AI landscape, CB Insights 2023
11
Adyen CEO on AI for payments, Venture Beat
12
AI and the banking industry, The Financial Brand 2023
13
AI investment forecast to reach $200 billion globally
14
The $100trn prize, The Economist, August 2023

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 Transition: finance | Fintech gears up for a new era

Edgar, Dunn & Company (EDC) is an independent Findexable produces the world’s first real-time fintech
global financial services and payments consultancy. index providing insight on fintech activity globally
Founded in 1978, the firm is widely regarded through real-time data gathering and proprietary
as a trusted advisor to its clients, providing algorithms to track, rank and benchmark fintech
a full range of strategy consulting services, companies in 250+ cities across 80 countries.
expertise, market insights, and M&A support.
To find out more about our research and what we do.
From offices in Frankfurt, Dubai, London,
Paris, San Francisco and Sydney, EDC delivers
actionable strategies, measurable results www.findexable.com
and a unique global perspective for clients in
more than 45 countries on six continents.

www.edgardunn.com

Contact Contact
Samee Zafar Simon Hardie
Director [email protected]
[email protected]
Tue To
Head of Advanced Payments
and Fintech for North America
[email protected]

Interviewees
Founding partner Mary-Ellen Iskenderian
Venture fund, United States President and Chief Executive Officer,
Gary Prince Women’s World Banking, United States
Chief Executive Officer Nikoletta Kovacs
The Payment Firm, United Kingdom Leader, Retail Banking Sustainability Strategy
Iana Dimitrova Raiffeisen Bank International, Austria
Chief Executive Officer Rose Goslinga
OpenPayd, United Kingdom Co-founder and President
Pula, Kenya

Research methodology
This paper was developed by Edgar, Dunn & Company
and Findexable using a combination of desk
research, in-market experience and conversations
with global fintech companies. Survey responses
were collected between May and July 2023.

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 Transition: finance | Fintech gears up for a new era

Edgar, Dunn & Company

Mergers & Acquisitions
Advisory
Edgar, Dunn and Company provides
comprehensive support for merger and
acquisition deals in the payments and digital
financial services space including

Buy–side support
(target selection, bid strategy)

Sell-side support

Due diligence

Valuation

Information Memorandums

Learn more at www.edgardunn.com