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Investment 2024 – The fintech, FI view

Wednesday, November 27, 2024 — 13:12:08 (EST)

London, 27 November 2024: Research released from FinTech Connect shows that more than 60% of companies face increasingly stringent due diligence requirements from investors compared to previous years, however more than half (65%) of these have noted increased investment in the past 12 months.

These findings are taken from FinTech Connect’s new State of FinTech Investment survey, which also highlights that 81% of FinTechs and Financial institutions have seen a shift in investor interest towards artificial intelligence (AI), payments and transfers, and digital lending.

Commenting on the findings, Laurence Coldicott, Senior Content Director at FinTech Connect said: “Most financial institutions and FinTechs (57%) are emphasising profitability over innovation, it is apparent that companies are looking towards internal strategies for growth and returns. However, the 77% shift of investor interest towards AI indicates the rise of AI and machine learning is not just a passing trend—it’s a critical opportunity for FinTechs and Financial institutions to secure the funding needed to drive innovation and differentiation, enhance operations, improve scalability, and increase profitability.”

However, the future of investment in the UK financial sector appears uncertain as half of FinTechs and Financial Institutions view political conditions as a key deterrent to investment in the sector. Cross-border regulatory divergence and data, and open banking mandates also emerged as top concerns for stakeholders.

Meanwhile, AML/KYC requirements and APP fraud prevention are key focus areas for compliance in the FinTech space. Additionally, the sector’s resilience is being tested by declining valuations and heightened scrutiny.

A large majority of FinTechs (69%) are concerned about FinTech valuations, with a quarter expressing extreme concern. Despite these headwinds, funding optimism persists —72% of FinTechs are actively pursuing investment, and 70% of respondents expect steady growth in the next 3-5 years.

For the 72% of FinTechs currently seeking investment, the path is fraught with challenges. Market conditions (57%), demonstrating ROI (43%), and intense competition (37%) were cited as the top barriers. Financial institutions, meanwhile, are embracing collaboration to drive growth. While 44% occasionally partner with FinTech startups, 17% are actively fostering partnerships to enhance customer experiences and reduce operational costs.

According to the report, key trends predicted to dominate the next 12 months include:

AI and Machine Learning (71%): Accelerating efficiency and enabling smarter decision-making. Embedded Finance (57%): Driving seamless integration of financial services across industries. Sustainability and Green FinTech (40%): Reflecting growing demand for environmentally conscious solutions.

Other findings show that amidst global economic uncertainties and market trends, the average FinTech company is concerned about valuation. However there remains a sustained positivity towards the FinTech sector and Financial Institutions with nearly a majority (49%) believing these factors will drive innovation in the FinTech space.

Laurence added: “This research shows that while 69% of respondents expressed concern over the decline in FinTech valuations over the past year, optimism remains strong. A notable 70% foresee steady growth in FinTech investments over the next 3-5 years, reflecting confidence in the sector’s long-term potential.”

More insights from the State of FinTech Investment report will be further explored at FinTech Connect 2024, taking place on 4th-5th of December, at ExCeL, London. This yearly event draws FinTech leaders who spend two days discussing trending topics dominating the landscape such as scaling, digital transformation, Web3, Gen AI, customer experience and embedded finance.

To download the full report, visit: www.alphaevents.com/events-fintech-connect-london/landing/fintech-connect-state-of-investment-report.

ENDS

About FinTech Connect

FinTech Connect is where large teams from major financial institutions go to assess the latest innovations on the market, and where FinTechs come to accelerate dialogues with digital buyers with responsibility across digital transformation, payments, financial security, RegTech and blockchain. The 2024 event will bring together 2,000+ of the fintech community to share best practice, showcase new products and solutions and shape financial services of the future. The two-day conference and exhibition offer a comprehensive programme of interactive workshops, multiple fireside chats, innovative tech demos, and multiple networking opportunities

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Source: Company press release.