Fintech executives descend on Amsterdam for the annual Money2020 conference.

MacKenzie Sigalos

AMSTERDAM, Netherlands – At last year’s Money 20/20 event – ​​Europe’s flagship event for the fintech industry – investors and industry insiders were excited by talk of embedded finance, open banking and banking as a service.

As vague as these terms may be, they reflected a very real push from tech startups, including the industry’s biggest names like Stripe and Starling Bank, to enable businesses of all sizes to develop their own financial services or integrate with other firms. products to their platforms.

This year, as fintechs and their mostly venture capital and private equity backers reel from a terrible slump in tech valuations and softer consumer spending, the story of what’s “hot” in fintech hasn’t changed much.

Investors still love companies offering services to businesses rather than consumers. In some cases, they were willing to write checks to companies with valuations unchanged from their last funding round. However, there are several key differences – not least of interest is generative artificial intelligence.

So what’s hot in fintech right now? And what not? CNBC spoke with some of the industry’s leading insiders at Money 20/20 in Amsterdam. Here’s what they had to say.

what is hot

Looking at Money 20/20 this week, it was easy to see a clear trend. Enterprise or business-to-business companies like Airwallex, Payoneer and ClearBank dominated the show floor, while consumer apps like Revolut, Starling and N26 were nowhere to be found.

“I think a lot of fintechs have focused on enterprise sales because consumers have found it hard to get enough economic unit – plus it’s quite expensive to get a stand and attend M2020 so you have to sell to other attendees to justify the spend,” Richard Davies, CEO of UK startup lender Allica Bank, he told CNBC.

“B2B is definitely in good shape – SaaS for SMBs and Enterprises [software-as-a-service] — provided you can demonstrate your products and services, demonstrate customer demand and good unit economics. Embedded finance is certainly part of it and has a long way to go as it is in its infancy in most cases,” Davies said.

B2B fintechs are startups that develop digital financial products tailored to businesses. SaaS is software that technology companies sell to their customers as a subscription. Embedded finance refers to the idea of ​​integrating third-party financial services, such as bank accounts, brokerage accounts and insurance, into the platforms of other businesses.

Niklas Guske, who heads operations at Taktile – a fintech start-up focused on streamlining underwriting decisions for corporate clients – describes the sector as in the midst of a renaissance for B2B payments and financing.

“There is a huge opportunity to learn from B2C fintech to improve the B2B user experience and provide customers with a much better solution,” Guske said. “This is particularly true for SME financing, which is traditionally undersized because it has historically been difficult to accurately assess the performance of younger or smaller companies.”

One area fintech companies are excited about is improving online checkout tools. Payment technology company Stripe, for example, says a newer version of its checkout counters helped customers increase sales by 10.5%.

“This is something incredible,” David Singleton, Stripe’s chief technology officer, told CNBC. “There aren’t many things you can do in business that will increase your revenue by 10%.”

Meanwhile, companies tightening their belts at the event are also a topic.

One employee of a large firm that usually attends the event said it limited the number of people it sent to Money 20/20 and didn’t even buy a booth. The employee was not authorized to speak to the media.

As companies try to cut costs, many people say that adequate risk management is a key priority.

“When funding was readily available, many fintechs were able to subsidize poor risk assessments with investors’ money,” Guske said of the sector, adding that in today’s climate, fintechs are only profitable if they can identify and secure the right customers.

“This is another moment where the proliferation of new data sources and the adoption of sophisticated risk modeling allows fintechs to better target their ideal customers better than ever before,” said Guske, who has raised more than $24 million from the likes of Y Combinator and Tiger. Global.

Generative AI

However, the main area that generated the most hype among Money 20/20 attendees was artificial intelligence.

That’s ChatGPT, OpenAI’s popular generative AI software that produces human responses to user queries, dazzled fintech and banking leaders eager to understand its potential.

In a closed-door session on fintech’s application of AI on Wednesday, one startup boss outlined how they are using technology to be more creative in communicating with their customers by incorporating memes into the chat function and allowing their Cleo chatbot to “roast” users about bad spending decisions.

Callan Carvey, global head of operations at Cleo, said the firm’s AI connects to a customer’s bank account to better understand their financial behavior.

“It strengthens our understanding of transactions and deeply personalized financial advice,” Carvey said during her talk. “It also allows us to use artificial intelligence and have predictive measures to help you avoid future financial mistakes,” such as avoiding high bank fees that you might otherwise avoid.

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Teo Blidarus, CEO and co-founder of financial infrastructure company FintechOS, said generative AI benefits platforms like his, where companies can build their own financial services with little technical expertise.

“AI, and particularly generative AI, is a big enabler for fintech infrastructure because if you look at the hurdles that low code, no code is trying to solve on the one hand, and generative AI on the other hand is trying to solve the complexity of the overall infrastructure,” he told CNBC .

“Work that would normally take about a week or two can now be completed in 30 minutes, right. Granted, you still have to polish it up a bit, but basically I think it allows you to spend your time on more productive things.” – creative things, rather than integration work.”

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As businesses focus on how they can do more with less, both tech-savvy and traditional businesses say they are turning to revenue and finance automation products that handle back-office operations to optimize efficiency.

Taktile’s Guske notes that the current demand to continue to scale rapidly while reducing costs has driven many fintechs to reduce operational costs and increase efficiency by increasing automation and reducing manual processes, particularly in onboarding and underwriting.

“I see the biggest and current application of generative AI in using it to create signals from raw transactional or accounting data,” Guske said.

what no?

One thing’s for sure: consumer-facing services aren’t the ones getting love from investors.

Big digital banking and payments groups have seen their valuations plummet this year as shareholders reassess their business models in the face of rising inflation and higher interest rates.

British foreign exchange services giant Revolut has had its valuation cut by shareholder Schroders Capital by 46%, a $15 billion cut from $33 billion, according to a filing. Atom Bank, the UK challenger bank, has had its valuation cut by 31% from Schroders.

It comes as an investment in European technology startups on track to drop another 39% this year, from $83 billion in 2022 to $51 billion in 2023, according to venture capital firm Atomico.

“Nobody comes to these events to open like a new bank account, do they?” Hiroki Takeuchi, CEO of GoCardless, told CNBC. “So if I’m Revolut, or something like that, then I’m much more focused on how I get my customers and how I make them happy. How do I get more of them? How do I grow them?”

“I don’t think Money 20/20 really helps with that. So I’m not surprised that there’s more of a shift toward B2B stuff,” Takeuchi said.

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The layoffs have also been a massive source of pain for the industry as Zepz, a UK money transfer firm, by cutting 26% of its workforce last month.

Even once-richly valued business-focused fintechs have suffered, with Stripe announcing a $6.5 billion fundraising at a $50 billion valuation — a 50% discount from its last round — and seeing its intrinsic value drop 15% to $9 billion. according to introductory news site Sifted.

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It comes after a a turbulent year for the crypto industry which has seen failed projects and companies go bankrupt – probably a big part of why there have been few crypto startups in Amsterdam this year.

During the height of the last bull run, digital asset companies and “know your customer” providers dominated much of the Money 20/20 exhibit hall, but conference organizers told CNBC that only 6% of revenue came from crypto-affiliated companies. .

A sharp drop in liquidity in the crypto market, coupled with a regulatory crackdown in the US against companies and banks trading in the crypto sector, have changed the value proposition for digital asset integration investments. Several fintech executives interviewed by CNBC said they are not interested in launching products tailored to cryptocurrencies because the demand from their customers is not there.

Airwallex, a cross-border payments start-up, works with banks and is regulated in different countries. Jack Zhang, CEO of Airwallex, said that the company will not introduce support for cryptocurrencies in the near future, especially given the regulatory uncertainty.

“It is very important for us to maintain a high standard of compliance and regulation … it is now a real challenge to deal with cryptocurrencies, especially with these global banks,” Zhang said in an interview with CNBC on Tuesday.

Prajit Nanu, CEO of Nium, a fintech company that has a product to enable financial institutions to support cryptocurrencies, said interest in the service had “waned”.

“The banks that we control today have become very skeptical of cryptocurrencies… as we see the whole ecosystem going through this… difficult period… we’re looking at it much more carefully than we would have looked at last year,” he said Nanu CNBC. in an interview on Tuesday.

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Blockchain is also no longer the buzzword it was in fintech.

A few years ago, the trending thing to talk about was blockchain technology. Big banks said they were not interested in the bitcoin cryptocurrency, but were instead optimistic about the underlying technology known as blockchain.

Banks have appreciated the way ledger technology can improve efficiency. But blockchain was barely mentioned on Money 20/20.

The exception was JPMorgan, which continues to develop blockchain applications with its Onyx arm. Onyx uses technology to create new products, platforms and marketplaces – including the bank’s JPM Coin, which it uses to transfer funds between some of its institutional clients.

However, Basak Toprak, managing director for EMEA and head of coin systems at JPMorgan, gave attendees a taste of how limited the technology’s practical use in banking is at present.

“I think we’ve seen a lot of POCs, proofs of concepts that are great at what it says on the tin, proving the concept. But I think what we need to do is make sure we create commercially viable products to solve specific problems , maintaining customer trust, solving problems and then launching a product or way of doing things that is commercially viable, and working with regulators.”

“Sometimes I think the role of regulators is also quite important for the industry.”

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