Key Points:
- The Fintech State of the Union 2023 report, conducted by Discover Global Network and 451 Research, reveals strong investor confidence in fintech’s future despite a $30 billion funding decline.
- The survey suggests significant growth is anticipated due to growing consumer adoption of digital payments.
- Fintech remains one among the top three investment sectors, with opportunities identified particularly in creating frictionless checkout experiences and innovating and modernising payment infrastructures.
- Venture capital investors place emphasis on the importance of partnership strategies in fintech, especially with payment networks. 98% of VCs find them important to the success of their portfolio companies.
The 2023 Fintech State of the Union study conducted by Discover Global Network and 451 Research signaled strong investor confidence in the future of fintech, despite a $30 billion decline in funding. The report was revealed during the Money20/20 USA conference, one of the world’s most influential fintech conferences.
The survey sample comprised of more than 5,004 consumers, 852 fintech vendors in VP, C-suite, and founder roles, and 83 venture capitalists, who provided a global perspective. The report noted that while three in five fintech portfolio companies are experiencing slowed growth, 94% of venture capitalists have a robust growth outlook for the fintech market over the next five years. This perspective is driven by the rapid consumer adoption of digital payments, with 89% of consumers having used at least one digital payment service over the past 90 days.
The study identified two main areas of fintech investment – consumer demand for frictionless checkout experiences and innovation in modernising payment infrastructures. Regarding the latter, various solutions were being explored that either build upon legacy infrastructure or replace it altogether. The report stressed that strategic collaborations are integral to competitive positioning, meeting consumer payment needs, and identifying potential partners.
The exploration of partnerships was a significant theme in the report. The majority (98%) of venture capitalists considered partnership strategies as crucial to the success of their fintech portfolio companies, with strong partnerships with payment networks deemed critical by 59% of VCs. Ninety-one per cent of fintechs are reliant on payment networks, 48% of whom have significantly increased their dependance on them due to economic pressures. The study thus highlighted the importance of partnerships, both as a growth lever and a means to lower costs.
Despite economic pressures, the study revealed a resilient and evolving fintech ecosystem with continued investor confidence in the sector’s potential for significant future growth.
