12 October 2023 |

Where’s the Money Going?

By

What’s Up In Fintech

On Thursdays, I share news stories and trending pieces I’m keeping tabs on. Consider it your shortcut to shifting through the noise in the fintech news world.

#1 Global Fintech VC Funding Goes Mostly To North American Market

It appears that the lion’s share of venture capital funding flowing into the fintech sector is finding its way to North America, as revealed by Tipalti’s recent research.

In 2022, a significant 56.3% of global VC funding in fintech has been channeled into North American fintech companies, underscoring their pivotal role in propelling innovation and shaping the worldwide financial landscape.

Across the Atlantic, Europe, boasting disruptor banks like Revolut, Monzo, and Starling Bank, secures the runner-up position with 22.2% of venture capital investment directed into its burgeoning fintech industry. Meanwhile, in third place, Asia, led by the fintech giant China, captures 16.1% of global venture capital funding in 2022.

Diving into the data reveals that fintech adoption rates vary quite a bit across regions. Notably, the UK, Singapore, and Hong Kong have adoption rates surpassing the 60% average for fintech adoption as of 2019. Surprisingly, the United States, despite being one of the largest fintech economies, lags behind with a mere 46% fintech adoption rate, the lowest among the six markets examined.

On the other end of the spectrum, Japan grapples with a modest 34% fintech adoption rate due to its conservative and risk-averse financial environment. In stark contrast, China and India lead the charge with a remarkable 87% of their digitally active populations embracing fintech as of 2019.

Why It Matters:

In the midst of economic turbulence, the fintech sector continues to attract VC investments. However, the data unveils a persistent issue: the lack of diversity in venture capital funding, leading to a mere 2% of women-led fintech companies receiving VC support.

With women representing 26% of investment professionals, it’s evident that the industry urgently needs to bolster gender diversity. While there are minor improvements in racial and ethnic representation, there’s still a long road ahead.

Diversity isn’t just a buzzword; it’s the lifeblood of the fintech sector. It fosters creativity and innovation, ensuring that financial products cater to a diverse audience. Companies must recognize the value of diverse perspectives in creating viable products.

The upcoming Money 20/20 event serves as a prime platform to raise the bar and underscore diversity as a cornerstone of the industry’s future success. An amalgamation of diverse minds can spark groundbreaking ideas and practical financial products. Moreover, diverse teams bring a wealth of knowledge and experience, fostering customer satisfaction and enhanced profitability.

The industry faces a significant challenge in ensuring better representation for those impacted by these issues. With a history of male dominance, women and founders from diverse backgrounds often face exclusion and inequity in the venture capital landscape. Rectifying these imbalances is crucial as the fintech industry charts its course forward.

#2 Orum Aims to Change the Game with ‘Verify’ 

In a world where failed payments chip away at the global economy to the tune of a staggering $100 billion annually, Orum is on a mission to lead the charge in transforming the payment landscape. 

Meet the driving force behind this, Stephany Kirkpatrick, the founder and CEO of Orum. She understands that the valuable time spent on account verifications is not only costly but also risks losing both revenue and customers. In response, Orum has announced its new product, ‘Verify.’

‘Verify,’ perched atop the innovative FedNow infrastructure, has set its sights on eliminating the need for customers to wade through the verification process. It does this by harnessing data transfer and automation, streamlining the process to a mere 15 seconds.

While instant payments have become a global success story, the United States has been slow to join the party, ranking a modest 33rd for real-time payment usage. However, the launch of FedNow promises to bridge the gap, aiming to make real-time payments as commonplace as card transactions, effectively resolving a significant connectivity challenge.

But, it’s important to recognize that successful adoption requires a shift in the mindset of banking institutions. They must transition from conventional business hours to an all-encompassing 24/7 infrastructure while shoring up their defenses against potential fraud risks.

Why It Matters:

‘Verify’ tackles the age-old challenge faced by businesses in authenticating bank accounts before initiating payments. It instills the confidence that payments will reach their intended bank account safely, sidestepping the delays caused by outdated methods.

Currently, only a paltry 1.2% of payments in the U.S. are sent via faster payments. FedNow’s launch signifies a step toward modernizing the U.S. payment system, poised to introduce more efficient and cost-effective payment options for consumers.

While this launch is indeed a milestone, the path to widespread adoption and addressing operational hurdles is pivotal for FedNow’s success in reshaping the U.S. payment landscape. 

Stay tuned as I track the evolution of FedNow and its profound influence on everyday financial transactions. Innovative solutions like Orum’s ‘Verify’ might be the spark that ushers the U.S. into a new era of payment efficiency.

#3 The Crypto Industry On Trial Alongside SBF 

As we delve into the trial of Sam Bankman-Fried, founder of FTX, it’s impossible not to feel that the entire crypto industry is on trial alongside him. 

The crypto world watched in shock as FTX, once considered one of the safest havens for investors’ money, collapsed in November, shattering customers’ trust in crypto companies. SBF, once a darling of the crypto industry and beloved by Silicon Valley investors, now finds himself in the spotlight, with the fate of crypto hanging in the balance.

The fallout from the FTX collapse had a ripple effect. Major cryptocurrencies’ prices plummeted and stagnated, eroding investor confidence. Then came the banking crisis, triggered by the Silicon Valley Bank’s downfall in March, ironically boosting Bitcoin’s narrative. It left depositors questioning traditional banks and seeking refuge in cryptocurrencies.

In Congress, two bills loom on the horizon, one aiming to regulate stable coins pegged to the U.S. dollar and the other addressing market structure. However, with the ongoing SBF trial and various government priorities, these bills’ prospects seem uncertain at best.

Why It Matters:

Crypto’s journey began in response to the financial crisis 15 years ago, born from a lack of faith in the traditional financial system. Throughout the years, Bitcoin and the crypto industry weathered the storms of scandals, frauds, and collapses, from Mt. Gox in 2014 to FTX in 2022.

As regulators and policymakers grapple with balancing innovation and protection, the crypto industry finds itself in the hot seat. Regulatory crackdowns have targeted significant exchanges, including Binance and Coinbase, while essential services vital to the crypto sector have been severed.

Yet, we must remember the core vision of Satoshi Nakamoto: financial inclusion, freedom, and empowerment. It’s about ensuring everyone has equal access to banking regardless of their background. The crypto industry is at a pivotal juncture, and it’s not just about wealth; it’s about enabling this vision for all. 

Amid challenges, the next generation of innovators is poised to realize this vision. Check out my deeper story on my Forbes contributor page for more in-depth insights. 

MARK YOUR CALENDARS 

A Week In The Life

Tune in every Thursday to keep in the loop on the best fintech events happening each week! Whether it’s an online meetup or a fintech conference, these gatherings provide amazing opportunities to network, learn and connect with our incredible fintech community. 

So, let’s fill up those calendars with all the awesome events out there – I’d love to see you at one, or even better, if you have one you’d like to share, please let me know! 

SATURDAY 10/14

MONDAY 10/16

TUESDAY 10/17

WEDNESDAY 10/18

THURSDAY 10/19

  • [NYC] Consumer AI Deep Dive: Panel discusses building early-stage consumer AI companies that capture consumers’ attention and captivate investors in an AI-saturated market.

FRIDAY 10/20

  • [VIRTUAL] Unlocking Biometrics: Join me for a live chat with Anonybit’s CEO, Frances Zelazny, to learn how fintech companies can fight fraud and improve customer experience with biometrics. Get the recording and access exclusive resources like this when you join Real Talk.

HUMANS OF FINTECH

Jenny Just, Poker Power

Jenny Just - Worth

Did you know that less than 7% of poker players are women?

Jenny Just, the founder of Poker Power, is on a mission to change that. Join me and the fintech powerhouse as we discuss the importance of women’s representation in the poker world and how playing poker can develop valuable skills for both personal and professional growth.

Jenny shares her vision of creating a gender-neutral poker app and her goal of having half of all poker players be women. We also explore the role of women in decision-making around money and the need for more financial education programs in schools.