Outlook 2024 - Fintech: All eyes on crypto and GenAI

As the shift towards profitability continues, the fintech industry has reached a new maturity level. Performances within fintech sub-themes were unequal in 2023. Innovation will prevail in 2024.

Bottom line

2024 is poised to be a landmark year for Bitcoin, with the anticipated approval of a Bitcoin ETF, the Bitcoin halving event, and increased liquidity in the financial system acting as significant catalysts for the blockchain ecosystem.

Concurrently, the surge in AI integration within the financial software industry is set to revolutionize fintech, benefiting both developers striving for innovation and end-users who will enjoy more personalized and automated financial services. This marks a significant step towards the realization of a fully automated financial industry.

Fintech landscape: 2023 review and beyond

The fintech industry has presented a contrasting landscape over 2023.

After a dismal 2022, the sector's strong start of the year surprised many investors. Attractive valuation levels led to a partial rebound in stocks. Then, the failure of Silicon Valley Bank (SVB) created opportunities, particularly for neobanks offering competitive deposit rates and blockchain companies seen as alternatives to traditional finance. Nonetheless, it posed challenges for U.S. fintech firms heavily reliant on smaller and regional banks.

In early August, the Fed's confirmation of a scenario of “higher for longer” interest rates particularly affected high-momentum stocks, such as those of early-stage fintech companies. The same stocks have recently shown signs of recovery, buoyed by hopes for a more accommodating monetary policy next year.

Blockchain rules, payments cry

Fintech straddles the line between the information technology and the financial sectors, exhibiting unique behaviors compared to these sectors. In 2022, the fintech ecosystem underperformed both industries. This year, it is heading towards a better average performance than the financial sector, which faces its own challenges (see Financial Services section), but still trails behind Big Tech companies. The size factor has mattered this year.

Delving deeper, the performance within the fintech sub-themes has been uneven. Our exposure to blockchain-sensitive stocks has been supportive. Neobanks have also fared well, as the global economy has shown more resilience than many investors initially feared at the start of the year.

Conversely, the payment industry has significantly underperformed compared to the broader fintech landscape. This underperformance reflects slowing growth, increasing competition, and a commoditization of the payment function. Similarly, our investment in Chinese companies has not been as fruitful as expected. Despite the country's reopening and the anticipation of a new cycle for Chinese fintech, macroeconomic uncertainties and low sentiment have overshadowed these developments, even with several stimuli announced.

Embracing 2024

In 2024, the macroeconomic environment and monetary policy will likely influence our strategy once more. The fintech industry, and consequently our strategy, inherently leans more towards being cyclical and consumer-oriented than other sectors.

Being late in the economic cycle does not mean there will be no industry opportunities. Each fintech sub-sector, including the payment industry, has potential catalysts ahead. However, if we were to highlight two sectors with promising prospects, they would be (1) the blockchain industry, which is poised for a new growth cycle, and (2) financial software developers, which are likely to maintain their pricing power and will deploy key GenAI features to make clients more captive.

Blockchain, on track for a Crypto Spring

The year of the Bitcoin ETF…

2024 could mark a pivotal year for Bitcoin with the potential approval of a spot Bitcoin ETF in the United States. This development is highly anticipated, as it would allow investors to gain exposure to Bitcoin through a regulated and trusted stock exchange, a preferred route for many over unregulated crypto exchanges. More integration with traditional finance can only be positive.

While we have anticipated the approval of a Bitcoin ETF several times (here, here, here, or here), this time should be the right one! Several indicators suggest that the U.S. Securities and Exchange Commission (SEC) may greenlight a Bitcoin ETF in early 2024. Firstly, major U.S. asset managers, closely linked with regulators, are in the starting blocks for a Bitcoin ETF. Secondly, a federal ruling has compelled the SEC to reconsider its rejection of converting Grayscale's Bitcoin trust into an ETF. Lastly, in its recent actions against Binance, the U.S. Department of Justice did not accuse the platform of market manipulation, a concern often cited by the SEC.

But how sustainable would these flows be? We recognize that the impact of a Bitcoin ETF might be short-lived. The market is already pricing this event with a high probability of approval. A "sell the news" effect is even plausible, considering that U.S. institutional and qualified investors already have access to Bitcoin through offshore investment vehicles.

…and Bitcoin halving

The next Bitcoin halving (reduction by 50% of the rewards given to miners) is scheduled for 19 April 2024. The block reward will go from 6.25 BTC to 3.125 BTC. This reduction will decrease the monthly selling pressure of bitcoins in the market from miners from $1bn to $500mn, assuming a Bitcoin price of $37K and excluding revenues related to transaction fees.

Historically, Bitcoin halvings have positively influenced its price due to a reduction of the selling pressure. As a consequence of the reduction of the rewards, miners will have to deal with higher production costs for each Bitcoin mined (>$40k, after the halving), disincentivizing them from selling at a loss.

The halving will pose challenges for miners engaged in a race for computing power. Listed miners currently account for approx. 20-25% of the total network hashrate, a market share that has not exponentially increased despite the significant investments to increase the computing power. Some private players also invest massively. As a result, the difficulty of mining a block has only gone up, even during the recent crypto Winter. After the halving, the price of Bitcoin will not double overnight. Miners will be impacted on their revenue, cash flows, and net income. The weakest mining companies may go bankrupt.

Investors must remain very selective with miners and be conscious of the high risk of dilution next year. Other blockchain-sensitive companies seem to offer a better risk-return profile. For instance, exchanges should benefit from a regain in trading activity in case of higher crypto prices, while companies with Bitcoin on their balance sheet will benefit.

Beyond Bitcoin: A positive outlook for digital assets

2024 is set to be favorable not just for Bitcoin but for all digital assets. The perspective of more liquidity in the financial system to offset an economic slowdown should eventually benefit risky assets, including cryptocurrencies.

On the regulatory side, the recent fine imposed on Binance by the U.S. Department of Justice confirms that the crypto far west is over. All institutions must have strict regulatory processes in place to control money laundering, fraud, and financial crime and verify the owners' identity. The utopists of an alternative financial reality have lost the war.

Legal proceedings, notably the ongoing battle between the SEC and Coinbase Global Inc, are likely to bring much-needed regulatory clarity. Such developments are expected to encourage the institutional adoption of cryptocurrencies.

Finally, the technological promise of blockchain is steadily materializing. Projects aimed at improving financial infrastructure, optimizing supply chains, and enabling asset tokenization are progressing. Tokenization goes beyond NFTs, although their use as authentication certificates in the art, jewelry, and luxury sectors (e.g., LVMH)) is already booming. Interoperability of the protocols and improved scalability are required to bring more projects to the masses. The ongoing developments in proto-danksharding on the Ethereum network, set to be implemented next year, go in the right direction (i.e., reduced costs for layer-2 transactions and better efficiency with off-chain storage).

Navigating challenges for Mobile Payments

Commoditization and competition

Years go by and the payment industry looks the same in a post-Covid era. The convergence of revenue growth rates within the industry will mark 2023. A significant indicator of this trend is the reset of mid-term revenue growth and EBITDA margin guidance by Adyen, underscoring the industry's prevailing challenges. Merchants are increasingly cost-conscious and exploring competitive payment processing fees.

Payment processors are facing margin pressures from revenue declines and higher operational costs, despite support from high interest rates that bolster net incomes. The financial crime compliance burden has become a significant expense, attracting regulatory scrutiny and making these companies targets for short-sellers, as seen in the cases of dLocal and Block Inc (which we debunked).

The landscape in emerging markets is more promising for payment processing companies. In regions like South America, digital payment penetration lags behind developed markets, offering growth opportunities. Additionally, the less developed banking infrastructure paves the way for payment companies to offer banking services. Decreasing interest rates in countries like Brazil further reduce payment technology firms' funding costs, which is also a net positive.

New risks for payment incumbents

Being underweight in legacy payment companies and having no exposure to credit card networks have clearly been not ideal in the past two years for our strategies. The compression of multiples has not been as high for many of these well-established companies, which is quite a normal behavior in this kind of market.

Innovation remains a driving force in the payment industry. However, incumbents are burdened by outdated legacy systems, as McKinsey’s annual payment report highlights. The widening technological gap makes modern solutions from payment challengers increasingly attractive to merchants. Meanwhile, upgrading legacy systems represents an opportunity for payment software providers.

On top of that, the regulatory risk is increasing, especially for credit card networks. The duopoly situation of Visa and Mastercard is not sustainable. The Federal Reserve wants to reduce the interchange fees on debit cards. Moreover, we shall watch the Credit Card Competition Act, which could end loyalty card programs, creating an opening for non-card payment methods like account-to-account (A2A).

Banks regaining control with A2A payments

Banks were initially slow to adapt to the rise of digital wallets but are now making strides in the A2A payment space. This progress has been buoyed by advancements in the payment infrastructure. Consumer-to-business (C2B) A2A payments, as well as other pay-by-bank options, are gaining popularity due to their real-time processing capabilities, high level of security, and convenience.

Merchant associations around the world are pushing for the adoption of A2A payments as a response to the high fees charged by payment aggregators, which can reach up to 2.5% for card payments. FedNow, the recently launched instant payment scheme of the Fed, only charges $0.045 per transaction.

Boosted by regional or country-specific measures, A2A is already the preferred payment method in several countries, such as Finland, the Netherlands, Poland, Brazil, India, and Thailand. In Europe, McKinsey estimates that A2A transactions will surge from 1.5% to 8% of the total payments by 2027, with new government incentives.

The market share gains of A2A payments potentially represent billions in savings for merchants. It benefits consumers, banks, and software developers specializing in A2A infrastructure like Jack Henry & Associates Inc, Flywire, or Tink (acquired by Visa).

Financial software entering the GenAI era

The rollout of GenAI

Thanks to the abundant financial data available for AI model training, Fintech's affinity with Generative AI is increasingly evident.

A notable development this year came from Intuit Inc, the leader in accounting, personal finance, and tax software. The company has introduced Intuit Assist, an AI-driven financial assistant integrated across its product suite. This innovation is set to revolutionize the user experience for Intuit’s >100mn customers by providing personalized advice and automating various tasks.

While well-established companies have the resources to develop advanced AI tools, a new generation of fintech startups is emerging and could threaten the market's status quo. These startups inherently embed GenAI into their solutions from the ground up. Amazon.com Inc, which wants to be a key partner of these companies, has launched its first AWS Global Fintech Accelerator this year, aiming at mentoring companies innovating with AI and machine learning in financial solutions.

This is a new milestone towards our vision of an automated financial system. Companies that are leading this revolution have a competitive advantage and will play an important role in improving efficiency globally and delivering personalized services.

As we move into 2024, expect further surprises from GenAI, with potential applications for all financial services. Generating complex reports, comparing financial products, or simply reviewing information in seconds without heavy IT developments will increase productivity.

Continued pricing power for software developers

In 2023, a range of fintech firms, from credit scoring agencies to e-commerce payment platforms, have raised their fees. This increase is attributed to customers' deep reliance on these comprehensive software solutions and the continued shift from growth to profitability from those companies.

We expect this trend to continue in 2024. As financial software solutions evolve into comprehensive service hubs (accounting, financing, payment, etc.), they become increasingly critical for businesses of all sizes. This centrality allows companies to focus on their core operations.

The incorporation of cutting-edge technologies like GenAI into these solutions provides a strong justification for the price increases. The enduring high customer retention rates, often surpassing 100%, indicate a broad acceptance of these price adjustments, reflecting the added value and enhanced capabilities these advanced software solutions offer. Such companies will remain an important part of our portfolio, as they offer a different risk/return profile than the pure financial service providers.

Financial services at a credit crossroads

Remaining cautiously optimistic in a late credit cycle

The delinquency rates on consumer loans (2.5%) and credit cards (3.0%) in the United States are currently at levels not witnessed in the past decade. This trend is not expected to reverse anytime soon, as the average interest rate charged on credit cards is over 21%. To counter this, banks are becoming more stringent with their lending standards, limiting access to credit for many consumers. Consequently, there has been a significant increase in demand for buy now, pay later (BNPL) services, which have seen a 20% surge in volume since 2022 in the United States.

Alternative lenders, who operate on a capital-light model, face challenges in securing funding from third parties. To overcome this, the securitization of loan books has become a common practice. However, this year, traditional lenders require alternative lenders to share the risk by taking on their balance sheets some exposure to the asset-backed securities. It is worth noting that aggressive accounting practices for loans on balance sheets are attracting scrutiny from short-sellers.

What should we expect for 2024? Central banks may pause tightening measures with indicators like falling inflation and a sluggish credit market. An economic slowdown could lead to lower interest rates, potentially boosting alternative lenders' profitability. This could also result in relaxed credit standards, making loan approvals more common. However, the possibility of a hard landing scenario, characterized by a spike in non-performing loan write-offs and rising risk premiums, looms as a significant risk.

Maintaining exposure to the leading alternative lenders such as SoFi or Upstart makes sense. They are gaining market share for all types of loans to individuals and will become stronger in the next credit cycle. The gap with traditional lenders in terms of tools and experience keeps widening. However, the exposure must be well-diversified to reduce the idiosyncratic risks. In the case of hard lending, there will be a rare opportunity to significantly increase this exposure, as the lending business is cyclical, and recovery typically follows downturns.

Finding substitute revenue streams for neobanks

We mentioned that several payment companies have bolstered their net income thanks to higher interest income. Non-U.S. neobanks have also reported increased revenue from interest income, exploiting the gap between reference rates and rates credited to customer deposits.

Boosted by enhancements in customer experience the long-term outlook for neobanks remains positive. However, in the short term, there may be some challenges, and investors may need to adjust their expectations as the high interest income levels seen in 2023 may not be sustainable. A more accommodating monetary policy could have a negative impact on neobanks' profitability. In addition, customer loyalty is decreasing as people opt for higher interest rates offered by other neobanks to new clients.

On the verge of a data revolution

The Consumer Financial Protection Bureau (CFPB) has been working on a major regulation, the Personal Financial Data Rights. Under the latest proposed rule, people would have the ability to access their data held by banks and financial service providers, control how their data is used, and share their financial data from one financial service provider to another. The development and use of standardized formats will potentially lead to greater transparency. This move mirrors European regulations like the open banking framework and the related Payment Service Directive (whose next update is expected to be voted on in 2024).

The impact on the fintech industry is expected to be significant. Banks will lose their tight grip over data. As banks will have no incentive to develop APIs, technology enablers like Plaid or Galileo by SoFi will see opportunities. Once approved by the clients, applications will be able to access banking data at no cost. Fed by more data, fintech applications will provide end-users with enriched services, personalized solutions, and streamlined processes.



  • Bitcoin halving. Keep in mind one date: 19 April 2024. A new cycle will start for the blockchain ecosystem.

  • GenAI breakthrough. The developments in generative AI are extremely quick. Despite upcoming regulatory challenges, it is certain that a financial service company will propose a new banking experience of some sort in the next 12-18 months.

  • Regulations. The Personal Financial Data Rights is not the only regulation that could be a tailwind to the fintech industry. More regulations are anticipated for BNPL, which will eventually de-risk the ecosystem.


  • Reduced demand for financial services. Fintech companies are susceptible to economic downturns. In the case of a severe hard landing, people would lose their job, consume less (payment), miss their interest payments (lending), reduced their investments and insurance policies, while companies would limit IT expenditures (financial software).

  • Big Tech. Big Tech companies want to play a greater role in tomorrow’s financial landscape, beyond their impact on payment industry. They do not mind failing 10 times; the access to financial data is worth the investments. They represent a competitive threat to challengers. In particular, it will be interesting to see which banking partner will replace Goldman Sachs Group Inc in the fintech partnership with Apple Inc (cards, saving accounts, etc.). We can expect an aggressive marketing campaign at the time of the change. Moreover, prior to the termination of the agreement, there were rumors that Apple was working on a trading app.

  • Data breach. We have already mentioned the risk of a major cyberattack for the fintech industry. Any financial company is a prime target for hackers. In 2024, with the developments of new data rules that will favor the deployment of APIs, new threats will appear.

Companies mentioned in this article

Adyen (ADYEN); Amazon.com Inc (AMZN); Apple Inc (AAPL); Binance (Not listed); Block Inc (SQ); Coinbase Global Inc (COIN); Flywire (FLYW); Goldman Sachs Group Inc (GS); Intuit Inc (INTU); Jack Henry & Associates Inc (JKHY); LVMH) (Not listed); Mastercard (MA); Plaid (Not listed); SoFi (SOFI); Upstart (UPST); Visa (V); dLocal (DLO)


  • Current Account Switch Service
  • Fred, St. Louis Fed
  • JPMorgan
  • McKinsey - Global Payments Report
  • WorldPay - The Global Payments Report
  • eMarketer



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