At Money 20/20, the fintech ecosystem explores ways to scale B2B business models

Money20/20 is Europe’s largest payments and fintech conference and, thus, a great place to take the pulse of the fintech ecosystem. This year’s recent gathering in Amsterdam was busier than ever, and it gave us useful insights into what key players in the fintech and payments space are focused on—or not. Here are our five biggest takeaways from this year’s event:

1. Optimism persists. First, the mood was quite positive, despite the challenges fintech financing has been facing the past three years. Venture capital funding for fintechs is down by 75 percent from its 2021 peak, and in the first quarter of this year, funding totaled $9 billion, compared to $41 billion in the first quarter of 2021 and $36 billion in the same period in 2022. However, volume now seems to have stabilized—the year-to-date numbers are about the same as the last three quarters of last year. Another reason for the upbeat feel to the conference may be the untapped potential of B2B payment. Indeed, the focus of the conference was much more concentrated on B2B than B2C this year, reflecting some important market shifts.

2. Convergence on the horizon. Second, picking up on that last point, the whole ecosystem is coming together in a new way, reflecting a great willingness to solve issues together. We witnessed many conversations that brought together fintechs, banks, regulators, platforms, and merchants, all looking for ways to unlock new opportunities. All sides have their own priorities and challenges, but at the core, fintechs are seeing that they need banks for reach, while banks need fintechs for product. And there are several topics that everyone will want to work through together, including infrastructure, open banking, digital ID, compliance services, fraud, and anti-money laundering.

3. Acceleration and scaling in B2B. Third, there’s a continuing acceleration and scaling of B2B business models. Emerging trends point to an intriguing shift of funding to the mid-market: the share of smaller deals of less than $100 million has been rising. In the first quarter of this year these smaller deals accounted for almost 70 percent of the total. In the past, there were indicators that many niches were being explored, but this year we saw that successful business models have been scaling well, especially in B2B—it seems almost as if the more restricted funding environment has helped bring focus to this area.

4. Cloud migration remains an opportunity. Fourth, there are still many, many opportunities out there—and plenty of ground to be made up in a number of areas. Cloud migration is one of the big ones: all players are in some stage of a transition, but many have quite some road ahead to catch up. Our cloud surveys suggest that while financial institutions globally aspire to invest more than one-third of their IT spending on private cloud systems, they for now are spending less than half of that. Likewise, there is much ambitious talk about moving to software-as-a-service solutions for payments—but a lot more action that is still needed to make that a reality. If players gain traction on these and other ways to scale and innovate, market growth could be substantial.

5. Macroeconomics and AI in the background. Finally, there were two topics that we didn’t hear very much about—perhaps surprisingly, given the headlines these past months. The first was the macroeconomic situation, with interest rates seemingly staying higher for longer than expected (although the European Central Bank did trim rates this month, potentially kicking off a change in direction for others). The second was generative AI. Our sense is that many players are still examining use cases carefully but aren’t yet convinced about how to make them work and scale; our expert colleagues wrote about just this topic two weeks ago.

In short, the fintech and payments ecosystem remains vibrant and focused on a new phase of growth. And the new cohesion we are seeing bodes well.

Albion Murati is a partner in McKinsey’s Stockholm office; Reinhard Höll is a partner in the Düsseldorf office.

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