Last year, Headline marked 25 years of partnering with generation-defining companies like Pismo, Raisin, Appfolio, Acorns, Defacto, Swile, and Zeller. After witnessing numerous market cycles, we’ve solidified our firm’s winning formula. Headline combines an acquired wisdom working alongside the best and brightest founders with real-time data to map trends and inform our future investments, so we can confidently say, “We know what’s next.” In this week’s Lookahead series, we share what to watch in 2024 across the firm’s Fintech pod, on both sides of the Atlantic.
While the headlines may have suggested that “fintech is dead,” at Headline we believe that innovation in financial services has just scratched the surface. In the U.S. fintech companies have captured ~10% of the market opportunity. In Europe, progressive regulatory tailwinds and a breadth of talent graduating from the first iteration of unicorns serve to further our view that the local fintech ecosystem is maturing. Headline’s unique local-to-global strategy positions the fintech team to identify and compare emerging business models and innovations across Europe, the U.S., LatAm, and Asia. In 2024, we are focused on a few key sectors:
- Wealth Management: The great wealth transfer is already starting, with an estimated $68T being passed on to younger generations who are looking for tech-first ways to manage their money, necessitating new applications in wealth and asset management. Our investment in Acorns was an early leader in this category, making personal finance more accessible to all income levels. From Europe, Raisin, with €55B in AuA (2024) is democratizing access to deposits, investments, and pension markets.
- B2B Payments/Innovation within Payments: In Europe, we are excited about the possibilities and adoption of account-to-account payments, while in the U.S. we are closely monitoring how real-time payments will develop. In both geographies, the majority of B2B payments occur on antiquated rails and merchants are dissatisfied with the traditional bank/card model. These inefficiencies provide a significant opportunity for payment startups to move volume online in a more efficient way through novel platforms and proprietary infrastructure. Our investments in iink, a payments network that helps restoration professionals get paid more efficiently after an insured property loss, and Brite Payments, an account-to-account payments platform based in Sweden, are working to do just that.
- AI Applications: Some of AI’s early applications were in fintech–i.e. fraud detection/prevention models and underwriting models–and we are bullish on how AI will be further leveraged to improve bookkeeping, payment reconciliation, and fraud detection. For example, Our investment in Defacto, a France-based company that offers short-term financing for SMBs through an embedded API-first approach. The company is using AI to streamline the loan application process to deliver results in seconds and to proactively advise customers on the optimal timing to initiate a loan based on real-time cash flows.
- Intersection of Climate x Fintech: In the US, the Inflation Reduction Act is spurring innovation and demand for solutions to monitor, report, and reduce carbon emissions and maximize tax credits. Europe is much farther ahead, with the adoption of these platforms at the consumer, government, and corporate levels already making an impact. Furthermore, the continued transition of the grid towards renewable energy will provide new opportunities in areas such as energy pricing, lending, and infrastructure. Our investment in Monta, A Danish operating platform powering the EV charging ecosystem reflects these tailwinds.
We believe that the fintech market has recovered from recent market adjustments and that 2024 will see the re-emergence of fintech headlines. The last 12-18 months have represented a readjustment of the investor mix as “tourist” investors have largely backed off fintech. With their absence, fintech multiples have mostly normalized lower than their recent comps in the private markets. The confluence of this price reset and resurgence in the funding market combined with massive tailwinds across fintech subsectors, make us excited to see what 2024 brings. Given our historic experience investing in payments as well as balance sheet businesses, Headline is well placed to engage with the fintech ecosystem of tomorrow.
Are you building a fintech company that maps to these themes? Pitch us here.