Enterprise Fintech Opportunities in 2024: A Look Ahead

As the year comes to a close, I’m thinking about the themes that will shape enterprise fintech in the year ahead. While it may be “predictions” season, I prefer to think of these as opportunity spaces for investing in startups that tackle new, and continuing, challenges in financial services.???

Altari’s enterprise fintech investment thesis is strongly informed by my background in banking, and a belief that the “tech” in fintech won’t swallow the “fin” anytime soon. In my view, truly defensible fintech investment opportunities have technical financial knowledge at their core, translated into software via best-in-class technology. That’s why I look at breakthroughs like GenAI as part of a toolkit that can be used to solve real business problems: the understanding of, and focus on, the problem is as important as the technology itself.

Here are a few specific areas for innovation I am watching in 2024:

Risk Management – A Better Way to Acquire Customers

Want to acquire a financial services company as a customer? Look for the places where they are struggling to manage institutional risk.?

Right now, there is great urgency within finserv to catch developing risks and comply with constantly evolving regulatory requirements. Financial institutions typically move slowly when startups try to sell them better ways of doing things, even if the solution results in improved business efficiency over time. However, they respond more quickly when there’s a consequence to not adopting technology.?

Business losses, penalty fees, increased oversight burden and other risks are heightened by ever-growing volumes of data; and tools that offer granular, actionable insight derived from it allow financial firms to more precisely assess and isolate unwanted exposures. Technology, especially AI, is the only way to uncover these new frontiers of risk as well as respond to them in real time. (To highlight one example, I wrote about the role that GenAI plays both in creating, and helping to avoid, reputational risk through data in this recent Fast Company article.)

The financial services industry is notorious for risk imbalances that lead to burst market bubbles and new waves of regulation. But regulation is always reactive and backward-looking. Armed with more tech solutions to monitor emerging risks, both finserv and fintech companies can get ahead of future bubbles before they burst.?

Even better, actionable risk management insights aren’t just beneficial for financial institutions internally but can also be a powerful differentiator with their own clients. In my experience, sharing risk intelligence and offering tailored solutions informed by it can help financial services companies earn market share to a greater degree than other, more typical, ways of acquiring B2B customers.?

In 2024, I see a significant opportunity for fintech startups with a risk management application of their product to gain market share. We know how hard it is to do a deal with large financial? institutions. Leaning on risk management in the go-to-market strategy could be the advantage that helps founders beat the competition.

The Better the Data, the Bigger the Moat

A superior user experience alone is not enough to stand out in enterprise fintech. The same data granularity that enables better risk management is also key to finservs’ and fintechs' ability to strengthen their product moats and, to take it a step further, roll out next-generation, data-driven financial products that are exclusively available to their clients.

Finserv companies need software that can capture, and help them and their customers make sense of, proprietary data. Startups that translate this proprietary data into value-added financial solutions stand out in the market. There are a handful of huge B2B product areas where software can play a transformative role in helping financial services companies:

Tailored Credit – Enhanced and better priced lending options based on data from clients’ digital business systems (such as ERP, accounting, expense management) or vertical SaaS platforms offering end-to-end ecommerce experiences.

Insurance – Parametric offerings that allow users to isolate a precise exposure instead of bundling it into a bigger package.?

Capital Markets – Solutions that minimize and ultimately phase out basis risk by hedging exact exposure instead of using the closest proxy; programmatic execution software tools; platforms that facilitate risk transfer via peer-to-peer activity or other mechanisms.

In my dealflow, I’m seeing more early stage companies that understand the value of products built on proprietary data captured by their software, and I hope to see them in even greater numbers in 2024. The examples above really just scratch the surface on potential areas of impact inside enterprise fintech.

Fat Margins Are Still Out There

Over the last decade, many fintech companies have found pockets inside financial services to build a business on reducing historically fat margins to their—and their customers’—advantage. Perhaps the obvious areas have been identified, but there are still many places where fat margins are waiting to be discovered by founders.?

Whether it is an unnecessary delay in money movement while someone else earns interest, an extra logistical step in the settlement process which includes an upcharge, or misaligned provider interests being rewarded by fees, the opportunity to optimize industry infrastructure is still a significant one.?

And, once again, it’s financial domain expertise that unlocks the ability to identify and tackle these challenges by pairing them with the right technology. I’d urge any founder planning to build an enterprise fintech startup in 2024 to consider focusing on one of these seemingly obvious but untouched areas of finserv infrastructure.?

At a holiday party this week, someone asked me if there was still a lot to do in fintech. In their view, the ecosystem seemed very well mapped out, so what could be left? We had a great conversation and agreed that while those observations may be true for B2C, there is still so much untapped potential in enterprise fintech, where client needs are far more sophisticated, risk exposures are much larger, and consequences of things going wrong are an order of magnitude greater. Technology upgrades and better products are truly needed, so I can confidently say there is a lot yet to come in B2B fintech—and I am excited to back those future innovative startups in 2024 and beyond!?

I’d love to hear what you see coming in the year ahead. Please comment below, and do drop a link to your own predictions if you’ve written them for 2024. If you are a founder working on any of these problems, I’d love to meet you. Reach out.

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