Exploring the Implications of AI Agents in Crypto; Key growth drivers for B2B BNPL; Accounts Payable (AP) Automation;
This week in Fintech Wrap Up, we’re diving into the shifting fintech funding landscape, the rise of AI in financial services, and the growing impact of instant payments on banking and liquidity management.
Insights & Reports:
2️⃣ AI Landscape in Financial Services
3️⃣ Lessons from Zing’s closure
4️⃣ Instant payments will disrupt end-to-end enterprise capabilities
5️⃣ Key growth drivers for B2B BNPL
6️⃣ Accounts Payable (AP) Automation
7️⃣ Key AI Trends for Financial Services in 2025
TL;DR:
This week’s fintech landscape is a mixed bag of challenges and bright spots. The State of Fintech 2024 report paints a cautious picture — funding has hit a seven-year low, with deal volume down 17% year-over-year. But there’s a silver lining: bigger checks are being written for high-potential companies, particularly in banking and payments. Speaking of payments, five of the top 10 fintech equity deals last quarter went to payments companies, reinforcing its position as a key driver of digital commerce. Meanwhile, fintech M&A is heating up, with Stripe’s $1.1B acquisition of Bridge making waves.
AI continues to dominate financial services, with firms expected to pour nearly $100B into AI-driven innovation by 2027. Banks, capital markets, and payments companies are leveraging AI to boost efficiency, reduce fraud, and enhance customer experience. Notably, generative AI is now the second-most-used AI workload in finance, with firms seeing significant cost savings and revenue boosts.
On the payments front, instant payments are poised to shake up banking as we know it. With 24/7 settlement becoming the norm, banks must rethink liquidity management, compliance, and fraud prevention. The transition won’t be easy, but those who modernize their infrastructure will gain a competitive edge.
In the BNPL world, B2B BNPL is emerging as the real game-changer. Unlike its consumer counterpart, B2B BNPL serves a much larger market, helping businesses optimize liquidity while boosting supplier relationships. However, providers must tread carefully — managing debt burden, ensuring transparency, and mitigating risk remain key challenges.
One of the biggest fintech closures this year? HSBC’s Zing. The UK-based cross-border payments app never stood a chance against Wise and Revolut, struggling with limited reach, low brand awareness, and bank-backed constraints that prevented it from scaling. The lesson? Market timing, funding flexibility, and global expansion are crucial in the cross-border space.
Meanwhile, Plaid is reportedly working with Goldman Sachs on a tender offer deal worth up to $400M, allowing early investors and employees to cash out. Klarna is expanding its BNPL footprint by teaming up with J.P. Morgan Payments, and Stripe is eyeing an employee share sale at an $85B valuation — still below its 2021 peak but a significant boost from last year’s $70B.
Finally, AI and crypto are becoming an interesting duo. The rise of autonomous AI agents is pushing blockchain innovation forward, with new use cases in DeFi, digital influencers, and financial advisory. Could we see AI-driven smart contracts managing crypto transactions in real time? The potential is massive.
That’s it for this week! As always, hit reply with your thoughts — what trends are you watching?
Insights & Reports
State of Fintech 2024
Key takeaways from the report include:
- Fintech dealmaking continues downward trend in 2024. Annual fintech deals and funding both dropped to 7-year lows in 2024. While deals dropped by 17% YoY to a total of 3,580, funding fell by 20% to $33.7B.
- One positive signal: bigger deals. The median fintech deal size increased to $4M in 2024 — marking a 33% jump YoY — with deal sizes rising across every major global region. Across fintech sectors, the biggest jump occurred in banking, where the median deal size rose by 70% YoY to reach $8.5M. Though fintech saw fewer deals overall in 2024, the increase in deal sizes suggests that investors are writing bigger checks for companies with compelling growth potential.
- M&A activity is also picking up. Fintech M&A exits jumped 24% quarter-over-quarter (QoQ) to 189 in Q4’24, with Stripe’s $1.1B purchase of stablecoin platform Bridge marking the quarter’s largest deal. Overall, fintech saw a total of 664 M&A exits in 2024 (up 6% YoY) as financial services companies sought to diversify their capabilities and build full-service platforms.
- Mature banking companies are catching the eyes of investors. Banking saw mid- and late-stage deals rise to 38% of its total deal volume in 2024 (vs. 21% in 2023), outpacing the 4 percentage point increase in fintech more broadly. Uncertainty about new banking technology and regulatory volatility — particularly among banking-as-a-service players — is likely driving investors to more proven solutions.
AI Landscape in Financial Services
Financial services firms have been using AI in their processes for decades. Shortly after the advent of genAI, it became evident that these firms — because so much of what they do is language-based — had a greater potential than most others to capitalize on large language models (LLMs). In fact, the tasks that take up almost half of all the time spent by financial services employees are well suited to either automation or augmentation.
It’s no surprise, therefore, that financial services businesses are exploring, investing in, and implementing AI at a faster rate than other industries. As its early pilots deliver promising outcomes and start to be scaled across the enterprise, the commitment of the industry is only expected to deepen. Financial services firms spent a significant $35 billion on AI in 2023, with projected investments across banking, insurance, capital markets, and payments expected to reach $97 billion by 2027.
👉 Industry Applications of AI in Financial Services Banking: Customer service agents receive quick and comprehensive information on all aspects of products, policies, and processes from a variety of sources.
Value Delivered:
- Greater agent efficiency
- Increased response accuracy
- Quicker response time
🔹 Capital Markets: Firms use AI models to create investment portfolios, offer financial assistance, and provide clients with real-time insights and trading recommendations.
Value Delivered:
- Enhanced client satisfaction and retention
- Competitive advantage
Curated News
Plaid working with Goldman Sachs on raising $300M to $400M in tender offer
Plaid, a company that connects bank accounts to financial applications, is working with Goldman Sachs on a deal to allow early-stage investors and employees to sell existing shares, which will raise between $300 million and $400 million, Bloomberg reported, citing sources.
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