Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
AI, Funding Shifts and Regulatory Hurdles in Fintech 2024
Fintech Report | Nov 11, 2024
Image: Fintech's Vertical Integration Into Banks (SVB 2024 Future of Fintech report)
5 Takeways from Silicon Valley Bank's Future of Fintech 2024 Report
Fintech never sleeps. It's been constantly evolving since NCFA Canada launched over a decade ago. Last month, Silicon Valley Bank dropped a 24 page data filled PDF report with a comprehensive outlook of the latest drivers of change in "Future of Fintech 2024". As regulatory pressure increases combined with a tougher funding environment and game-changer AI on the rise, fintech firms have both new obstacles and also fresh opportunities. This article looks at the top 10 insights that capture how the fintech industry is changing so that fintechs and investors can adapt accordingly.
1. Generative AI is Reshaping Fintech
- The report shows that AI focused fintech companies that raised approx. $3.6 billion in 2020 have now reached a total value of over $9 billion, showing that they've gained a lot of investors and their trust.
- AI is seen as a big shift in finance for a range of sectors, especially for portfolio management and market analysis given that AI tools can churn through real time data and make personalized recommendations or execute logic on behalf of users.
See: Some Exciting Fintech Stats (2023-2025)
- Klarna’s chatbot has massively improved customer support, slashing response times to just 2 minutes down from 11 minutes, replacing work done by hundreds of people.
- Mentions of AI in earnings calls have increased by 400% since 2021.
- AI is now actively being used for compliance, claims handling, and customer support, and is helping lower costs and streamline administrative regulatory tasks.
2. Increasing Regulatory Pressure on Fintech
- The FDIC has started cracking down more, primarily aimed at fintech-bank partnerships.
- Although these partner banks only make up a small part of the U.S. banking ecosystem, they account for over 10% of serious regulatory enforcement actions issued by regulators. Confirming that regulators are in deed keeping an eye on these partnerships and on a short rope.
- September 17, 2024 the FDIC suggested that banks and their fintech partners should keep more detailed records and set stricter standards for compliance.
3. Funding, Valuation Pressures, Increasing Costs, Exits, M&A
- According to the SVB report, VC fintech funding declined 91% since peaking in 2021. Only $5 billion was raised this year as of September 2024. For more insights see CB Insights Q2 global fintech funding report including some data on Canada.
- Series B and C investments are also bottoming out which are near decade lows (and need for more realistic fintech valuations).
- Larger deals above $200 million are becoming rare and now represent only 28% of investments (down from nearly half of all deals in the peak of 2021).
- More challenging now to move from Seed to Series A funding. The report highlights that only a few fintechs that started in 2022 or 2023 have successfully made the transition from seed to Series A funding. That's quite a drop given that only a few years ago about 20% of fintech firms successfully jumped the chasm.
- More startups are going for repeat seed rounds as it's more difficult to secure Series A. The difference in value between seed and Series A rounds is shrinking, making Series A investments appear like a better balance between risk and reward. Series A is seen as a safer option now, with adjusted valuations making it a more attractive funding round in a tough market.
See: European Fintech 2024: Profits Rise, Unicorns Fade
- th the fixed and variable costs involved of acquiring new customers has almost doubled. This adds more burden on companies as interest rates have also increased putting pressure on profits. As rates start to decline (hopefully) it will provide some relief to firms.
- The cash reserves of American tech unicorns shows a median runway of 20 months in 2024. This is a much shorter runway that past years where firms had access to cheaper funding conditions and less pressure on cash flow.
- Strategic partnerships like eBay and Venmo's collaboration are becoming more common as companies look for partnerships that can help reduce high costs of operating on their own.
- The exit rate per 10 late-stage deals has fallen from 3.9 in 2021 to 2.7 in 2024 (read: tougher exit market).
- IPOs and public exits are rare. Only 15% of M&A deals are disclosing terms which means it's a buyer’s market where valuations typically favour the buyers.
4. Growth in Embedded Finance and Payment Innovations
- Payment-tech now represents more than half of the fintech sector's valuation and is a huge part of the fintech unicorn scene.
- Major banks spent about $161 billion in acquisitions since 2020, choosing to buy fintech capabilities instead of building them internally from the ground up.
- Partnerships are growing like Wells Fargo and Bilt Rewards, but profitability is tough due to higher customer acquisition costs.
5. Focus on Efficiency and Reducing Burn Rates
- About 80% of fintechs saw improvements in EBITDA margins over last year. Top companies lowered their burn rates by half since 2022.
- Almost a third of U.S. fintechs have only 6-12 months of runway cash (up from 20% last year), showing the importance of sustainable growth strategies.
- Smaller fintechs with under $10 million in revenue show a median cash runway of just 10 months. They are looking for faster paths to profitability.
Closing Outlook
With tougher funding conditions, heightened regulatory scrutiny, and rising costs, fintech firms are focusing on partnerships and innovation to drive growth.
See: Investing in the Future of AI and Blockchain
AI is already a powerful and widely used tool, helping companies streamline, cut costs and integrate fintech deeper into traditional banking. the current environment calls for a lean approach while aiming for sustainable growth and profitability.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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