Fintech Growth Projected by Venture Capitalists, Reveals Discover Global Network Study

Discover Global Network recently published its third annual Fintech State of the Union (FSOU), a comprehensive study that offers global insights from fintechs, venture capitalists, and consumers. Conducted in collaboration with 451 Research of S&P Global Market Intelligence, the study highlights several key growth areas in the fintech industry, with an emphasis on the value of fraud prevention, security, and the increasing popularity of digital payments.

U.S. Venture Capitalists Foresee Industry Expansion

The most significant findings from the North American market show that a majority of U.S. venture capitalists anticipate growth in fintech. They identify investments/capital markets technology (78%), payment processing (67%), and fraud prevention (64%) as sectors with substantial growth potential in the upcoming five years.

Venture capitalists also emphasize the importance of strong relationships with payment networks, with over half (56%) labeling such relationships as crucial for fintechs. Among the desirable traits for fintech firms, experienced operating teams and proven customer traction both scored 44%, while proven founders and favorable valuation each garnered 33%, and technology capabilities received 31%.

Fraud Prevention and Security: Key to Trust and Adoption

Fintech firms consider payment and data security (59%) as a highly relevant use case. Over half (56%) of fintechs express interest in partnering with a payment network to develop solutions for data payment security. Cardless online payments (20%) and commercial B2B payments (18%) follow in terms of interest. For consumers, the security of personal information (67%) is their most significant concern when using emerging payment methods.

Digital Payments Thrive Despite Reduced Consumer Spending

The study reveals that while nearly half (46%) of consumers have reduced discretionary spending, 86% are using at least one digital payment service, a rise of 17 points year over year. When it comes to discretionary spending, online transactions (54%) have overtaken in-store purchases (46%) in the U.S.

The preferred method for online payments remains manually entering personal payment information (34%), though one-click checkout has seen a four-point increase (27%) over the past year. For in-person payments at businesses, card tapping is the preferred method for consumers (39%), surpassing inserting/swiping a card (32%).

The Evolving Fintech Ecosystem

“The fintech ecosystem is dramatically changing and fintechs need to make informed decisions to stay ahead of the competition,” says Katelyn McCarthy, vice president of payment strategy at Discover. McCarthy points out the importance of positioning to appeal to venture capitalists, meeting consumer payment needs, and partnering with payment networks. Discover Global Network intends to continue offering payments expertise and a robust network platform to its current and future fintech partners.