Top payment trends to watch in 2023, according to top VCs

  • Both private and public fintech valuations have been hit hard in 2022.
  • But major fintech players say payments could be a bright spot heading into next year.
  • Insider spoke with nine venture capitalists who analyzed the opportunities between payouts.

In 2020 and 2021, it looked like the value of private and public fintech startups could only increase. But this year, there was no shortage of fintech names that have already achieved sky-high valuations.

In the third quarter of this year, fintech funding volume fell to its lowest level since late 2020, according to research firm CB Insights. Funding of $12.9 billion raised from July to September marked a 64% decline from the same period last year. Meanwhile, the number of “mega deals” – or funding rounds over $100 million – fell to its lowest level since 2018, CB Insights also reported.

But payments were a relatively bright spot in the third quarter.

According to CB Insights, payment-related transaction volume reached almost $4 billion, or just under a third of all fintech funding.

And while not a record amount, the payouts are a bigger slice of the fintech funding pie. A year ago, when third-quarter fintech funding topped $36 billion amid a bull market, payouts accounted for about 20% of overall funding volume.

But even amid a relative decline in broader fintech funding, payments represent a safe and persistent thesis because it is a largely complicated and analog space. There’s plenty of room for efficiency and digitalization, according to Hope Cochran, managing director of Madrona Venture Group.

“While the solutions market may seem fragmented and confusing, it’s because there are so many parts of the process that are complex and need improvement,” Cochran told Insider.

The headwinds sweeping through the U.S. economy also position payments as an opportune investment growth area for fintech in the fourth quarter and into the new year.

“Payments is one of those inflation-hedged sectors,” said Mark Batsiyan, partner and chief operating officer at seed-stage investor Inspired Capital. “As everything gets more expensive, payments take a slice of everything.”

Here are the payment areas where nine top fintech investors say they see opportunity.

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