Two years into the
Venture-capital investments in financial technology companies, which includes payment fintechs, fell 42% in 2023, from about $62 billion to $35 billion, according to
"I do not sense that the market has turned a corner," said Aaron McPherson, principal at AFM Consulting. "The fintech space continues to be crowded, which makes it difficult to grow."
As a result, more consolidation is likely, McPherson said. "I continue to see
A sample of firms including Marqeta, MoneyLion and Verituity discussed how they've changed their businesses to stay relevant in a tough market.
"There's not as much money going into fintech," said Todd Pollak, chief revenue officer at Marqeta.
Block party
Marqeta's success has traditionally been tied to Block, which has long supplied most of its revenue. Market pressures are leading Marqeta, an Oakland, California-based company that was founded in 2010, to look for more partners and clients.
"Even a year and a half ago, the No.1 topic was that our Block partnership was 70% of revenue," Pollak said, adding that this share is now just below 50% following a restructuring that included an
Marqeta reported gross profit of $84 million in the most recent quarter, which was down 6% from about $89 million, year-over-year. Total payments volume was $67 billion, an increase of 33% from about $50 billion.
Marqeta recently entered partnerships with Klarna to power the buy now/pay later firm's payment card, and payment firm Rain, which supports earned wage access programs for Hilton, McDonald's, Arby's and Subway. Marqeta also extended its collaboration with Uber Eats to Canada, Australia, Mexico, Brazil, Colombia, Peru, Chile and Costa Rica. "There is a flight to quality," Pollak said, adding that potential clients are looking for payment companies that can demonstrate financial health.
Amid this push to diversify its clients, Marqeta's relationship with Block is growing, Pollok said. For example, Marqeta is involved with the expansion of Afterpay, a buy now/pay later firm that
Learning to pivot
Demonstrating profitability has been a "watershed" for MoneyLion, according to Dee Choubey, MoneyLion's founder and CEO.
MoneyLion in its most recent quarter reported net revenue of $121 million, or 29% over the $102 million it reported the prior year. It also reported net income of $7.1 million in the quarter, up from a loss of $9.2 million the prior year. The New York-based MoneyLion was founded in 2013.
"The fintech industry is saying you can no longer fund multiple loss-leading products," Choubey said. "That's good for the overall industry and it's good for innovation."
Over the past two years, the company has pivoted to savings accounts, and away from a strategy that deemphasized consumer loans tied to future payments. The firm is also focusing on AI-powered product search.
These efforts have helped it expand its customers from 7.8 million to 15.5 million in the past year. MoneyLion is currently testing technology that uses large language models to analyze transactions to improve recommendations and other content it delivers to its customers.
The company's diversification strategy is relying on partnerships such as a
"We've shifted from a neobank to a platform business," Choubey said. "You can engage with tools to find different types of products and tools without having to be a digital banking customer. We want you to be one, but you don't have to be."
Moving faster in a crowded market
Despite the funding slowdown, the payments technology market may still have too many firms, a result of the flood of digital-focused startups during the pandemic.
"There is some excellent intellectual property available but not enough market to support all the vendors who want to sell it," said Aaron Press, a research director at IDC, who like McPherson said industry consolidation is likely.
Some of the consolidation will come from the established vendors looking to replace legacy platforms or extend into adjacent spaces, Press said, adding that
Verituity, a privately-held business-to-consumer and business-to-business payment company that was founded in 2020, recently increased its focus on selling discounted faster cross-border payments. It integrated with Mastercard's portfolio of U.S. and international money transfer options to support a range of near-real-time business payouts that don't necessarily use dedicated instant processing networks.
"There is still some shakeout to go in the payments industry. There were a lot of payment companies created in the past few years," said Ben Turner, CEO and president of Verituity, which is based in McLean, Virginia.
To support its strategy, Verituity cited
"Instant payments are not as important as on-time payments," Turner said, adding that non-real-time options can be less costly. "There are a lot of options that do almost the same thing as instant payments."
