With interest rate hikes, a “crypto winter,” and mounting stagflation or recession concerns, there is a general sense of uncertainty at best — and pessimism at worst — about the current state of financial markets.
That has “Big Tech” companies and investors scrambling. But local fintech leaders see unique reasons to be optimistic right now. That was the general consensus at two fintech-focused conferences this week, Fintech South in Atlanta and Fintech & Insurtech Generations in Charlotte. Both conferences highlighted how founders and investors are reimagining technology’s role in the post-pandemic areas of financial services, banking, and payments. And as more complex challenges emerge, many local fintech leaders say the Southeast is poised to tackle fintech’s next big challenges.
Can Southeast Fintech Meet The Moment?
‘Meeting the moment’ was a key theme of the week, which underpins how fintechs are positioning themselves to help consumers and businesses weather any upcoming economic storm.
“Those of us who have been in business for a few decades have seen the cycles, but they each look different. There are always going to be nuances that we’re not ready for. But the FinTech industry has such an incredible opportunity now because payments, to me, is the great equalizer,” said Lara Hodgson, president and CEO of Now.
Hodgson spoke to Hypepotamus following her talk on financial inclusion at Fintech South. Financial inclusion is what Now tackles by providing faster invoicing solutions to small businesses. As Hodgson explained, this helps “level the playing field for small and underrepresented businesses” as they can compete for larger projects with more competitive terms.
Financial equity and inclusion were a big topic coming out of the pandemic. That helped spark a new crop of banking alternative and credit-focused startups in the Southeast. As the pandemic takes a new form in 2022 and businesses prepare for an uncertain future, areas of fintech like BNPL, embedded finance, fractional investing, blockchain, crypto, and yes…even the role of the metaverse in financial services, are taking center stage.
“Many first-movers in fintech were focusing on solutions that competed directly with banks and other legacy financial institutions. Since the pandemic began, we’ve seen a new wave of startups building technology solutions targeting credit unions and community banks, to help these organizations modernize their operations and better compete with fintechs and other larger incumbents,” said Lucas Timberlake, co-founder at Fintech Ventures Fund.
BNPL (buy-now-pay-later) is a particular area of interest for large companies and startups alike. As Mastercard’s Les Matthews explained during his panel in Charlotte this week, BNPL can be “another tool for managing finances” and can help “diversity and extend someone’s purchasing power.”
But the space is in constant flux as big players, like Mastercard and Apple, enter and early players like Klarna have struggled with layoffs and losses recently. Despite the challenge in the BNPL space, Matthews said there is opportunity for those who can bring a better consumer experience to market and those who can figure out how to improve loyalty and access to credit down the road.
THE STATE OF FINTECH: SIGNS FOR OPTIMISM?
How much fintech startups can insulate themselves from market turmoil in the coming months is an open question. But outside capital has not entirely stopped, as investors look for fintech startups tackling major gaps in the space.
“I’m still quite optimistic on early-stage fintech investing and am not yet seeing a significant slowdown at the pre-seed/seed stages in terms of invested dollar volume or valuations. At the Series A level and beyond, we are seeing a noticeable decrease in funding availability and valuation corrections, something that was bound to happen at some point, given where the market had moved to,” added Timberlake.
Keep Financial (launched by Kabbage’s co-founders), FilmHedge, Groundfloor, and Wayflyer all announced significant outside investment rounds this year. (TAG’s 2022 Fintech Ecosystem report goes deeper into the trends and recent big moves for those looking to explore more).
The pre-seed through Series A funding has seen some significant headlines this year as well. Verdata, Charityvest, Uplinq, Hello Donor, Ledgible, Audit Sight, Layr, Gridline, Bear Tax, and Alto Solutions all raised venture capital funds in the first part of 2022. This is as funding to global fintech companies fell 18% quarter-over-quarter, according to CB Insights.
Funding isn’t the only reason for optimism. The local fintech scene has continued to attract new talent and expand the overall talent pool recently, with news that startups like Capital on Tap are expanding their footprint in the city.
Capital on Tap, which just crossed the 200,000 customer mark in the SMB credit card space, said moving into Atlanta was a strategic decision for the scaling company. It recently raised $200 million in funding for expansion efforts.
“In Atlanta, our customer operations agents sit in the same office as our corporate staff. We collaborate every day, sharing insights from both sides all in the interest of better supporting and communicating with our customers,” Kiera Wiatrak from Capital on Tap, told Hypepotamus. “We can’t control the economy, but we can provide the best possible product and experience to help small businesses weather the tough times and thrive in the better ones.”
Another reason for optimism: Corporations like Visa are expanding their footprint in Atlanta specifically to capture local fintech talent. The credit card giant is the latest corporate sponsor of ATDC, and if the turnout at this week’s Entrepreneurs Night was any indication, the local fintech community is ready to start building.