a16z | Dec 20, 2022

This time of year, the floodgates open to a deluge of best-of lists and end-of-year recaps. But we at a16z have always been more interested in what’s to come. Here are the biggest ideas for Fintech to tackle in 2023:

• Compliance as a Competitive Advantage:  Post-Dodd-Frank, financial services companies face more than 50k regulations across dozens of federal and state agencies (and that’s just in the United States).
  • The existing and very manual compliance and risk processes are failing at both large financial institutions and at fintech startups supported by sponsor banks. While compliance is complex for businesses operating in just one geography, it’s even more difficult to manage across multiple countries. As more global companies embed fintech, the need for global compliance and risk infrastructure increases.
  • “We expect to see more tools for sponsor banks to manage third parties; for fintech companies and companies embedding financial services to manage all aspects of risk and compliance; and more compliance infrastructure serving default global companies.”

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• Money saving and financial health tools:  With the backdrop of a challenging macro environment, a renewed focus on cash management, equity efficiency, and preserving capital markets relationships will spawn both the adoption and proliferation of a host of new tools and services to help companies better manage their financial health.
• AI/GPT to unlock credit counseling:  it unlocks labor supply at 10x a lower cost than humans.
  • “We expect to see this capability — and services like it — become available for subprime and early-credit consumers in particular. In that simple financial coaching could dramatically improve many consumers’ credit files, this technology could act as a counterweight to some of the negative macroeconomic factors currently affecting consumer credit, such as inflation, job loss, and depleted savings accounts.”
• B2B banking infrastructure: As every company becomes a fintech company, we have seen an explosion of fintech infrastructure companies: KYC/AML, data APIs, bank accounts as a service, issuer/processors, etc. Thanks to these companies, it is much easier to launch a new fintech company, and for software companies to embed fintech.

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• Fintechs becoming banks:  In 2023, we expect more digitally native lenders to pursue bank charters. In the current higher interest rate environment, marketplace lenders are offering high-yield accounts to collect deposits on behalf of their capital partners who in turn buy their loans. This strategy may be a first step toward building their own capital base. As these digital lenders look to become banks, what remains to be seen is how regulators will respond.

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