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2024 Money20/20 Europe Key Takeaways and Top Themes – Fintech Schweiz Digital Finance News


The Money20/20 Europe conference, one of the largest annual payments and fintech events in the region, returned to Amsterdam from June 04 to 06, 2024, bringing together global innovators, venture capitalists (VCs), banks, regulators and media platforms to discuss the fintech industry’s biggest opportunities and most pressing issues.

The 2024 edition ran under the theme “Human X Machine”, examining the dynamic relationship between humans and intelligent machines, and how a partnership between artificial and human intelligence can forge a new era in finance.

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With over 350 speakers, the event explored significant technological advancements and trends, including artificial intelligence (AI), open banking, growing collaboration between industry stakeholders, and business-to-business (B2B) fintech innovation.

Optimism persists

McKinsey reports that, despite funding challenges over the past three years, optimism remains strong within the fintech ecosystem. Funding volumes have stabilized with year-to-date numbers standing at about the same level as the last three quarters of last year and industry stakeholders showed confidence on the sector’s growth prospects, particularly in the untapped potential of B2B fintech.

The consultancy notes a shift in investment patterns with a larger portion of capital going allocated to middle-market companies rather than just large, high-profile deals. Mid-market companies typically refer to the companies that are not as large as major corporations but which are more established than early-stage startups. In Q1 2024, the share of smaller deals of less than US$100 million accounted for almost 70% of the total, suggesting a diversification of investment that’s expected to drive greater innovation in untapped fintech verticals, including B2B fintech.

The growth of B2B fintech

Initially, fintech innovation focused on consumer-targeted services such as mobile banking, peer-to-peer (P2P) payments, personal finance management, and investment apps. However, there has been a growing emphasis on B2B fintech solutions.

McKinsey notes that this year’s Money20/20 Europe edition highlighted the continuing acceleration and scaling of B2B business models. Successful business models are scaling well, especially in B2B, and are moving from exploratory niches to robust growth domains.

FXC Intelligence, a data platform specializing in the cross-border payment and e-commerce sectors, reports signs of growing engagement with the infrastructure side of the industry, with more companies discussing payment rails, networks and interoperability. This has led to greater interest in real-time payment solutions, particularly in markets with traditionally slower rails and for applications such as B2B payments.

Ecosystem converges

One main theme at the 2024 Money20/20 Europe conference was the convergence of the fintech ecosystem and the collective willingness to solve issues together. Many conversations involved fintech startups, banks, regulators, platform operators and merchants, all seeking to unlock new opportunities.

While all sides have their own priorities and challenges, fintech startups are recognizing that they need banks for reach, and banks are understanding that they need fintech startups for product, McKinsey reports. It notes that currently, collaborative efforts mainly focus on infrastructure, open banking, digital identity, compliance services, fraud, and anti-money laundering (AML).

Cloud migration opportunities

McKinsey reports significant opportunities in cloud migration. While nearly all players are in some stage of a transition, considerable progress is still needed. McKinsey’s cloud survey suggests that while financial institutions globally aspire to invest more than one-third of their IT spending on private cloud systems, they for now are spending less than half of that.

Likewise, there was much ambitious talk about moving to software-as-a-service (SaaS) solutions for payments, though more action is needed to fully realize this transition. This presents significant opportunities for providers, the consultancy says.

AI still in the early adopter phase

While AI was a major theme at this year’s event, research and advisory company Forrester reports that discussions remained mostly high-level and focused on operationalizing generative AI (gen AI). This includes conversations on budget and generating return on investment, legal and ethical implications, as well as investing in appropriate data and risk foundations.

Overall, organizations are largely focusing on how they can realistically make use of the technology, with proven areas such as fraud prevention currently winning out over some of the more exciting but experimental areas of focus.

Experts noted that technology departments currently lead gen AI efforts, but for significant impact, business ownership is crucial. Seamus Smith, group president of global B2B payments at FIS, highlighted the potential of AI and machine learning (ML) in transforming B2B payments, though he noted the early stage of these technologiesm

Open banking opportunities

Changing payment methods is difficult because of the complex value chain, high security and reliability standards, and business models that depend on scale. This is why open banking payments have been slow to catch on since the Payment Services Directive 2 was introduced. In January 2024, only 8.2% of digitally enabled customers in the UK used open banking payments, and these payments still made up a small portion of total payment volume.

However, there was a lot of energy and optimism about open banking at Money20/20 Europe, with practical solutions discussed that could lead to significant growth in open banking payments by 2025, Forrester reported.

In retail, discussions focused on how payment stakeholders can replicate the success of card schemes. One approach is to unbundle card services and add value as needed. For example, merchants could offer discounts or rewards to customers who use open banking payments, or provide insurance for transactions where customers might want a chargeback option.

Huw Davies, co-founder and CEO of Ozone API, and Marie Walker, open futurist at Raidiam, explored the evolution of open banking into “open everything”, embedding financial services into sectors like healthcare and transportation to create new market opportunities, the Fintech Times reports. They emphasized the importance of leveraging common infrastructure and industry collaboration.

Tokenization sees slow adoption

Tokenization, a process which involves converting assets into digital tokens that can be traded on a blockchain, is gaining increasing traction within the financial industry.

Industry leaders discussed the progress and future of tokenization. Anthony Day, head of strategy and marketing at Midnight, noted that mass adoption of tokenization has been slower than expected, a sentiment which was shared by Ryan Rugg, head of digital assets at Citi Treasury and Trade Solutions, who expressed surprise at the slow progress.

Alisa DiCaprio, chief economist at R3, emphasized that tokenization offers more efficient solutions compared to existing paper-based systems. It allows for continuous, real-time transactions and can integrate various systems seamlessly.

 

Featured image credit: Money2020EU



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