Big ideas in Fintech for 2024

For our final newsletter of 2023, a16z's Fintech partners previewed the one big idea they believe will drive innovation in 2024.

The Rise of the Developer as Buyer in Financial Services

In 2024, the developer will become one of the most important influencers in the purchase of financial services infrastructure.

Historically, financial services infrastructure purchases were mostly driven by the economic buyer (“What’s my ROI?”) or the business lead (“Does this solve my use cases?”). But there is now a third, increasingly influential constituent: the developer. Look no further than Moov’s growing fintech developer conference and associated 4,000+ strong community. In tandem, developers at larger financial institutions and insurance companies are becoming more influential in buying decisions.

The rise of the developer as buyer in financial services companies of all sizes favors new entrants; for fintech companies that pride themselves on a great developer experience, this will play to their advantage. Fintechs are already prioritizing the creation of developer sandboxes to let customers “try before you buy,” and are even open sourcing parts of their solutions. The developer-buyer would, of course, prefer to get a sense of how the product works prior to full implementation. But isn’t this strategy also better for everyone?

For larger financial institutions selling their infrastructure, appealing to the developer will be a new muscle that may require improvements in product architecture (including up-to-date documentation!). Still, it’s clear these institutions are recognizing the need to influence the developer, as well.

– Angela Strange, a16z fintech general partner

Tech Helps Community and Regional Banks Compete

In the wake of SVB and First Republic, community and regional banks are facing significant regulatory pressure and margin compression from a higher rate environment. Despite challenges, these institutions remain vital for the health and vibrancy of our local economies and small businesses. My hope is that we’ll see fintech companies step up and provide needed tools and technology to help this ecosystem of banks compete with larger institutions, manage balance sheet risks effectively, and better serve their clients.

The time is now!

– David Haber, a16z fintech general partner

Financial Professional Services Get Supercharged by Software

The professional services work of financial services — the accountant, the tax adviser, the wealth manager, the investment banker — will change. These professions typically involve researching and applying learned expertise, as well as client management. Historically, software has mainly assisted in tracking workflows, with only some analytical tools (e.g., transaction categorization in accounting). With the advancement of generative AI and LLMs, more of the work can be automated, including administrative tasks, the research process (collecting and ingesting data, searching for information), summarizing and surfacing insights, and report generation. A tax advisor can more easily look through precedent to answer a question, an accountant can automatically generate a financial statement, a wealth advisor can scenario plan across a broader set of data.

Software may eventually automate the task entirely, but for now the skill set for humans in the loop will shift toward specialized expertise, reviewing the generated work, and client-facing engagement. As always, it’ll be a race between distribution and innovation: Incumbents that have already established relationships with financial professionals will need to incorporate AI into their software, while startups with modern software capabilities will need to find and build trust among new customers.

– Seema Amble, a16z fintech partner

LLMs Capture New “Foundational Customer Units”

Operating systems are incredibly valuable — they own what we call the foundational customer unit (FCU). Historically, certain types of unstructured data have been challenging for operating systems to ingest. For example, Vertafore or Applied Systems in insurance have struggled to expand outside of tracking policies once they are written, since collecting data earlier in the process requires ingesting information that lives in email, PDFs, or spreadsheets. In 2024, startups leveraging LLMs will capture data that has been challenging for incumbent operating systems to collect, while automatically tagging and storing it. If these startups capture FCUs upstream from traditional platforms, we may see segments that have been served by software oligopolies shift into a new era.

– Joe Schmidt, a16z fintech partner

New Tools for Banking and Trading

In 2024, we’ll see ambitious founders tackle some of the messiest problems that financial institutions have to offer.

Though the investment banking and trading services market produces nearly $350 billion of annual revenues globally, it still largely relies on systems and software built on-prem in the 1980s. While banks have started to buy cloud-based solutions to serve various horizontal needs — Salesforce for CRM, Azure for cloud computing, Databricks for lakehouse architecture — the tools vertically deployed in the banking and trading businesses to model risk, confirm/settle/clear trades, and record client orders are often manual (Excel), outdated, or both! At the same time, the buying behavior at these institutions is changing. Willingness to try new tools is at an all time high.

– Marc Andrusko, a16z fintech partner

AI Will Push Latin American SMBs to Go Digital

Many merchants in Latin America use WhatsApp for customer service and support. These interactions predominantly involve tasks in which consumers expect quick responses, such as quoting, scheduling, and logistics. Currently, merchant response times can vary greatly depending on representatives’ availability and the complexity of the request. AI assistants could significantly streamline these time-consuming tasks, unlocking value for merchants and consumers.

One recent example: this year, Nissan developed chatbots on WhatsApp that direct customers in Brazil to one of its nearby car dealerships. Nissan estimates that 30 to 40% of its sales leads in Brazil are now generated via WhatsApp, and the company’s average response time dropped from 30 minutes to a few seconds.

However, though such early inroads are promising, structural challenges remain before the technology can be widely adopted by Latin American SMBs. In Brazil, for instance, over 40% of SMBs still rely on pen-and-paper operations. As automated customer service becomes increasingly prevalent and consumers grow accustomed to these prompt interactions, businesses will be compelled to digitize their workflows. There’s an opportunity for startups to facilitate this digital shift in the region.

– Gabriel Vasquez, a16z fintech partner

AI Will Be the Key to Higher ROE

In the coming year, we’ll begin to see financial institutions adopt AI-native applications across a variety of operational workflows (and we’ll likely be surprised at how big of an economic impact the technology has on their P&L). While the opportunity set spans both revenue generating and middle- to back-office functions, adoption in 2024 will be focused on use cases throughout engineering, procurement, legal, compliance, and risk management.

– David Haber and Marc Andrusko

More from the a16z fintech team

My First 16

A new video podcast series in which a16z partner Seema Amble interviews founders and CEOs of fintech companies about how they acquired their initial customers and the hard lessons they learned along the way. The series explores how B2B fintech founders should think about targeting their first set of customers and how to engender trust in a new startup.

In the most recent episode, Seema chatted with Dimitri Dadiomov, co-founder and CEO of Modern Treasury. She has also interviewed Zach Perret, co-founder CEO of Plaid, Jason Gardner, founder and current executive chairman of Marqeta, Waseem Daher, co-founder and CEO of Pilot, and Immad Akhund, co-founder and CEO of Mercury.

Read more »

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