Fintechs have been in a trough since the Federal Reserve’s interest rate hikes began in 2022, but analysts expect that to end as the industry gets accustomed to a different macroeconomic world.

Fintechs attracted a lot of venture capital before the rate hikes, Sarah Lamont, senior associate at global fintech venture capital firm F-Prime Capital, told Bank Automation News. With high rates, VCs are reducing the amount they are investing and waiting for a favorable environment to resume funding on all cylinders, she added. 

Funding 

AI companies and mature fintechs were relatively untouched during this trough, Lamont said. 

Total global fintech funding dropped 20% year over year in 2024 to $28 billion, according to a Jan. 30 S&P Global report. The number of funding rounds in 2024 of more than $100 million hit 65 deals, a 15% YoY increase. 

“I am cautiously optimistic,” Charles Birnbaum, partner at Bessemer Venture Partners, said during a panel at Fintech Meetup on March 11. 

Companies that are catering to businesses will find it much easier to raise money because there is quicker route to profitability and prove that their solution is worth investing in, he added. 

While young startups will look to VCs for investments, the VCs are looking toward public markets for exits to get back locked up capital for new funding rounds, Birnbaum said. 

IPOs 

“My gut tells me there will be a lot of M&A and let’s see what happens to the IPO market” Andrew Jamison, chief executive of spend management provider Extend, told BAN. “If we see a couple of successful IPOs with Klarna and others, … I think maybe that will give people the confidence [and] more people will go public.” 

While investors hope mature players like the Swedish buy now-pay later fintech Klarna have successful IPOs, expectations might be too high. 

CoreWeave, a cloud and data management service provider that boasts Nvidia as the holder of 39% of its shares, went public on March 28, but its shares have moved sideways since. 

The Roseland, N.J.-based company planned to raise $1.5 billion from the public markets at an offer price of $40 per share, but trading for its stock opened at $39 per share and closed at $38.55 on the day it went public. 

Shares of CoreWeave (NASDAQ: CRWV) were trading at $37.08 per share at market close today, down 7.3% from the previous market close.

With AI-driven IPOs not faring well and no fintech IPOs on the horizon, many investors are looking toward the M&A market. 

M&A 

Google plans to acquire cybersecurity company Wiz for $32 billion to provide better cyber security for its cloud customers and to work with cloud providers seamlessly, the tech giant said in a March 18 release. 

The fintech industry is very crowded, Jamison said. 

“There are dozens of companies that are growing faster than any consumer fintech companies I’ve ever seen, and they’re really just undercutting the existing market,” Birnbaum said. Companies that haven’t found a core business offering or are not profitable will be ripe for acquisition.  

SmartBiz, a fintech providing loans to small and medium-sized businesses, acquired United Community Bancshares and its subsidiary, Centrust Bank, on March 17 to gain a banking charter and expand its services to SMBs, according to SmartBiz release. 

Similarly, crypto platform Kraken plans to acquire trading platform NinjaTrader for $1.5 billion, according to Kraken’s March 20 release. 

Banks are also jumping on the M&A bandwagon, with Birmingham, Ala.-based Legacy Community Federal Credit Union agreeing to acquire First Community Bank of Cullman in an all-cash transaction, according to Legacy’s March 18 release. No terms were disclosed. 

While the industry faces macroeconomic headwinds, these companies did raise money in March: 

Mercury raises $300M in series C 

Fintech startup Mercury raised $300 million in a series C round led by new investor Sequoia Capital, valuing the company at $3.5 billion, according to Mercury’s March 26 release. 

The San Francisco-based company offers bank accounts integrated with other financial tools businesses need like venture debt, treasury management and business credit cards. 

Kosli gets $10M to expand 

Kosli, an Oslo, Norway-based provider of automated governance solutions for software delivery, has raised $10 million in series A funding round from Deutsche Bank Corporate Venture Capital and other investors, according to a release from Kosli on March 21 release. 

The company will use the money to accelerate its expansion into large financial institutions, grow its team and enhance its governance automation technology, the release stated. 

Abu Dhabi Commercial Bank and consultancy PwC are Kosli’s existing clients, according to the company. 

Flex raises $225M  

Back-office process automation service provider Flex has raised $25 million in series A funding from Titanium Ventures and raised $200 million in venture debt from Victory Park Capital among others, according to Flex’s March 10 release. 

The money will be used to develop Flex’s consumer arm, allowing business owners to manage personal and company finances on the same platform, the release stated. 

$33M raised by NymCard for growth  

Dubai-based embedded finance platform NymCard has raised $33 million in a series B funding round, led by QED Investors, according to a NymCard release on March 19. 

The money will be used to deepen its offerings in the Middle East and North Africa to develop new tools for payments and lending as well as add institutional clients, the release stated. 

Mastercard, Al Rayan Bank and Faysal Bank are among NymCard’s customers, according to the company.