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January 24, 2024
1 min read

Brighter Days Ahead: The Promising Venture Capital Outlook for Payments

A slide in global fintech venture capital funding over the past two years hasn’t affected the payments sector as much and there are signs that payments startups may be closer to a recovery. While global fintech funding fell 50% in 2023 compared to the previous year, funding for payments startups only decreased by 30%. Investors have identified several factors that may have contributed to the relative strength of the payments sector, including the shift in focus towards revenue models.

Investment in the payments sector is expected to focus on restaurant payments technology, digital wallets, buy now/pay later lending, and business-to-business digitized payments. While investment activity in the sector is predicted to remain muted compared to two years ago, there were still some standout deals in the payments sector, such as Stripe’s $6.5 billion funding round and Nuvei’s acquisition of Till Payments for $30.5 million.

Despite the overall slowdown in fintech investment, observers expect VC funding to flow into payments at a similar rate as last year, with some healthy M&A activity in the sector. The challenge, however, is that payments entrepreneurs and investors may have unrealistically high expectations, and payment startup valuations and appetite for risk have declined. Maturing venture-backed payments startups and fintechs are the most likely candidates for acquisition, especially as valuations fall to more reasonable levels.

Key points:

  • Global fintech funding in 2023 fell by 50% compared to the previous year, with payments startups experiencing a 30% decrease in funding.
  • Payments VC funding this year will focus on restaurant payments technology, digital wallets, buy now/pay later lending, and business-to-business digitized payments.
  • Several standout deals were made in the payments sector last year, including Stripe’s $6.5 billion funding round and Nuvei’s acquisition of Till Payments for $30.5 million.
  • VC funding is expected to continue flowing into payments at a similar rate this year, with some healthy M&A activity in the sector.
  • Maturing venture-backed payments startups and fintechs are likely to be targets for acquisition as valuations decline.
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