Fintech is dead. Long live fintech.

For all of its progress, fintech is still emerging tech. Reaching its potential will require a human-centered customer experience.

Innovation in the financial services space has brought a number of conveniences over the past decade. From using our phones to deposit checks and tap to pay to splitting bills with apps like Venmo, more consumer-friendly banking and payment methods are widely available. And yet, we still have to wait in line to pay for things at brick and mortar stores, including drive-thrus.

Despite the range of emerging tech, apps, and services, no big bank, startup, or tech company has designed a revolutionary UX or UI. At least not yet. The power struggle between fintech, legacy firms, and Big Tech continues to define the consumer experience. Where established institutions have been reliable from a security standpoint but unable to modernize fast enough, newer players are resurging from recent macroeconomic challenges. However, consumer trust in fintech is a critical factor, particularly in the wake of blunders like the Synapse fiasco.

Combined with increasing regulation from Washington, the next frontier of fintech waits in the wings. Moving the digital financial services ecosystem forward means the industry will have to figure out how to use technology safely and responsibly. So, is fintech going to make it? Here are some current trends in the B2B and consumer fintech space.

Fintech’s investment winter showing signs of warmth

After a decade of rapid growth, funding for the fintech industry dropped dramatically in 2021 and has declined 70% since, according to a 2024 report by Boston Consulting Group. The unexpected and dramatic closure of several U.S. banks in 2023 certainly complicated matters. However, for fintech startup Brex, the collapse of Silicon Valley Bank turned out to be a lifeline — the corporate expense management platform scrambled to extend credit lines to 4,000 impacted companies in 36 hours. 

Industry analysts say fintech’s funding winter was likely a short-term correction and the VC market has lost some of its bearishness. A 2023 outlook from BCG and QED Investors estimates that the global fintech sector will grow in value to $1.5T by 2030, a massive leap from its current value of roughly $300B.

The promise of AI, as well as a significant underbanked population globally, are just some of the reasons for an optimistic outlook. However, the path forward will be ruled by profitability, scalability, and compliance — gone are the days of burning cash and skirting regulations.

Financial AI use cases are on the rise

While digital native fintechs are able to innovate faster than traditional banks, the industry is catching up to the business case for AI. Examples include fraud prevention, compliance management, creditworthiness scoring, and chatbots for customer service and personalized financial advice.

One area that is showing clear ROI in its use of AI is the customer contact center, said Chris Albrecht, SVP and CX expert at Here (formerly known as OpenFin), in a recent webinar with Modus. “Everything within a contact center is quantified and tracked … and you can define what success looks like,” he said. Albrecht says that AI-powered contact centers are seeing, at minimum, 20% faster workflows. “But we're seeing a lot of that enhancement north of 80% as well,” he said.

A 2024 SAP Concur CFO Insights survey found that 51% of CFOs are investing in AI, although only 4% say they have a strong understanding of how AI can be used in finance. This is where reskilling and upskilling will be necessary for financial services in order to provide human oversight to the automated outputs of AI. Organizations also need to establish clear AI governance to balance innovation, financial stability, and risk management.

Embedded finance is redefining the customer experience

Financial products and services are being embedded into non-financial, everyday experiences at an increasing rate via APIs (application programming interfaces). Embedded finance offers a more intuitive, less fragmented customer experience by layering in financial features within the user’s real-time moment of need. Beyond payments, examples of embedded finance can include lending, insurance, and BNPL (buy now, pay later).

B2C examples abound. Take everyone’s favorite omnichannel brand, Starbucks. Customers who prepay in the loyalty app are incentivized with more points for their purchases, and they get to skip the line. Not only does this digital rewards platform give Starbucks key insights into customer preferences and behaviors, but Starbucks also gets to hang onto all of that stored cash, interest-free — which it turns out, at $1.6B, is more than many banks’ reserves.

For B2B, embedded finance opportunities are beginning to take off. This is a seismic shift for a sector where 42% of transactions still use paper checks. Enter Melio, which helps small businesses accept and make digital payments by integrating with platforms like Shopify and Quickbooks. On the Shopify side, merchants can pay and manage bills from vendors and suppliers, all within the same Shopify account they use to process sales. Another example is Gusto Embedded, which uses bank partners like JPMorgan Chase to embed its payroll product within existing platforms.

Firms that are successful with embedded finance are the ones that not only solve a customer need, but increase usage and loyalty with the technology.

Fintech needs to strike a balance on how to best serve customers 

No matter how shiny the packaging, banking is banking, and companies must find a way to communicate that reality to their customers. Any new financial product is still subject to the same old market forces, and that truth should be clear through marketing, as well as UX and UI.

Inexperienced investors might expect more stability and guaranteed gains through startups like Acorns, which makes micro-investing easy. Intolerance for riding out unavoidable downturns in the market means new users are more likely to abandon these platforms over conditions that long-term investors generally accept.

Plus, digital processes shouldn’t always be frictionless. They should match the level of risk involved. For instance, getting into margin investing on Robinhood — which can lead to losses greater than the starting deposit — shouldn’t be as easy as onboarding on the basic, free version of the app.

The Consumer Financial Protection Bureau agrees — a proposal to add more oversight to digital wallets and payment apps, bringing the industry on par with banking and credit unions, recently went before Congress, triggering fierce debate. Wherever the policy ends up, companies must integrate the reality of consumer risks into their UI and UX to avoid potentially major problems. Consumers lost a record $10 billion to fraud in 2023, with the majority of losses coming from investment scams.

So, where is this all going?

Can fintech survive? As fintech evolves to match the security infrastructure of banks to enhance customer confidence, traditional financial institutions are adding more digital experiences to stay competitive. Customers will continue to reward the players that deliver intuitive and personalized experiences with self-service capabilities. And from a holistic perspective, moving toward a more accessible, transparent financial system will benefit communities by fostering entrepreneurship, increase better financial habits and maturity, and close historical wealth gaps.

Modus remains focused on ensuring financial services platforms deliver the best available user experience. Our work with fintech retailers such as Payomatic streamlines some of the challenges customers experience, from managing multiple profiles to shopping in-person or online. We’ll continue to keep up with the promise and pace of change in fintech, and guide businesses with similar challenges through the next frontier of financial services.