For one, describing and marketing financial products to customers is often an uphill battle, both because of the complex nature of these products and because of strict regulatory oversight. These same aspects can make internal operations difficult to streamline and automate.

Generative AI has the potential to address these challenges by sifting through, summarizing, and personalizing complex information at scale to improve customer experiences and employee productivity. It can also generate synthetic data to support mission-critical machine learning (ML) applications like fraud detection.

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Fintech deal volume, on the other hand, increased for the first time since Q1’23.

Based on our deep dive below, here is the TL;DR on the state of fintech:

• Fintech funding falls 16% QoQ to its lowest quarterly level since 2017. Quarterly funding declined to $7.3B in Q1’24, counter to the 11% rebound in the broader venture market. That said, fintech deals increased by 15% QoQ as investors focus on writing smaller checks.
  
  
• Average deal size YTD in fintech is $11.1M, down 18% vs. $13.6M in full-year 2023. A dearth of blockbuster deals is driving the decline: In Q1’24, there were just 12 mega-rounds (deals worth $100M or more) representing 26% of total funding — the lowest share since Q2’23, when it hit 23%. Nevertheless, these rare deals can reach a massive scale: the biggest fintech round in the quarter was UK-based challenger bank Monzo‘s $431M Series I deal — worth 6% of the global funding total. 
• Mid- and late-stage deals make up 20% of deals YTD, up from 18% in full-year 2023, as investors look to startups with more established track records. So far this year, investors are favoring later-stage companies to a greater degree than the past 2 years. The shift is most pronounced within specific sectors. In payments, for instance, mid- and late-stage deals make up 29% of deals YTD, vs. 21% in 2023. In digital lending, mid- and late-stage deals make up 40% of deals YTD, nearly double the 2023 total.
• Banking startups have a billion-dollar quarter. Banking funding doubled in Q1’24 to reach $1B across 38 deals. Five of the top 10 banking deals in the quarter were late-stage, and 2 were mega-rounds of $100M+. Besides the Series I deal for Monzo, Germany-based banking-as-a-service company Solaris raised a $104M Series F round.
• Europe fintech funding increases 22% QoQ to $2.2B. Europe was the only major global region to see fintech funding increase in Q1’24. The continent also led all regions with 37% of exits in the quarter. Meanwhile, funding declined 11% QoQ to $3.3B in the US, which still led all regions in total fundraising.

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Its corporate venture arm, MassMutual Ventures, was among the top 25 most active CVC firms in 2023, backing 22 companies. Insurance sales are MassMutual’s foundational growth driver, so the company prioritizes investments to serve policyholders — and sell more insurance. 

But its reach extends far beyond core life insurance. The company also offers annuities, retirement plans, and other financial products to businesses and consumers.

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Based on our deep dive below, here is the TLDR on the state of fintech:

• Global fintech funding nosedived to $39.2B in 2023 (down 50% YoY), while deal volume slipped 38% to 3,801 — the lowest levels since 2017. On a quarterly basis, Q4’23 saw the fewest fintech deals in 7 years.
• The US increased its dominance of fintech, drawing 41% of deals in 2023 — its highest share since 2016. Meanwhile, Asia’s deal share fell to a recent low of 20%. The uptick in US deal share came as investors shifted toward early-stage companies: early-stage deal share in the US climbed to its highest level in more than a decade.
• At 612 deals, annual M&A exit volume remains higher than it was any year prior to 2021. Quarterly M&A deals saw a modest gain in Q4’23, rising to 149. Europe saw 34% of these deals — more than any other global region — but the top 3 M&A exits in Q4’23 all went to US fintechs.
• Eight fintech unicorns were born in Q4’23 — a 6-quarter high, but far below 2021’s quarterly average. Asia contributed half of the new unicorns — 3 of which are based in Gulf States. This was the first time since 2019 that more fintech unicorns were born in Asia than in the US in a given quarter.
• Investment to banking startups has evaporated, with funding falling 72% in 2023 — the biggest YoY decrease across fintech sectors. Payments startups saw funding decline just 30% YoY — the least of any fintech sector — though the annual funding total was propped up by 2 massive rounds to Stripe ($6.5B) and Metropolis ($1B). Payments remains the most well-funded fintech sector by a wide margin.

Below, we’ll explore these themes across 7 charts.

Globally, funding to fintech startups fell 50% YoY, slipping below $40B for the first time since 2017. Fintech fared worse than the broader venture market, which saw funding decline 42% YoY in 2023.

The average and median deal sizes in fintech continued to decrease from 2021’s highs, falling to $13.8M and $3.2M, respectively, in 2023.

Among global regions, LatAm and Europe saw the largest drops in fintech funding in 2023:

• LatAm funding slid 68% to $1.2B
• Europe funding fell 64% to $6.5B

Q4’23 was a particularly harsh quarter for fintech in terms of deal activity.

The quarter saw fintech startups secure just 740 deals — the fewest in a quarter since Q4’16, and the third straight quarter of declines. 

Among the top deals of the quarter, payments solutions for online and in-person shopping were prominent. These included SumUp ($307M Series F), as well as buy now, pay later players Tamara ($340M Series C) and Tabby ($200M Series D). Notably, payments leaders Checkout.com and PayPal invested in the deals to Tamara and Tabby, respectively.

Despite global declines in deal volume, the US picked up a greater share of deals in 2023 at 41%. The 4-percentage-point increase came at the expense of Asia, which lost 3 percentage points in share YoY. The US’ share was the highest for the country since 2016.

Fintech dealmaking in the US has shifted toward the early stages (seed/angel and Series A), which now claim 70% of all US deals — the highest annual share in more than a decade.

While down from a peak in Q1’22, M&A activity remains relatively steady for fintech startups. Financial services incumbents, larger fintech firms, and PE buyers continue to seek out undervalued assets. In Q4’23, global M&A volume ticked up to 149 deals.

While Europe led in M&A deal share in Q4’23 at 34%, the top 3 M&A deals that quarter all went to US-based firms:

• In capital markets, TMX Group acquired VettaFi for $1.1B
• In insurance, Travelers purchased Corvus Insurance for $435M
• In business payments, WEX acquired Payzer for $261M

Eight fintech companies reached unicorn status (valued at $1B+) in Q4’23. Among global regions, Asia led with 4 of these new unicorns, followed by the US with 2. LatAm and Oceania each accounted for 1.

This was the first time since 2019 that Asia outpaced the US in the number of new fintech unicorns in a single quarter.

Within Asia, the Gulf States saw especially strong representation. Two unicorns (Tabby and Tamara) came out of Saudi Arabia, while the United Arab Emirates contributed one (Andalusia Labs).

Within fintech, banking startups’ access to capital has been restricted substantially. In 2023, they raised $2.2B in equity funding, down 72% from $7.8B the year prior.

Wealth tech funding wasn’t far behind, with a decline of 61% YoY in 2023. 

Funding to payments startups, on the other hand, remains relatively strong, down just 30% in 2023. The top equity deal in Q4’23 went to parking management and payment platform Metropolis, which raised over $1B.

While fintech funding fell across every global region in 2023, Africa was the least affected by the downturn. Africa-based startups drew $0.8B in funding in 2023, down just 27% from 2022.

Meanwhile, the continent’s early-stage deal share declined to a recent low of 83% in 2023. While the vast majority of deals are still early-stage, this trend suggests a growing contingent of companies are maturing into later stages of funding.

Across the whole year, the top 2 deals in Africa went to North Africa-based startups: Egypt-based MNT Halan ($260M Series D) and Morocco-based Cash Plus ($60M round). The third-largest round went to Kenya’s M-Kopa ($55M round).

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Although financial services players have been slower to move — largely due to concerns around compliance and data quality — they are increasingly taking steps to integrate LLMs into their offerings.

However, how they do this varies from one company to the next. Incumbents are taking several different approaches to deploying LLMs, including:

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Fintech deal activity also continued to trend down in Q3’23. Deal count slid back to 2017 levels, falling by 18% QoQ to hit 754.

Using CB Insights data, we highlight key takeaways from our State of Fintech Q3’23 Report, including:

1. Global fintech funding falls 3% QoQ to hit $7.4B.
2. US fintech funding experiences a 5% drop in Q3’23.
3. Unicorn births remain at 3 in Q3’23.
4. Fintech mega-round funding climbs 50% QoQ.
5. Digital lending funding jumps 70% while deals fall 56% QoQ.

Let’s dive in.

Global fintech dollars dipped 3% QoQ to hit $7.4B in Q3’23, leveling off after seeing sharp declines in most quarters since the end of 2021. Meanwhile, deal count fell by 18% QoQ.

This fintech funding stabilization was supported by $100M+ mega-rounds, which accounted for 33% of total fintech funding ($2.4B) in Q3’23.

The top 3 deals of the quarter went to:

• Hong Kong-based microfinance platform Micro Connect ($458M Series C)
• US-based spend management company Ramp ($300M Series D)
• India-based digital lending solution Perfios ($229M Series D)

While US-based fintechs saw a 5% drop in funding QoQ, they continued to drive a significant chunk of global fintech funding. The US accounted for almost half (47%) of all quarterly fintech funding in Q3’23 — the highest share among global regions.

Asia, on the other hand, secured a smaller share of the funding total but saw funding rise substantially. Companies in the region experienced an 82% increase in funding QoQ.

This jump was supported by deal-making activity among digital lending companies — 6 of Asia’s top 10 deals in Q3’23 went to companies in this category.

Unicorn births also showed signs of stabilizing in Q3’23. Like the previous quarter, 3 unicorns (private companies valued at $1B+) were born in Q3’23, bringing the total unicorn count to 312.

Viewing unicorn births through an annual lens shows just how pronounced the unicorn slowdown is in the fintech arena. Just 8 unicorns have been born in 2023 so far, down from 163 in 2021 and 73 in 2022.

The US accounted for 2 new unicorns in Q3’23: crypto custody platform BitGo ($1.8B valuation) and insurtech Kin ($1B). The only other unicorn born in Q3’23 was Hong Kong-based microfinance platform Micro Connect ($1.7B).

Fintech mega-round funding rose 50% QoQ to hit $2.4B across 14 deals in Q3’23. Despite the upward trajectory, this marked fintech’s second lowest quarter for mega-round funding since 2016.

Asia surpassed the US in mega-round funding, securing $1.1B across 5 deals. The US raised $1B across 7 mega-rounds.

Despite a drop in deals, digital lending secured the most funding among fintech sectors in Q3’23 — funding to the space rose by 70% QoQ to hit $1.7B.

Digital lending’s funding boost was driven in part by mega-rounds, which brought in more than half of the sector’s quarterly funding.

Payments and insurtech tied for second in total fintech funding, raising $1.1B each. While this marked a 22% increase for insurtech QoQ, it represented a 39% drop for payments.

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Three-quarters of this year’s winners are B2B fintechs, including business spend management platforms, cross-border and real-time payment providers, and core banking and infrastructure platforms.

Additionally, 24 companies in this year’s cohort are B2C, including challenger banks, mobile wallets, and retail investing platforms. 

Using the CB Insights platform, our research team picked these 100 private market companies from a pool of over 19K companies, including applicants and nominees. They were chosen based on CB Insights datasets — including equity funding, investor profiles, business relationships, R&D activity, news sentiment analysis, competitive landscape, proprietary Mosaic scores, and Yardstiq transcripts — and criteria such as tech novelty and market potential. The research team also reviewed thousands of Analyst Briefings submitted by applicants.

CB Insights clients can access the entire Fintech 100 list and interactive Expert Collection here.

If you are not already a CB Insights client, sign up for a free trial to analyze each winner’s funding and valuation history, headcount growth, key competitors, and more.

Want to be considered for future rankings? Fill out this initial application form (it’ll take no more than a few minutes). If selected, you’ll be asked to complete our Analyst Briefing Survey so that our analysts can better understand your products, customers, and market traction.

Companies are categorized by their primary focus area and client base. Categories in the market map are not mutually exclusive.

Please click to enlarge.

TOP FINTECH COMPANIES 2023: FINTECH 100 COHORT HIGHLIGHTS

Overall funding and valuation trends: The Fintech 100 includes a mix of companies at different stages of maturity, product development, and funding. The cohort has raised nearly $22B in equity funding across 381 deals since 2019 (as of 9/22/23). This year’s list includes 31 unicorns (private companies with a $1B+ valuation).

Early-stage innovation: Twenty companies in this year’s winning cohort are in early fundraising stages (seed/angel or Series A). Solutions from early innovators are being developed across categories, including B2B BNPL (Mondu and Two), account-to-account (A2A) payments (Banked and kevin.), and mobile wallets and remittances (DANA and LemFi).

Most represented categories: The cohort is broken down into 20 categories. “Spend management” and “insurance” are tied for the largest portion of this year’s winners (9 companies each).

The spend management category is led by later-stage market leaders Brex and Ramp, which both launched generative AI product features this year. The category also includes two new winners in non-US markets: Singapore-based Aspire and Mexico-based Clara.

Insurance is one of the biggest categories for the second straight year. Eight out of the 9 insurtechs are B2B, including two insurance distribution platforms: repeat winner bolttech and new winner Cover Genius. 

Global reach: This year’s winners represent 24 different countries across the globe. Forty-three percent of the selected companies are headquartered in the US — down from 53% last year. The UK comes in second with 12 winners, followed by Singapore with 7.

Additionally, some emerging markets stand out with multiple winners this year. For example, India has 3 winners, while Indonesia and Egypt each have 2.

Novel applications: Two of this year’s winners are developing large language models purpose-built for financial services: conversational AI provider and returning winner Kasisto and financial document processing platform Cognaize.

Two winners in the wealth and asset management category, AlphaSense and SESAMm, have integrated generative AI into their market intelligence platforms for document summarization and extraction. 

Finally, within core banking and infrastructure, embedded finance platforms — like repeat winner Unit and an early-stage new winner Synctera — are growing quickly in the United States.

THE FINTECH 250 CLASS OF 2022: WHERE ARE THEY NOW?

The Fintech 250 2022 cohort has posted some notable accomplishments since October 4, 2022. Collectively, this cohort has seen:

• $10B in equity funding across 64 deals — including Stripe’s $6.5B round in March 2023.
• 14 mega-rounds (deals worth $100M+).
• 2 acquisitions: Uplift was acquired by another Fintech 250 winner, Upgrade, for $100M, and PolicyGenius was acquired by Zinnia.
• 4 new entrants to the unicorn club: eToro, Kin, Liquidity, and Quantexa all hit $1B+ valuations for the first time.

The post Fintech 100: The most promising fintech startups of 2023 appeared first on CB Insights Research.

Using CB Insights data, we dig into key takeaways from our State of Fintech Q2’23 Report, including:

1. Global fintech funding falls by nearly half to $7.8B, its lowest level since 2017.
2. Funding from $100M+ mega-rounds totals $2B — a 6-year low.
3. Payments funding falls 75% QoQ, the biggest decrease across all fintech sectors.
4. LatAm & the Caribbean funding more than doubles, making it the only region to see funding grow QoQ.
5. All 5 of the quarter’s IPO exits come from fintechs based outside of the US.

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Beyond this deal, UBS has also turned to technology to strengthen its leadership position. In fact, it spent roughly $4B on tech in 2022 alone.

Its commitment to technology can be broken down into 2 main objectives. The first is the digitization and expansion of its existing services to enhance the client experience. The second is diversifying its investment and trading products through the use of novel technologies like blockchain, cloud, and alternative investment platforms.

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There are mixed reports on ESG demand and performance. However, several prominent data providers still suggest a relatively healthy market and appetite for ESG among investors. 

For example, despite negative returns for Morningstar’s US Sustainability Index in 2022, it still outperformed the overall market. And according to Refinitiv Lipper, ESG equity funds saw net inflows in Q1’23, while non-ESG equity funds suffered more withdrawals than inflows. 

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Business-to-business (B2B) fintechs were central to its strategy — in fact, 85% of the fintechs accepted in W23 cater to businesses.

While 77% of the fintech companies in the W23 cohort are based in the United States, Y Combinator also turned to emerging markets. The accelerator invested in 5 emerging-market fintechs, most of which cater to businesses. A couple of examples include Colombia-based treasury automation platform Milio and account-to-account (A2A) payments solution Palomma.

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1. Net losses are compounding 
2. Active users are at a fraction of previous peaks
3. Transaction-based revenues are up and down from one quarter to the next but aren’t growing over time

This is old news to the public markets, as Robinhood’s market capitalization is down 77% compared to its exit valuation at IPO in July 2021. 

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But more broadly, Nasdaq is a global capital markets tech company that builds and sells financial software to corporations, investors, and other marketplaces.

These offerings range from platforms focused on data management for environmental, social, and governance (ESG) initiatives to portfolio analytics for asset managers. 

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ESG in investing is the general approach of putting money into companies, funds, and projects that adopt environmental, social, and governance (ESG) principles. It’s a framework for investors to identify opportunities and mitigate financial risks, with the ultimate goal of generating higher returns.

Asset and investment managers now feel mounting pressures concerning the accuracy, biases, performance, and even political motivations of ESG. The dramatic rise and fall of corporate interest in ESG can be seen in recent company earnings call mentions of the term.

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Using CB Insights data, we highlight some of the key takeaways from our Q1’23 State of Fintech report, including:

1. Global fintech funding grows 55% QoQ in Q1’23; $6.5B is raised by Stripe alone. 
2. Early-stage deal share reaches 72%, a new high.
3. Unicorn births fall to 1 for the first time since 2016. 
4. Fintech M&A exits rebound, increasing 15% QoQ. 
5. Banking funding and deals hit lowest levels since Q2’17. 

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Get up to speed with our explainer video — and read on for the full report.

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At the same time, financial innovation, rapid advances in AI modeling, and new digital customer data streams are making the nature of regulatory and compliance management significantly more complicated.

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Fintech was Sequoia Capital’s top investment category in 2022, representing nearly a quarter of the firm’s deals.

Using CB Insights data, we mapped how Sequoia Capital spread its 2022 fintech investments across categories like capital markets, personal finance, real estate, and more.

CB Insights clients can dig deeper into all 25 deals listed above as well as explore Sequoia Capital’s bets beyond fintech using this CB Insights platform search.

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However, some top investors like Andreessen Horowitz (a16z) remained active in the space across various deal stages, valuations, geographies, and sub-industries. 

Fintech is central to a16z’s investment strategy. In recent years, the firm has not only shored up its presence in more familiar sectors like banking, but also reached deeper into newer territory like blockchain. 

Of the 206 deals a16z participated in last year, almost a quarter went to fintech companies — more than any other industry. Sixty percent of these fintech investments closed in H1’22, and the remaining 40% closed in H2’22.

Using CB Insights data, we mapped how a16z spread these fintech investments across categories like payments, blockchain, digital lending, and more. 

Below, we dig into a16z’s top 3 fintech targets in 2022, including key deals in each category.

Payments 

More than a quarter (28%) of a16z’s fintech investments in 2022 went to the payments category. Notable investments include:

• SpotOn ($300M Series F): SpotOn offers a cloud-based platform that provides payment solutions for restaurants and small retailers. 
• Jeeves ($180M Series C): Jeeves offers corporate cards and other expense management tools for businesses, with a focus on credit and payments rails across countries and currencies.
• Tally Technologies ($80M Series C): Tally’s app helps consumers pay off credit card debt more quickly by automating payments.

Blockchain

a16z has actively invested in companies developing blockchain platforms for years. In 2022, 22% of its fintech deal volume went to blockchain companies — although most of these deals closed between January and June, before the year-end turmoil that rocked the cryptocurrency markets. Notable investments include: 

• Matter Labs ($200M Series C): Matter Labs is an Ethereum development company building a rollup layer 2 network designed to lower fees and speed up transactions. 
• Lightspark ($175M Series A): Lightspark, launched in May 2022, is building a Bitcoin payments tool.
• NEAR Protocol ($150M Series B): NEAR Protocol is developing a platform for blockchain-based decentralized applications, with a heavy focus on Web3.
  

Digital lending

a16z’s third-most popular fintech category in 2022 was digital lending, accounting for 12% of the firm’s fintech deal flow. Notable investments include: 

• Point Digital Finance ($115M Series C): Point provides a lending marketplace that allows homeowners to borrow against a percentage of the future value of their property.
• Valon ($60M Series B): Valon offers residential mortgage loan servicing technology through a cloud-native platform. 
• Vesta ($30M Series A): Vesta provides a platform for mortgage origination and underwriting that is designed to streamline processes, reduce risk, and help lenders improve their book of business. 

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Overall, deals fell 8% year-over-year to reached 5,048 in 2022. Africa was the only major region to see deals increase compared to 2021.

Below, check out a handful of highlights from our 178-page, data-driven State of Fintech 2022 Report. For deeper insights, all the record figures, and a ton of private market data, download the full report.

Other 2022 highlights across fintech include:

• $100M+ mega-rounds accounted for $36.5B in funding in 2022, marking a 60% drop from 2021.
• Banking funding declined 63% YoY — the sharpest drop across fintech sectors analyzed — to return to pre-Covid levels.
• US fintech funding fell 50% YoY to $32.8B. Despite the drop, 2022 was the second-highest funding year for US fintechs on record.
• Africa-based fintechs saw a record 227 deals in 2022, a 25% increase YoY.
• Insurtech M&A exits reached a new high, rising 40% in 2022 to 81 deals.
• Fintech unicorn births steadily declined throughout 2022, sinking to a low of 5 new unicorns in Q4’22 — an 87% drop compared to Q4’21.

Download the full State of Fintech 2022 Report to dig into all these trends and more.

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Nevertheless, continued investment and partnership activity in the space highlight emerging technologies that are helping firms use data to improve efficiency and maximize planning process outcomes. These technologies enable capital markets firms not only to adapt to market volatility, but also to pursue new growth opportunities.

Using CB Insights data, we surface 3 capital markets tech trends to watch and highlight what’s next across:

• Equity management practices
• ESG reporting requirements
• Trade analytics and execution

EQUITY MANAGEMENT PRACTICES

Tech to watch: Equity management platforms

Why we’re paying attention: Three of the top 10 capital markets tech deals in Q3’22 went to companies developing equity management platforms, which offer technology for companies and their stakeholders (e.g., investors, law firms, etc.) to manage data related to shareholder equity over time.

These platforms simplify administrative efforts — across areas like accounting, human resources, and legal — and employ data and software modules to help companies plan for future equity changes (such as before a funding round).

Raising $40M in a Series B deal, Pulley offers an equity management platform that enables startups to manage cap tables and fundraising activities. The company also partners with law firms, which offer Pulley’s service to their startup clients.

Meanwhile, Switzerland-based Ledgy, which raised $23M in a Series B, enables startups and investors to automate and manage equity activities across international environments. In addition, the company offers an analytics module that allows firms to model potential funding and exit scenarios.

Quotabook, a South Korea-based equity management platform that raised $11M in a Series A, also targets both investors and startups. For investors, the platform includes broader solutions for fund and portfolio management.

Why it matters: Companies use these platforms to manage existing equity structures, as well as plan for changes to equity related to future funding rounds. Funding to these 3 companies follows a record year for venture investment in 2021, which suggests a strong, ongoing need among startups for solutions to manage equity given the influx of capital.

What’s next: Although funding is down from 2021 highs, startups will continue to raise funding to fuel growth. For instance, half of insurtechs plan to raise funding in the next 12 months. Expect continued demand for equity management solutions that help with preparation for future funding rounds.

ESG REPORTING REQUIREMENTS

Tech to watch: ESG intelligence

Why we’re paying attention: ESG intelligence technology helps capital markets firms gain insight from ESG-related data. This can support firms’ reporting on progress to meet environmental, social, and governance (ESG) standards.

Demand for ESG reporting is growing as investors, ratings agencies, and regulators push for firms to adopt ESG standards. News coverage of ESG reporting has grown dramatically, more than doubling over the past 2 years.

Q3’22 saw 1 early-stage deal and 1 exit among ESG intelligence companies:

• In August, Worldfavor raised a $10M Series A round. Worldfavor offers a SaaS platform for firms to manage ESG-related information, including capabilities for sustainable investment monitoring.
• alva uses machine learning and natural language processing to help firms understand ESG-related risks and build ESG profiles. The company merged in September with several research and analytics firms to form Penta, which provides solutions to help businesses and their stakeholders improve decision-making related to risk and strategy.

Why it matters: ESG standards are evolving, and investors are grappling with an increasing number of reporting requirements. Proper data not only helps capital markets firms ensure ESG agreements and standards are met, but also improves decision-making related to ESG-focused strategies, investments, and partnerships.

What’s next: Expect to see further investment in companies that offer data-driven solutions to make ESG reporting more efficient and transparent. ESG intelligence products may take different forms, but the underlying technology will broadly improve how capital markets firms use data for ESG-related initiatives. For more, explore how AI could transform the ESG space here.

TRADE ANALYTICS AND EXECUTION

Tech to watch: Trade APIs

Why we’re paying attention: Trade application programming interfaces (APIs) provide structured data for use in trading activities to simplify data acquisition, engineering, and management for capital markets firms.

Q3’22 saw 2 early-stage deals and 1 partnership among companies developing trade API technology:

• Thalex is a trading platform for cryptocurrency derivatives. In addition to its online portal, the company’s platform offers traders an API to facilitate trade execution. It raised $7.6M in a Series A deal in July.
• Meanwhile, Tradefeedr’s trade API platform provides traders with access to trade analytics and technology teams with normalized data for model development. The company raised $1M in a seed deal in July.

• In July, Tradier announced a partnership with TradingView — which is used by over 30M investors — to embed its API-enabled trade execution capabilities within TradingView’s charts and dashboards.

Why it matters: Capital markets firms that adopt trade API technologies can streamline trading operations and build more efficient workflows for trade execution, which can ultimately lead to improved trade decision-making based upon data that would otherwise be unavailable or unusable. Trade APIs also improve connections to markets, which can increase the pool of available investment opportunities for capital markets firms.

What’s next: The adoption of trade APIs aligns with a broader shift within financial services toward embedded finance, which uses APIs to embed financial services across third-party platforms. Expect to see further investment in trade API technologies, given the decreased cost of data management and the revenue potential from increased trade opportunities. Watch for more firms, ranging from large investment banks to small trading firms, to adopt these technologies to achieve broader market reach.

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• Alternative investing platforms that open access to non-traditional assets like private equity, real estate, art, and crypto for retail investors and their advisors
• ESG powered by AI that gives retail and institutional investors more complete and accurate assessments of investments’ environmental and social impacts
• Asset tokenization that converts financial or physical assets into digital tokens via blockchain technology, providing the infrastructure for companies and investors to more efficiently issue, track, and trade assets

In this report, we dive into how these 3 technologies are poised to have a transformative impact on both retail and institutional investing and the players that have an edge.

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But the firm is now looking to expand far beyond its traditional business lines, such as investment banking and asset management.

For example, it recently launched a digital consumer bank called Marcus and partnered with Apple to launch a credit card. Goldman is also building an embedded finance offering to allow its financial services — such as digital lending, escrow services, and payments processing — to be integrated with third-party platforms like e-commerce sites via APIs.

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To continue competing in this modern landscape, traditional advisors are turning to technology solutions to streamline and scale manual processes, as well as expand offerings. iCapital Network, for example, provides access to alternative investments through a solution that connects into existing advisory practices. ForwardLane offers an AI-powered platform for investment managers that automates data analytics by organizing unstructured data and deriving actionable insights. 

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