By: 9 January 2024

Alana Levine, chief revenue officer at Fintel Connect

Fintech in North America: What can we expect for 2024

North America continues to lead the charge for fintech innovation. Mordor Intelligence predicts that the US alone will account for more than 62% of the global fintech transaction value. This means it’s very likely that 2024 will be another big year for fintech in North America, even with increasing regulatory hurdles and pressures in the financial space. 

Innovation despite regulation  

If this year has been any indication, we are likely to see even more regulatory body activity aimed at fintechs. This is especially the case as we enter an election year. While the pressure on fintechs is increasing, so is their willingness to participate and work with the regulators and their sponsor banks to ensure they have what they need in place to operate safely and effectively.  

We will see new fintech entrants into the market, and those with a track record of operating in the banking landscape will be most likely to endure. In addition, there continues to be a growing urgency for the smaller community-regional banks to make this model work to innovate and meet consumer needs and demands, which is why fintech partnerships are more vital than ever. Players who get the unit economics right and have the right technology and solutions in place to manage these partnerships will be set up for long-term success. 

Continued expansion of AI technology usage 

A consistent theme we’ve seen this past year has been the exploration of AI solutions that can address the need for efficiency and accuracy in decision-making. We’ll see expanded scope and usage of these tools across a variety of functions and departments in both fintech and traditional financial institutions. 

From our perspective on the marketing front, the two primary areas of growth will be in customer targeting and customer servicing. Better recommendations, targeted messaging, and behavioural predictors will allow fintechs and financial institutions to increase the likelihood of conversions and improve customer engagement. On the servicing side, generative AI will help to enhance customer support, allow customers to better understand their finances and data, and more easily get the support they need, which means optimising the usage of resources on the financial institution side and improving experiences for the end customer. 

As these tools become more ubiquitous, regulators will be watching closely. Increased use of AI will mean more questions around the accuracy of AI tool predictors and data analysis, particularly in the context of areas like Know Your Customer (KYC) and Anti-Money Laundering (AML). 

More consolidation of services 

Several factors from 2023 will lead to further consolidation taking place in 2024, both in product offerings and in mergers and acquisitions. For the former, there is an increasing expectation from consumers for convenience of services. This means financial institutions and fintechs will likely further look to expand their suite of services or form strategic partnerships with complementary product offerings to incorporate into their solutions.  

In our affiliate marketing arena, we’re seeing several interesting affiliate-model partnerships forming between fintechs, in areas like credit building, payments and lending, and we anticipate this will continue to expand into 2024. 

On the other hand, market pressures and the evolving economic climate mean fundraising could dry up even more, which means partnerships may more likely turn into merger and acquisition opportunities, especially for earlier-stage companies that need further resources and runway to see a path to profitability. 

Banking-as-a-service and embedded finance growth 

Increased regulatory scrutiny won’t hold back growth in the Banking-as-a-Service (BaaS) and embedded finance sectors—if anything, 2023 was one step back only to make room for two (or three) steps forward in 2024. We’ll see a stronger, more purposeful approach in these areas, as solutions are refined and processes on the backend in areas like KYC/AML and marketing compliance make for more secure and transparent growth. 

At Fintel Connect, we are looking to contribute to a safer fintech-bank ecosystem. Our AI-driven marketing compliance tool, Fintel Check, was developed out of a direct need fintech, bank, and BaaS banks faced when it came to maintaining compliant advertising. In particular, it directly addresses the challenges  BaaS banks face when policing fintech partner marketing activity.  

With the rising warnings made by the FDIC, a US government organisation, and regulatory bodies against fintech and their sponsor banks, we’ll see more banks adopting solutions that allow them to get ahead of potential issues with regulators.  

Continued digitisation in banking 

We’ll see banks and credit unions looking to fully digitalise their suite of products, not just for the traditional products like deposits and loans. New incumbents in the loan origination and online account opening areas are enabling faster implementation and more flexibility to help address risk and compliance concerns unique to each bank.  

We’ll also see more digital banking brands unfold that target niche audiences. The need for deposits will sustain well into 2024 and so we’ll notice more and more traditional financial institutions turn to areas like BaaS or digital account opening to stay competitive. 

Summary for 2024 

Overall, 2024 will be a year of sustained, meaningful growth and innovation for fintech. In a lot of ways, it will be expansion and doubling down on areas already preliminarily explored, like AI technology and banking digitisation. In other ways, there will be new and unique partnerships that form, as well as acquisitions that open new avenues for scaled growth. One thing is for certain: the North American fintech landscape will continue to lead the charge into 2024 and beyond. 

Image: Fintel Connect  

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Guest Editorial
This article was produced specially for Fintech Intel by an expert guest contributor.