High payment company valuations and funding rounds were driven by investors bidding up deal prices without paying significant attention to profitability. However, now there is a far greater focus on earlier profitability over hyper-growth; leading to questions on whether this trend will last.
The findings come from a new report released by the Payments Innovation Jury, a not-for-profit initiative analysing insight of leaders from the payments industry. The 2024 global report ‘Market meltdown – impacts on infrastructure, regulation and innovation‘, reveals global payment leaders’ views on how tumultuous macroeconomic changes over the past two years have affected their sector.
Research undertaken in collaboration with the World Bank and backed by Interswitch, FIME and HPS, features 136 jurors from across the globe, all of whom are in senior roles at national payments companies, banks, fintechs, payments policy bodies, central banks and investors.
Overall, the Jury judged start-up businesses (55 per cent), as the most negatively impacted by plummeting valuations and investment rounds, followed by scale-ups (38 per cent) and enterprise-scale businesses (seven per cent).
Businesses developing AI and climate fintech tools and technologies also look the most likely to benefit from the diversion of investment from payments businesses.
The report also suggests that, while credit and debit cards will remain important in developed markets, their growth is becoming increasingly more difficult to achieve than before. In emerging markets in which they were unable to replicate this success, cards could struggle to improve their position – due to fierce competition with account-to-account payments and mobile money.
Planning to ‘weather the storm’
Banks, rather than fintechs or mobile network providers, will ultimately be the major players in mobile wallets globally.
The talent acquisition activities of payment enterprises in developed markets are a significant challenge for those in emerging markets, with almost 60 per cent of Jury members in emerging markets saying that they are losing an unacceptable number of staff with consequential risks to innovation programmes and sometimes even ongoing operations.
Asia Pacific retained its crown as the region with the most payment innovations, while the Middle East and Africa emerged as a clear second favourite despite Africa’s macro-economic challenges, relatively low levels of investment funding and a talent drain.
John Chaplin, founder and chairman of the Payments Innovation Jury, commented: “Looking back on the last two years of market turmoil, it feels like this unique insight from industry leaders has never been more needed. Our Jurors’ deep understanding of the causes and effects of macroeconomic changes and their impact on the long-term direction of the payments industry helps all of us understand how we can best move forward and continue to weather the storm.
“I am immensely grateful to each of the 136 members of the Jury for thinking through such complex issues and sharing their views, as well as to the World Bank, Interswitch, FIME and HPS. Their participation and support makes the publication of these insights possible, and this report is very much their report.”
