Long gone are the days when venture capital flowed into fintech startups with bold ideas – and little to show for it in terms of business metrics and fundamentals.

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Long gone are the days when venture capital flowed into startups with bold ideas and little to show for it in terms of business metrics and fundamentals.

Iana Dimitrova, CEO of embedded finance startup OpenPayd, told CNBC in an interview at the company’s booth that the market has “recalibrated.”

Embedded finance refers to the tendency of technology companies to sell financial services software to other companies, even if those companies do not offer financial products directly.

“Value is now being placed on companies that can demonstrate that there is a solid use case, a solid business model,” Dimitrova told CNBC.

“This is recognized by the market, because three, four years ago, that wasn’t necessarily the case anymore, with crazy ideas of domination and hundreds of millions of dollars in VC funding.”

Iana Dimitrova, CEO of OpenPayd, speaks on stage at the Web Summit in Lisbon, Portugal.

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“I think the market makes more sense now,” he added.

Last week, in the exhibition space of the RAI conference venue, banks, payments companies and big technology companies showed off their products, hoping to reignite conversations with potential customers after a difficult few years for the sector.

Many attendees CNBC spoke to said the conference room was much lighter in terms of conference attendees and the shuffling of delegates crowding into the various booths and booths around RAI.

Many of the most productive conversations, say some attendees CNBC spoke to, actually happened on the sidelines of the event: in bars, restaurants and even at boat parties held around Amsterdam once the day on the show floor was over.

According to KPMG, global fintech funding reached an all-time high of $238.9 billion in 2021. Companies like Block, Affirm, Klarna and Revolut had reached incredibly high multi-billion dollar valuations.

But by 2022, investment levels dropped dramatically and fintechs globally raised just $164.1 billion. In 2023, funding fell further to $113.7 billion, a five-year low.

And this despite the massive growth of many companies.

The negative impact of higher interest rates means that, even for the most attractive and fastest-growing players, financing is difficult to obtain or is offered at lower prices than before.

Nium, Singapore’s payments unicorn, said in an announcement Wednesday that its valuation has fallen to $1.4 billion in a new $50 million funding round.

Prajit Nanu, CEO of Nium, told CNBC that investors have sometimes been too distracted by artificial intelligence to pay attention to the innovative products and growth stories happening in the world of fintech.

“Investors now have an AI mindset,” he told CNBC. “Like, whatever the cost. I want to go into artificial intelligence. They’re going to burn a lot of money.”

Nanu added that the trend mimics the “madness” fintech has seen in terms of frothy valuations in 2020 and 2021.

Today, according to him, we have reached the “bottom” regarding the values ​​of the fintech market.

“I believe this is the low point of the fintech cycle,” Nanu said, adding that “this is the right time to get it done.”

Consolidation will be key moving forward, Nanu said, adding that Nium is eyeing several startups for acquisition opportunities.

OpenPayd’s Dimitrova said he is not currently considering turning to outside investors for fundraising.

But, he said, if OpenPayd were to look to accelerate its annual recurring revenue past the $100 million mark, venture capital investments would be considered more carefully.

Cryptocurrencies have also made something of a comeback in terms of hype and interest at this year’s event.

Scattered throughout the RAI headquarters were the stands of some of the major players in the sector. Ripple, Fireblocks, Token8, and BVNK, a cryptocurrency-focused payments company, all had a large presence with noteworthy booths around.

CoinW, a cryptocurrency exchange backed by Italian soccer star Andrea Pirlo, ran the advert across a bridge connecting two of the conference’s main halls.

Fintech executives and investors CNBC spoke to at this year’s Money20/20 said they are finally seeing a real use case for cryptocurrencies after years of bulls touting them as the future of finance.

Despite AI’s enormous promise to change the way we manage our money, for example, “there is no new AI to move money,” according to James Black, partner at venture capital firm IVP – in other words , AI is not changing the infrastructure behind payments.

However, stablecoins, tokens that match the value of real-world assets like the US dollar, are changing the rules of the game.

“We’ve seen the wave of cryptocurrencies, and I think stablecoins are the next wave of cryptocurrencies that are going to get more mass adoption,” Black said.

“If you think about the most exciting payment channels, there’s real-time payments – I think that’s exciting too. And it fits with stablecoins.”

Charles McManus, CEO of ClearBank, speaks at the Innovate Finance Global Summit in April 2023.

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ClearBank, the British embedded finance startup, is working on launching a stablecoin backed by the British pound and expects to receive a provisional blessing from the Bank of England soon.

Emma Hagen, CEO of ClearBank, and Charles McManus, president of the company, told CNBC at its booth at Money20/20 that the stablecoin it is working on would be sufficiently backed by a corresponding number of reserves.

“It’s early days as we learn with our partners,” Hagen told CNBC. “It’s about doing it in a way that gives people that confidence and security that there will be a practical issuance.”

ClearBank is also working with other cryptocurrency companies to offer the ability to earn a high return on uninvested cash, McManus said.

He declined to reveal the identity of which company, or companies, ClearBank was in talks with.

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