VCs anticipate future growth for fintech

The research study commissioned by Discover Global Network with 451 Research of S&P Global Market Intelligence surveyed each sector to reveal key areas for growth, the value of fraud prevention and security, and the rise of digital payments among consumers.

At Money 20/20, Discover will share an exclusive look at FSOU results, which highlight emerging trends in the industry.

Here are key takeaways from respondents in the North American market:

Majority of US Venture Capitalists Anticipate Growth; and with Founders that have Proven Experience and Technology
VCs believe that investments/capital markets technology (78%), payment processing (67%), and fraud prevention (64%) are the fintech segments with the most growth opportunity in the next 5 years.
More than half (56%) of VCs believe it’s critical for fintechs to build strong relationships with payment networks.
VCs are looking for fintechs with experienced operating teams (44%), proven customer traction (44%), proven founders (33%), favorable valuation (33%) and technology capabilities (31%).
Fraud Prevention & Security are Crucial to Building Trust and Adoption of New Digital Payment Experiences
Fintechs see payment and data security (59%) as a highly relevant use case.
Fintechs (56%) are most interested in partnering with a payment network to develop solutions for data payment security, followed by cardless online payments (20%) and commercial B2B payments (18%).
The most critical factor to consumers when using an emerging payment experience is security of personal information (67%).
Despite a Decline in Consumer Spending, Digital Payments & E-Commerce Continue to Rise
Nearly half (46%) of consumers have reduced discretionary spending and 86% of consumers use at least one digital payment service; up 17 points year-over-year.
Online (54%) is now the preferred channel for discretionary spending over in-store (46%) in the US.
While manually entering personal payment information continues to be the preferred way of making online payments to a business for consumers (34%), one-click checkout rose four points (27%) year-over-year.
Tapping a card at checkout is now the preferred payment method for in-person payments at business for consumers (39%), increasing six points year-over-year and surpassing inserting/swiping a card (32%).

“The fintech ecosystem is dramatically changing and fintechs need to make informed decisions to stay ahead of the competition and continue to meet their goals. Our study shows how fintechs can position themselves to appeal to venture capitalists, meet the payment needs of consumers, and the importance of partnering with a payment network," said Katelyn McCarthy, vice president of payment strategy at Discover. “Discover will continue to provide payments expertise, a robust network platform and collaboration on solving customer needs with our current and future fintech partners.”