Business Fintech & e-commerce Venture

Fintech Led VC Investment Last Year. Here’s What To Look For In 2022

Financial services was the leading sector for venture investment in 2021 with $134 billion invested, marking a whopping 177 percent year-over-year growth. That compares with overall global venture capital investment, which grew by a still astonishing 92 percent. 

With fintech emerging as the leading sector for startup sector investment, here are three trends worth watching in 2022—plus a few words of caution from investors we spoke with. 

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Fintech apps

“The desire for personal financial stability and security, amidst all of the economic uncertainty unfolding in the world right now,” is a core focus for San Francisco-based venture firm SignalFire, said principal and creator economy expert Josh Constine. “People want to have a better sense of not just how much they’re saving, but how much they need to save to be able to reach the milestones that could really change their life.”

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Portfolio companies that focus on savings the firm invested in last year include Quo Finance, which builds a roadmap for savings toward buying a home; and Monarch Money, a startup that helps its users set savings goals.

Jon Keidan, founder of New York-based Torch Capital, envisions the building of a new tech stack where “you have a lot more flexibility in the type of capabilities and services you can offer,” with more specificity around different audiences and their needs. 

Keidan mentioned Lili, which is focused on managing finances for independent contractors, a group that can include “a driver of a car, a seller of something online, a creator”— anyone who is suddenly required to manage business alongside personal expenses, and withholdings for taxes and invoicing.

“Fintech and the creator economy are colliding to create an incredible class of new businesses that are powering the fastest growing sector of small businesses right now: independent content makers,” said Constine. 

Karat, another of Signalfire’s portfolio companies, provides a credit card specifically targeted to creators, to help pay for production costs upfront and allow payment over time. 

Embedded services will power further growth

To power the growth of these affinity-based financial services, we will see continued growth in embedded financial services beyond where the trend started in payments with “embedded lending, embedded insurance and embedded capital markets businesses,” said Ben Savage of Clocktower Technology Ventures (CTV).

“The ability to have an infrastructure layer of companies that can offer financial services products to both fintechs and existing financial services firms, but also to allow nonfinancial corporates to monetize their customers through financial services and add a lot of very high margin businesses, is a very powerful opportunity,” said Savage. 

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Where once there was one company offering banking as a service, there are now a dozen in the space. There are more companies on the credit card issuing side as well. 

On the other hand “the way capital markets function, which is a surprisingly technologically sophisticated set of business processes, is still actually in need of a lot of reinvention,” Savage said. 

There has been a lot of innovation for consumer services, but less so on the enterprise side, he noted. 

One such company is Torch Capital portfolio company Embed, which hosts APIs to allow a fintech company to offer trading solutions. And Imperative Execution, a portfolio company of CTV uses artificial intelligence for optimized trading.

B2B payments will become more digitized

Another area that investors have shown a lot of interest in is business-to-business payments. Savage noted that much of the consumer payment space has been digitized, but that hasn’t happened as much for business payments, which see higher payment volumes. 

Brex, Ramp and Jeeves have innovated helping businesses gain control of employee expenditures. Next will be the “marriage of business intelligence with payments,” with “financing products wrapped around it as a way of monetizing, but the underlying function is about business intelligence,” he predicts. 

BNPL will expand into new markets amid concerns

Buy now, pay later platforms, which allow buyers to make purchases on payment plans, first became integrated into payment systems in e-commerce and are now rapidly expanding to other industries. In 2021, around $4 billion was invested in companies described as buy now, pay later, or with installment payment plans up from $1.7 billion in 2020. 

Leading BNPL platforms are partnering with other large companies: Klarna coupled up with Stripe in 2021, and Affirm struck a deal with Shopify in 2020 and more recently Amazon

Square, meanwhile, is in the process of getting regulatory approval to acquire Australia-based Afterpay. And last year, Apple announced it is launching a BNPL service as part of Apple Pay, with Goldman Sachs covering the loans. BNPL platforms are an alternate payment method circumventing the credit card industry, prompting both Visa and Mastercard to announce their own BNPL initiatives in 2021.  

BNPL is now moving from e-commerce to other sectors. One such sector is travel, with Silicon Valley-based Uplift partnering with airlines and travel brands to offer these experiences. And Fly Now Pay Later, headquartered in the U.K., helps consumers split large vacation bills over time.  

San Francisco-based PayZen is an example of the emerging “care now, pay later” trend, with the service letting consumers pay for health care expenses over time. Patients can schedule the health care they need and avoid being reported to collections agencies, while hospitals,  which typically get 15 cents on the dollar, are paid a higher proportion, said Constine, who makes a distinction between pay later shopping for fun and services that are needed.  

PayZen“uses an algorithm to assess the finances of patients. That way they can put them on a payback plan that they can actually adhere to, so that they are able to pay for their care upfront,” he said. “Before it was just not scalable to be able to build a custom payback plan for every single person with a medical bill. But through AI you can actually build systems that can scale to millions of patients and give them all this custom plan.”

The concern with BNPL platforms as it extends across payments is the impact on the consumer. A recent survey from Credit Karma found that 44 percent of respondents have used BNPL services and more than 1 in 3 of them have missed a payment. 

“What does it ultimately mean for consumer financial health to participate in these by now, pay later experiences?” asked Savage. And will prices for merchants come down as this becomes more of a commodity product in the market? For some of these services, there is value in creating a merchant network, according to Savage. 

On Dec. 16, 2021, the U.S. Consumer Financial Protection Bureau requested data from five buy now, pay later companies over concerns on the impact on consumers. 

Looking forward

In 2022, we expect to see innovation in the infrastructure layer, consumer fintech and business payments, not to mention continued growth in investing in crypto assets. Investments in financial services will continue to be a leading sector for late-stage investments in 2022, as well as newer entrants to the market. 

But will fintech investment beat the massive increase it saw in 2021? That’s anyone’s guess.

Illustration: Dom Guzman


  1. Within financial services, the sector that showed the most growth in investments year over year were cryptocurrency and blockchain startups, which collectively raised more than $26 billion in 2021. For this analysis I’m focusing on trends other than crypto and blockchain, which we look at separately here.

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