Image by Nick Magwood from Pixabay fintech

Beyond the horror: F-Prime report gives many reasons to love fintech

Dig below the scary numbers in F-Prime Capital’s State of Fintech 2023; there’s still plenty to be optimistic about.

First, with the bad news: safe to say we’re out of the investment burst that saw $1.3 trillion flow into fintech, F-Prime partner John Lin said. The index dropped 70% from its market value high of $1.3 trillion in late-2021 to $397 billion. In 2022 alone, it fell 78%. The average company saw a 56% drop.

Hit especially hard was the 10 most significant in 2020-2021’s heyday. Together, Affirm, Transferwise, SoFi, Marqeta, D Local, Toast, Robinhood, Lufax, Nubank, and Coinbase saw a $220 billion-plus value drop. The steepest declines per sector in 2022 were Duck Creek (70%, B2B SaaS), Paymentus (77%, payments), Dave (96%, banking), Coinbase (83%-WAM), Affirm (84%, lending), Oscar (90%, insurance), and Opendoor (95%, proptech).

The pain wasn’t evenly spread out. While the average vertical decline was 56%, B2B SaaS saw the smallest drop at 39%, Lin said. They have good metrics and repeatable business models. Payments fell by 50%.

The other five sectors had worse-than-average hits ranging from 61% in banking to a cringey 89% in proptech. Sectors based on interest rates (lending, proptech, insurance) fared worst.

As the smoke cleared, a more mature fintech industry?

At the peak, money flowed in, in some cases indiscriminately. Investors with little knowledge of the space but wanting their piece of those healthy returns didn’t ask enough questions. Many got burned.

John Lin headshot
F Prime partner John Lin has many reasons to be optimistic about the fintech industry.

Lin said that kick to the wallet taught some tough but good lessons. Many financial institutions were counted as tech firms when they were FIs with a little bit of tech. They were valued as tech firms but are now more appropriately seen as the institutions that they are. Valuations are now based on sound principles like capital efficiency and evidence of growth.

Lin said that despite the correction, there is plenty to be excited about. Many companies are growing. The average company grew 48% year over year, and collective last-twelve-months revenue is up around 15% to $155 billion. The five most significant contributors to that additional $19 billion are scaled firms: Opendoor, Mercado Libre, Bright Health, Paypal, and Clover.

Less than one in four index companies was profitable over the preceding 12 months (most were payments firms). Close to half expect to be profitable this year. The companies have so far captured less than 10% of their markets, so there is plenty of room to grow.

Sector trends in fintech

Vertical fintech

One trend that excites Lin is the growth in vertical fintech. Traditionally, companies built software to target a specific area, like order management. Now they are developing solutions for entire industries like Toast is for restaurants and Squire is for barbershops.

“By embedding yourself into these different financial services products, you go from a purely SaaS revenue stream to also getting a part of every dollar they’re bringing in every dollar they’re paying out,” Lin said.


There are two different types of payment companies, Lin said. Some, like PayPal and Stripe, help folks send money from A to B. Others use payments to send money but have a different revenue model by providing services like Toast and Shopify.

How much money are they processing? Companies that perform well process volume at high margins.

“And the companies with the highest margins for this volume tend to have value-added services or be really easy to use,” Lin said.

FedNow is designed to make payments easier, and that brings opportunity, Lin said. New companies could develop mechanisms to facilitate payments.

COVID-19 drove a surge in international payments that might last. Companies have more complex payment and payroll needs, and their suppliers and staff have become more widespread. Whereas traditional payment rails simply helped folks send money, new ones need to adapt to the requirements of multiple countries and help users avoid chargebacks.

To decrease chargebacks, look for new value adds to payments like installments, shipping, returns, and background checks.


During the bloodletting in altcoins and NFTs, Lin watched those companies that worked on more robust compliance. Prudent oversight is wise, with much of the sector’s trouble emanating from the lack of precautions.

Blockchain technology remains promising. It helps facilitate simpler transfers and allows for fractionalization.


Lin said that smaller valuations led to a drop in merger and acquisition activity of up to two-thirds. During the boom, companies built healthy reserves. They hired and spent and have enough to try and fix things to slow the burn.

But that clock is ticking loudly. By mid-year, many will need to raise again. M&A activity could spike.


Banking disruptors do several key things well, Lim explained. They understand younger, more mobile generations and how to attract them. Their cost of acquisition is markedly cheaper.

The trade-off is the Chases of the world, who spend more to get folks, get more revenue from them once they’re in the camp. Look for smart startups to add more services to capture some of that money.


The role of insurance agents is changing, Lin said. New APIs allow them to gain access to more data from more sources. Applicants can see their information automatically added to an API so they can get automatic quotes.

B2B insurance companies can then use more data during their risk assessments. Access to Shopify and inventory data allow them to make better risk predictions.

Open Data’s impact on fintech

Lin said there are three broad categories where the data made more available by Open Data will have the most impact. One is fintech data allows for identity verification. It has implications for payroll and lending (the others are consumer and healthcare).

“Each different piece of this financial data creates new companies in themselves,” Lin said. “You almost have to go company by company, or area by area, to figure it out. For example, if you now have access to what someone took out as a loan… and permit me to check your credit score, I can offer you cheaper loans. So if I know how much you’re paying for loans and have good credit, I can offer you excellent terms. That could be a really big industry.

“Similarly, if I have payroll information about you, and I know that every single month, you’re about to get paid on this exact date, and you’ve probably already worked (most) days necessary to pay you in this two-week cycle, I can give you a payroll advance.”

  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.