Each quarter, our team at Cowboy Ventures reviews the key sectors we're focused on, including fintech. As part of this, we highlight ideas that have been underhyped or overlooked. Below are the themes in Fintech we are most excited about going into 2024.

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New Identity Solutions to Combat Fraud:

• Fraudsters are increasingly difficult to identify and prevent as they infiltrate more trusted sources and communication channels like email, phone, and text. While this was already a challenge, AI has only exacerbated it. A recent incident involving Andy Cohen (reality TV host) highlights the sophisticated methods scammers employ. They can spoof phone calls to make you think you think you are speaking to a trusted source, and get enough information about you that traditional verification methods fail.
• Despite early innings, identity fraud poses significant challenges to financial services, requiring new ways to verify digital identities across banking, payments, etc. Biometrics and other emerging AI technologies will play a crucial role in enhancing transaction security.

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B2B Software Targeting Overlooked Markets:

• Numerous industries have been neglected in terms of innovation due to their perceived lack of tech-forwardness. However, these sectors, including manufacturing, procurement, supply chain logistics, and agriculture, for example,  represent sizable markets with distinct needs ripe for disruption. Many still rely on antiquated methods like paper, email, and phone, with little digital record of business or transactions. Payments in a lot of these industries remain extremely antiquated and slow, relying on legacy systems and outdated invoicing structures.
• A software that can be the hub for businesses transaction needs for the sector, enabling operations to move faster and more efficiently and continue to expand financial products from there. There are also emerging opportunities for verticalization with AI that can supercharge businesses that we are very excited about.

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Selling Solutions to Financial Institutions (FIs) vs. Fintechs:

• While fintech startups have primarily targeted other fintechs, sustainable growth requires expanding beyond this ecosystem. Traditional financial institutions, burdened by outdated software and manual processes, present untapped opportunities. For example, many banks still run manual KYB - ad hoc requests and collection of data, then passed along to their internal teams to run processes. Something that should take seconds (barring concerns) requires multiple intermediaries, additional time, and additional cost with the number of players and humans in the loop.
• Traditional FIs, both small and large, are increasingly open to adopting technology for actual business cases (not just innovation teams) to remain competitive and enhance customer service. And, despite longer sales cycles, partnerships with FIs offer lucrative contracts and greater stability. Infrastructure for Real-Time Transactions:
• Despite the launch of initiatives like FedNow and RTP, adoption has been sluggish. There are challenges due to interoperability issues, increased fraud risks of real time payments, and perceived lack of demand from end customers. However, there's growing demand for real time decisions across all financial services - payments, lending, capital market, risk management, etc.
• As decision-making accelerates, businesses require better access to real-time, structured data and visibility for instant decision-making. Access to more alternative data sources to augment traditional but also the use of AI to make decisions and processes more efficiently and accurately.

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If you are building or thinking about any of these areas we'd love to chat! Reach out at Jillian@cowboy.vc and we are excited to see what 2024 brings for emerging technologies!

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