What Venture Capital Firms Want Out of FinTech

There's been an explosion of companies whose main focus is making finance more efficient, more easily digestible, and more nimble.

Applications like social media and smartphone technology allow companies to extend new services to consumers that take the cumbersomeness out of their experiences with financial services. Consumers are incredibly grateful for this accessibility, but they aren't the only ones paying attention to the rise of financial technology. So are venture capital firms. 

Below are some of the developments that VC firms are paying the most attention to in the fintech industry. 

Targeting Underserved Markets

Underserved consumers are those who have a difficult time accessing financial services for several reasons, whether it's income volatility, poor credit, or being unbanked. There's been a push to provide financial services and products to these individuals to help them improve their financial health. FinTech companies aim to serve these underserved markets and it's these startups that venture capital firms have taken a significant interest in. VC firms want to devote funding to these companies, as long as they can prove they're adaptable across a variety of markets and have the potential to scale quickly.

The Power of Social Impact

Consumers have more recently vocalized their exclusive support of brands that make social impact part of their operations. Venture capital firms are also looking for the same thing within the fintech industry. What financial technology startups have focused their efforts on solving a social issue? Do they have a strong social commitment outlined in their company mission statement? Are they driven by purpose over profits? These are all questions VC firms look to answer as they dive deeper into the fintech companies they're hoping to support.

Blockchain and Cryptocurrencies

Blockchain technology helps to improve security by tracking goods and monitoring transactions. Additionally, it also helps to reduce prices and eliminate third-party intervention. Decentralized finance is one of the biggest lures of blockchain technology. And despite market volatility, venture capital firms still have their eyes on cryptocurrency investments as well. Large corporations and small to medium-sized businesses alike are continuing to focus their efforts on adopting crypto into their operations. 

Neobanks

Neobanks are a relatively newer concept than blockchain technology and cryptocurrencies. These organizations are built from scratch and only exist in the digital realm, meaning there are no physical bank locations. Instead, consumers can access their financial services through smartphone apps. Venture capital firms are very interested in seeing how neobanks can disrupt the financial industry.

Above all else, VC firms are looking for fintech startups that disrupt financial services and can become leaders in the fintech space.