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B2B FinTech: The Future of the Industry

2022 was a challenging year for the FinTech industry, facing uncertainties related to geopolitical conflicts, supply chain challenges, rising inflation, and interest rates.

The macroeconomic headwinds affected consumer-facing businesses, forcing many to cut jobs and reduce expansion plans.

Below, we’ll explore the rising interest in B2B FinTech and its potential for growth amid digitalization efforts.

Relative dynamism and strong VC funding in B2B FinTech

Despite the global VC funding pullback, B2B FinTech has been relatively resilient compared to B2C FinTech.

In 2022, B2C FinTech VC funding declined 47%, from $57 billion to $30 billion, while B2B FinTech VC funding declined by 32%, from $93 billion in 2021 to $63 billion in 2022.

The B2B FinTech sector is also attracting a considerably larger amount of funding compared to B2C FinTech, more than double what B2C FinTech companies raised last year.

Untapped opportunities in B2B FinTech

B2B FinTech is considered less vulnerable to macroeconomic turbulence and inflation compared to B2C FinTech. Additionally, the B2B FinTech space is less saturated, providing a higher growth potential and lower competition.

The B2B BNPL market is expected to grow to $200 billion in Europe and the US, and the current Western European B2B BNPL market is estimated at $12 trillion.

Rising adoption of digital technologies

The accelerated adoption of digital technologies and opportunities for legacy technology upgrades are driving growth in the B2B FinTech sector. Interactions with banks have become more challenging, with the increased demand for B2B digital solutions.

The COVID-19 pandemic has changed the way businesses perceive their B2B needs and the way they buy technologies and services, leading to a higher demand for B2B digital solutions.

B2C FinTech companies entering the B2B space

The rise of B2B FinTech is further evidenced by the entry of B2C FinTech companies into the B2B space, building out B2B software and launching relevant products.

Examples include Starling Bank and Klarna, which are exploring B2B opportunities, and American Express, which has launched a B2B payments platform.

Conclusion

The B2B FinTech is poised for strong growth amid digitalization efforts and the rising adoption of digital technologies.

The relative resilience of B2B FinTech compared to B2C FinTech and the untapped opportunities in the B2B space are attracting investors and encouraging B2C FinTech companies to enter the B2B space.

From the above, it is clear that the B2B FinTech sector is the future of the industry, offering a high growth potential and less competition.

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