As is a long tradition in this newsletter, we ask readers to weigh in on what the new year will bring for private markets. This year, we've dedicated the entire first week of January to Crystal Ball, and today's edition features a collection of reader-made predictions about data, cybersecurity, fintech, and cryptocurrency.
What will current interest rates mean for fintech startups? Will US regulators start controlling cryptocurrencies?
This is what you had to say.
Note: Many answers have been abbreviated for clarity and/or brevity. The deals section will be back next week!
Data + cyber
There are an estimated 4,000 venture capital-backed cybersecurity companies today, but most of those companies are actually products or features that are not going to scale to become stand-alone businesses. We will see significant consolidation within cybersecurity spending: the days of a security team using 200 or 300 different tools will be reduced to 20 to 50 vendors. —Ryan Benevides, Vice President of WestCap
Democratized access to generative AI tools will be a boon for fraudsters. Financial institutions will need to find novel, real-time signals to combat the proliferation of harder-to-detect fraud schemes. — Charles Birnbaum, Partner, Bessemer Venture Partners
In 2024, companies are expected to make more explicit data requests to users, along with greater transparency. However, there must be a clear trade-off that shows users the direct benefits of providing their data. —Megh Gautam, Chief Product Officer, Crunchbase
In the last 10 years, the fraudulent startup landscape has multiplied by 4 times its projected market share. All fraud detection and prevention use cases are evolving and the ecosystem is a continually moving target. Bad actors have a huge window that investors (and founders) seek to close. The reality is that providers do not have the mechanisms to combat emerging types of fraud. The solutions needed to prevent new types of fraud are still being developed and will be a focus in 2024 and beyond. —Matt Streisfeld, General Partner, Oak HC/FT
2024 will be a threshold year in which we see the transformative power of large-scale catastrophic financial fraud powered by AI. AI will accelerate a trend that is already increasing: fraud has increased 30% annually over the past two years. At the same time, artificial intelligence tools will become increasingly critical in automating fraud detection and risk. —Kabir Kumar, Partner, Flourish Venture
financial technology
In 2024, when rates are expected to fall, the lower interest rate environment should increase capital deployment, a positive for both the fintech and integrated banking markets. Investors are likely to continue to focus on investing capital in profitable growth, rather than at all costs. We may also see further consolidation in the fintech market as a result of more favorable capital markets. —Meghan Ryan, Chief Financial Officer, Treasury Prime
Many fintechs rushed to make consumer loans, attracted by attractive economics: high returns and historically low losses. However, delinquencies are rising and defaults will accelerate in 2024 as a slowing economy coupled with persistently high interest rates putting pressure on borrowers will result in losses. Those who took underwriting shortcuts to get to market quickly will feel significant pain. —Vince Curotto, director, Klaros Group
Cross-border payments will dominate the fintech narrative in 2024. There will be an acceleration in the race between nation-state payments networks and stablecoins to replace SWIFT. India will lead the race with UPI, and a Circle IPO will help accelerate adoption of the stablecoin, which will surpass a monthly volume of $1 trillion by Q4 2024.Seth Rosenberg, Partner, Greylock
Physical branches may be on the decline, but next year has the potential to be the year banks start investing in digital real estate again and opening branches in the metaverse. —Pablo Alaejos PerezDesign Director, Designit
The worst of the fintech winter is behind us and 2024 will look more like a pre-pandemic 2019. Fintech deal volumes will eventually stabilize before rising again (the first increase since the 2022 quarter) and funding numbers will be like they were five years ago. —Nigel Morris, Co-Founder and Managing Partner, QED Investors
Crypto
Cryptocurrencies are making a comeback through some specific use cases: decentralized LLM training to access larger amounts of data, as well as validating the ownership of AI-generated images as the amount of AI-generated content proliferates exponentially. —Lindsey Li, investor, Bessemer Venture Partners
If you thought tokenization made waves in 2023, wait until next year as it permeates both Wall Street and mainstream finance. Not only will we see more tokenized bank deposits and on-chain funds, but the rise of real-world asset tokenization and issuance will increase inclusivity in our global financial system and spur a reinvigorated race to facilitate the fastest, most cost-effective, and cost-effective solution. . and payments and transactions accessible through blockchain. On-chain B2B, B2C and C2C transactions will become more popular as developments in the use of stablecoins and cryptocurrencies among the unbanked around the world. —Denelle Dixon, Executive Director and CEO, Stellar Development Foundation
The upcoming implementation of the Markets in Crypto Assets Regulation (MiCA) throughout the European Union in 2024 makes me optimistic about the advancement of the cryptocurrency and blockchain ecosystem globally. —Paul Brody, global blockchain leader, EY
2024 is the year when everyone forgets about Bitcoin again, as the surrounding Altcoins will see another level of growth. —Seth Ginns, Head of Liquid Investments and Managing Partner at CoinFund
As the government continues to debate CBDC, the first stablecoins will be launched in the US as registered securities, offering retail investors access to digital dollars that are registered with the SEC, pay a yield and can be held by their bank and broker. As adoption flourishes in 2024, entrepreneurs will begin to build payment gateways using these currencies, challenging the exchange model. —Mike Cagney, co-founder and CEO of Figure Technologies
Triple AAA publishers and old school games will create web 3.0 games enabled by blockchains. A huge success will generate a nine-digit user base globally. —John Wu, president of Ava Labs
An increasing proportion of crypto derivatives trading volume will move on-chain thanks to layer 2 scaling improvements and new application chains. Derivatives DEXs will increase ~4x market share and grow to ~7.5% of centralized derivatives volume. —Matt Kunke, research analyst, GSR
See you tomorrow,
Jessica Mateos
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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