AI-native fintechs are redefining the post-winter investment landscape, but we need to look beyond the AI hype, writes Raman Korneu, CEO and co-founder of myTU, the fully automated, AI-powered and cloud-first digital bank.
It’s been a long and hard period of barely-there investment in the fintech world, one befitting the various declarations of a ‘fintech winter’ in the press. What it might take to completely thaw the industry out is an ongoing topic of debate and discussion in fintech circles, including at Money 20/20, which I attended earlier this year.
The conversations were generally optimistic. Cautious predictions of an uptick in investor interest seem to be coming true. Scalable fintechs with real revenue and client traction are catching the attention of investors again, and scaled fintechs already generating more than $500million in annual revenue now account for roughly 60 per cent of the global fintech industry’s total revenue, according to one BCG report.
The long fintech winter breaks
The thaw is here, and it’s no coincidence that it corresponds with a significant increase in AI-native fintech startups proving their mettle. These startups understand that being AI-native is a business advantage that makes them more agile and more efficient. These startups aren’t integrating AI after the fact. Automated processes, lean ops, faster onboarding, and smarter compliance are built into the very fabric of their business.
Boosted by a list of major fintechs showing billions in profits – a high tide raises all boats—investors are demonstrating renewed interest in second-tier players and in areas like embedded solutions like banking-as-a-service, payments-as-a-service, and similar models.
Also back on the table are new solutions for international payments, especially ones that don’t rely on traditional channels like SWIFT but facilitate cross-border transactions through major credit card providers and stablecoin-based payment schemes. These are all areas positively ripe with AI-native startups. You can’t talk about these subsets of fintech without talking about AI.
The appeal of the AI-native fintechs
The AI-native fintech is the type of company that’s perfectly poised to dominate the next wave of payments services. Agentic AI, not single-function bots, will transform productivity and innovation within financial services, and this paradigm shift is not going to come from established players. Earlier-stage startups building agentic AI in from the start are going to be the ones to do it.
Investors are gravitating towards AI-native fintechs for two main reasons. The first is modern technology. Cutting-edge tech means customer integration won’t require constant (and frustrating) updates. Long-term, stable solutions that work without compromising on innovation matter to operators.
The second point is pricing. With AI doing the work, AI-native fintechs can operate on lean staffs and, in turn, offer particularly competitive pricing. There is a higher potential profit margin, and growth isn’t continually contingent on hiring and more hiring.
AI-native fintechs also tend to prioritize functionality. When you’re a lean and hungry startup in a crowded field competing for limited resources, you have to stick out from everyone else. The best way to do this is through features that are responsive and aligned to changing trends and, even more importantly, up-to-date on the latest regulations.
Investors bet on efficiency and margin, on just AI buzzwords
The AI advantage doesn’t exist on its own. It lives and dies on technical capability and the speed and sophistication of implementation. AI-native fintechs will fumble this moment if they don’t manage the full package.
Earlier this year, a McKinsey report found that nearly eight in 10 companies have deployed gen AI in some form, but roughly the same percentage report no material impact on earnings. These newly, partially AI-powered companies are using chatbots, employee co-pilots, and other AI tools that are not only highly function-specific but sometimes fail to make it past a pilot phase due to organizational and technical barriers leftover from prior processes.
The AI-native company isn’t working backwards from use cases and applying AI retroactively. They’re also more likely to use AI agents, which tend to go beyond individual processes or singular use cases. An AI agent can, for instance, read client info and make onboarding decisions.
Agentic AI’s potential goes well beyond replacing a customer service representative. An AI-native company that understands agentic AI’s potential and where and how to maintain human input in its multi-tiered processes is going to pull ahead of a company using a function-specific AI bot to replace a human employee.
The power of mindful trendwatching
The AI-native fintechs that will successfully court big investments and dominate the next phase of the fintech game are those that understand which way the winds are blowing. At any given point in the finance world, there are trends. But being able to determine which trends not only have staying power but are most applicable can make or break a startup. For AI-native fintechs using agentic AI, it’s time to pay attention to potential for local payments, international payments, and embedded payments.
We’re seeing a general push toward local payment systems that are cheaper than Visa and MasterCard. SEPA is one popular alternative, but it’s far from the end of the story. Meanwhile, international payments are changing as both establishment credit companies and determined startups challenge SWIFT’s monopoly. As more companies connect payments directly to accounting systems via APIs, embedded payments are undergoing a revolution of their own.
Smart AI-native fintechs will think seriously about the sea changes occurring in the industry, and they’ll rise to meet them. None of this is happening in secret; instead it’s a matter of mindful integration. AI presents infinite possibilities to any of these areas. The startups that succeed will be the ones that can harness them without sacrificing technical proficiency or implementation along the way.
