It’s 2024, and a special week of Term Sheet.
In a longstanding tradition for this newsletter, we ask readers to weigh in on what the new year will bring for the private markets. This year, we’ve dedicated the whole first week of January to the Crystal Ball, and today’s edition features a collection of predictions readers made on data, cybersecurity, fintech, and crypto.
What will current interest rates mean for fledgling fintech startups? Will U.S. regulators start getting their hands around cryptocurrencies?
Here’s what you had to say.
Note: Many answers have been shortened for clarity and/or brevity. The deals section will be back next week!
Data + cyber
There are an estimated 4,000 venture-backed cybersecurity companies today, but the majority of those companies are actually products or features that aren’t going to scale to be stand-alone businesses. We’ll see significant consolidation within cybersecurity spending—the days of a security team using 200 or 300 different tools will wind down to 20 to 50 vendors. —Ryan Benevides, vice president, WestCap
Democratized access to generative AI tools will be a boon for fraudsters. Financial institutions will need to find novel, real-time signals to fight a proliferation of harder-to-detect fraud schemes. — Charles Birnbaum, Partner, Bessemer Venture Partners
In 2024, expect to see companies making more explicit data requests from users, coupled with heightened transparency. However, there must be a clear trade-off, showing users the direct benefits of providing their data. —Megh Gautam, Chief Product Officer, Crunchbase
Over the last 10 years, the fraud-startup landscape has grown over its projected market share by 4x. All use cases of fraud detection and prevention are evolving—with the ecosystem a continuous moving target. Bad actors have an enormous window that investors—and founders—are looking to close. The reality is providers don’t have the mechanisms to combat the emerging types of fraud. The solutions that are required to prevent new types of fraud are still being built which will be a focus into 2024 and beyond. —Matt Streisfeld, general partner, Oak HC/FT
2024 will be a threshold year when we will see the transformational power of large scale AI-driven catastrophic financial fraud. AI is going to accelerate an already growing trend with fraud growing 30% annually during the last two years. At the same time, AI tools will become increasingly instrumental in automating fraud detection and risk. —Kabir Kumar, partner, Flourish Venture
In 2024, with rates expected to come down, the lower interest rate environment should increase capital deployment, a positive for both the fintech and embedded banking markets. Investors are likely to continue to focus on deploying capital into profitable growth, as opposed to growth at all costs. We may also see increased consolidation in the fintech market as a result of more favorable capital markets. —Meghan Ryan, CFO, Treasury Prime
Many fintechs rushed into consumer lending, lured by attractive economics—high yields and historically low losses. However, delinquencies are increasing, and defaults will accelerate in 2024 as a slowing economy coupled with persistently high interest rates squeezing borrowers will result in losses. Those who took shortcuts around underwriting 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 payment networks and stablecoins to replace SWIFT. India will lead the race with UPI, and a Circle IPO will help accelerate stablecoin adoption, 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 in which banks start investing again in digital real estate and opening branches in the metaverse. —Pablo Alaejos Perez, Design 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 finally stabilize before rising again—the first climb since 2022 Q1—and funding numbers will look like they did five years ago. —Nigel Morris, cofounder and managing partner, QED Investors
Crypto comes back via a few specific use cases—decentralized training of LLMs for access to greater amounts of data as well as validation of ownership of AI-generated images as the amount of content generated by AI exponentially proliferates. —Lindsey Li, investor, Bessemer Venture Partners
If you thought tokenization created buzz in 2023, just wait for next year as it permeates both Wall Street and main street finance. Not only will we see more tokenized bank deposits and funds on-chain, but the rise of real-world asset tokenization and issuance will both increase inclusivity in our global financial system and spur a revitalized race to facilitate the fastest, most cost-effective, and accessible payments and transactions via blockchain. B2B, B2C, and C2C transactions on-chain will become more popular coinciding with advances in stablecoin & crypto utilization among the global unbanked. —Denelle Dixon, CEO and Executive Director, Stellar Development Foundation
The upcoming implementation of the Markets in Crypto-Assets Regulation (MiCA) across the European Union in 2024 makes me optimistic about the advancement of the crypto and blockchain ecosystem globally. —Paul Brody, Global Blockchain Leader, EY
2024 is the year that everyone forgets Bitcoin again as surrounding Altcoins will see another level of growth. —Seth Ginns, head of liquid investments and managing partner, CoinFund
As the government continues to debate CBDC, the first stablecoins as registered securities will be launched in the U.S., 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 rails using these coins, challenging the interchange model. —Mike Cagney, the cofounder and CEO, Figure Technologies
Triple AAA publishers and old school games will all build web 3.0 games enabled by blockchains. A breakout hit will see a nine-digit user base globally. —John Wu, president, Ava Labs
A growing share of crypto derivatives trading volume will move onchain powered by layer-2 scaling improvements and new appchains. Derivatives DEXs will ~4x their market share and grow to ~7.5% of centralized derivatives volume. —Matt Kunke, Research Analyst, GSR
See you tomorrow,
Correction, Jan. 4, 2024: The online version of this newsletter has been corrected to specify that Nigel Morris was referencing the first climb in fintech deal volumes since the first quarter of 2022.