After a decline in valuations and funding constraints, fintech has reached a low point, according to executives and venture capitalists.

• At the Money20/20 event in Amsterdam last week, fintech executives and investors informed CNBC that valuations have decreased from unsustainable heights during the industry's peak in 2020 and 2021.
• Iana Dimitrova, CEO of embedded finance startup OpenPayd, stated in an interview with CNBC at the company's booth that the market has "adjusted."
• Higher interest rates are making it difficult for even the fastest-growing companies to secure funding, with prices being lower than before.

The financial technology sector is facing a new reality, with some executives and investors believing it has hit "rock bottom."

Executives and investors at the Money20/20 event in Amsterdam last week stated that valuations have decreased from unsustainable heights during the industry's peak in 2020 and 2021.

Venture capital funding for startups with innovative ideas has decreased, as investors now prioritize businesses with established metrics and financials.

Iana Dimitrova, CEO of embedded finance startup OpenPayd, stated in an interview with CNBC at the company's booth that the market has "adjusted."

Technology companies are increasingly offering financial services software to other businesses, even if they don't sell financial products themselves.

Dimitrova stated to CNBC that businesses are now being valued based on their ability to demonstrate a strong use case and a viable business model.

"The market recognizes that, as it was not necessarily the case four years ago, with the rise of crazy ideas of domination and significant VC funding."

"I think the market is now more sensible," she added.

Lighter footfall, talks happen on the fringes

Last week, at the RAI conference venue, banks, payment companies, and big technology firms displayed their products in an attempt to rekindle discussions with potential clients following a challenging period for the industry.

Several conference attendees who spoke with CNBC noted that the conference hall had fewer attendees and less activity, with fewer delegates moving around the various stands and booths at the RAI.

According to CNBC, many of the most productive conversations took place outside of the event, at bars, restaurants, and boat parties held around Amsterdam after the day on the show floor ended.

In 2021, global fintech funding reached a record high of $238.9 billion, according to KPMG. Notable companies such as Block, Affirm, Klarna, and Revolut had achieved multibillion-dollar valuations.

By 2022, global fintech investment levels dropped significantly, reaching $164.1 billion. In 2023, funding fell even further to $113.7 billion, marking a five-year low.

Have we reached the bottom?

That's despite the massive growth of many companies.

Higher interest rates are making it difficult for even the fastest-growing players to secure funding, with prices being offered at a lower rate than before.

In a new $50 million funding round, Nium, the Singaporean payments unicorn, announced its valuation had fallen to $1.4 billion.

Nium CEO Prajit Nanu stated that investors have been preoccupied with AI and neglected innovative fintech products and growth narratives.

"He informed CNBC that investors are now adopting an AI mindset, with a willingness to spend whatever it takes to gain access to this technology, despite the potential financial losses."

Nanu stated that the current trend resembles the "craziness" experienced by fintech in terms of inflated valuations during 2020 and 2021.

Currently, he thinks that the fintech market values have reached their lowest point.

""This is the right time to make it in fintech, as I believe it is the lowest point in the fintech cycle," Nanu stated."

Nanu stated that Nium is considering acquiring several startups for consolidation purposes.

Dimitrova of OpenPayd stated that she has no plans to seek external investors for fundraising at present.

If OpenPayd wants to exceed $100 million in annual recurring revenue, venture capital investment may become more attractive.

Crypto comeback?

This year's event saw a resurgence in excitement and buzz surrounding crypto.

Notable booths from Ripple, Fireblocks, Token8, and BVNK, a crypto-focused payments firm, were present around the RAI venue.

A crypto exchange, CoinW, which is backed by Italian soccer star Andrea Pirlo, had ads displayed on a bridge linking two major conference halls.

After years of promoting cryptocurrencies as the future of finance, fintech executives and investors are finally seeing a practical application for them, according to CNBC's Money20/20 attendees.

Although AI has the potential to revolutionize the way we handle our finances, James Black, a partner at VC firm IVP, asserts that there is no new AI technology for transferring money. In essence, AI is not altering the underlying infrastructure of payment systems.

The use of stablecoins, which are tokens that correspond to the value of real-world assets such as the U.S. dollar, is transforming the market, according to him.

Black believes that stablecoins will be the next wave of crypto to gain widespread adoption, as we have witnessed the rise of cryptocurrencies.

"Real-time payments are exciting, and they align with stablecoins."

ClearBank, a U.K. embedded finance startup, is planning to launch a stablecoin backed by the British pound, which it anticipates will receive a provisional nod from the Bank of England shortly.

Emma Hagen, CEO of ClearBank, and Charles McManus, the firm's chair, stated at Money20/20 that the stablecoin they are developing will have a reserve that matches it.

"Hagen stated to CNBC that they are in the early stages of learning with their partners. The focus is on doing it in a way that builds trust and ensures safety for practical issuance."

McManus stated that ClearBank is collaborating with other crypto firms to provide high yield on uninvested cash.

ClearBank was in talks with which firm or firms, and he declined to reveal their identities.