It's the year 2024, and it's a special week of the term paper.
In a long-standing tradition of this publication, we ask readers for their opinion on what the new year will bring for private markets. This year, we've dedicated the entire first week of January to the crystal ball, and today's edition includes a collection of reader predictions on data, cybersecurity, fintech and crypto.
What will current interest rates mean for fintech startups? Will US regulators start getting their hands on 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!
Photo illustration by Victoria Ellis; Original photos by Getty Images
Data + Cyber
There are an estimated 4,000 venture-backed cybersecurity companies today, but the majority of these companies are actually products or features that will never scale into stand-alone businesses. We will see significant consolidation in cybersecurity spending – the days of a security team using 200 or 300 different tools will shrink to 20 to 50 vendors. —Ryan Benevides, Vice President, WestCap
Democratic access to productive AI tools will be a boon for fraudsters. Financial institutions will need to find new signals in real time to combat the spread of fraudulent schemes that are difficult to detect. — Charles Birnbaum, Partner, Bessemer Venture Partners
In 2024, we expect to see companies making clearer data requests from users, along with increased transparency. However, there must be a clear trade-off that demonstrates to users the direct benefits of providing their data. —Meg Gautam, Chief Product Officer, Crunchbase
Over the past 10 years, the startup landscape has increased its expected market share by 4x. All use cases for fraud detection and prevention are evolving, with the ecosystem becoming a constant moving target. Bad actors have a huge window that investors — and founders — are looking to close. The reality is that service providers do not have the necessary mechanisms to combat the emerging types of fraud. The solutions required to prevent new types of fraud are still being built and will be the focus in 2024 and beyond. —Matt Stressfield, General Partner, Oak HC/FT
2024 will be the year we witness the transformative power of catastrophic, large-scale financial fraud driven by AI. AI will accelerate an already growing trend with fraud growing by 30% annually over the past two years. At the same time, AI tools will become increasingly effective in automating fraud and risk detection. —Kabir Kumar, Partner, Flourish Venture
Financial technology
In 2024, with interest rates expected to fall, the low interest rate environment should lead to increased capital allocation, which is positive for both fintech and consolidated banking markets. Investors are likely to continue to focus on deploying capital to achieve profitable growth, rather than growth at all costs. We may also see increased consolidation in the fintech market as a result of more favorable capital markets. —Megan Ryan, CFO, Head of Treasury
Many fintech companies have rushed into consumer lending, lured by attractive economic factors – high returns and historically low losses. However, delinquencies are on the rise, and defaults will accelerate in 2024 as a slowing economy coupled with continued high interest rates will pressure borrowers into losses. Those who took shortcuts around the IPO to get to market quickly will feel big pain. —Vince Corotto, Director, Clarus Group
Cross-border payments will dominate the fintech narrative in 2024. There will be an acceleration in the race between state-owned payment networks and stablecoins to replace SWIFT. India will lead the race with UPI, and Circle's IPO will help accelerate the adoption of stablecoins, which will exceed a monthly volume of $1 trillion by Q4 2024.Seth Rosenberg, Greylock's partner
Physical branches may be in decline, but next year will likely be the year that banks start investing again in digital real estate and opening branches globally. —Pablo Alejos PerezDesign Director, Designit
The worst of the fintech winter is behind us, and 2024 will look more like pre-pandemic 2019. Fintech deal volumes will finally stabilize before rising again – the first rise since Q1 2022 – and funding numbers will look like they did before five years. —Nigel Morris, Co-Founder and Managing Partner of QED Investors
encryption
Crypto is making a comeback with a few specific use cases – decentralized training of LLMs to access larger amounts of data as well as verifying ownership of AI generated images as the amount of AI generated content proliferates exponentially. —Lindsay Lee, investor, Bessemer Venture Partners
If you think the token has made waves in 2023, just wait until next year as it permeates Wall Street and mainstream finance. Not only will we see more bank deposits and money tokenized on-chain, but the emergence of asset tokenization and issuance in the real world will increase inclusivity in our global financial system and spur a renewed race to facilitate faster and more cost-effective transactions, payments and transactions accessible via blockchain. Cross-chain B2B, B2C, and C2C transactions will become more common in conjunction with advances in the use of stablecoins and cryptocurrencies among the unbanked globally. —Denelle Dixon, CEO and CEO of Stellar Development Foundation
The upcoming implementation of the Markets in Cryptoassets (MiCA) regulation across the EU in 2024 makes me optimistic about the progress of the cryptocurrency and blockchain ecosystem globally. —Paul Brodie, 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 Gaines, Head of Liquid Investments and Managing Partner at CoinFund
As the government continues to debate central bank digital currencies (CBDC), the first stablecoins will be launched as registered securities in the US, giving retail investors access to digital dollars that are registered with the SEC, pay a yield, and can be held by a bank. And the mediator. As adoption booms in 2024, entrepreneurs will begin building payment paths using these coins, challenging the exchange model. —Mike Cagney, co-founder and CEO of Figure Technologies
Triple AAA and old-school game publishers will build blockchain-enabled Web 3.0 games. The result of the hack will see a nine-figure user base globally. —John Wu, President, Ava Labs
An increasing share of cryptocurrency derivatives trading volume will move on-chain supported by Layer 2 scaling improvements and new application chains. Its derivatives market share will increase by approximately 4-fold and grow to approximately 7.5% of central derivatives volume. —Matt Conkey, Research Analyst, GSR
see you tomorrow,
Jessica Matthews
Twitter: @jesicamatthews
e-mail: jessica.mathews@fortune.com
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Correction, 4 January 2024: The online version of this newsletter has been corrected to specify that Nigel Morris was referring to the first rise in fintech deal volumes since Q1 2022.
