January 16, 2025
January 2025 newsletter: QED predictions and fintech insights
Message from Nigel Morris, Managing Partner
It's difficult to believe another year has come and gone. As I reflect on our achievements in 2024 – 14 investments in new companies, over 40 events held across the globe, and a few new hires and internal promotions to celebrate – I'm very proud of all that the QED team has accomplished.
In 2024 we witnessed elections held in over 60 countries, the beginnings of widespread adoption of GenAI, and geopolitical tensions flaring across the world. And the fintech industry continued to evolve, with valuations stablising and a growing cohort of real fintech businesses arriving on the scene.
The QED team is looking ahead at 2025 and beyond, keenly monitoring market moves and megatrends. We remain focused on surefooted growth and helping our portfolio companies navigate unfamiliar paths and embrace the unknown. From global supply chains to amplified M&A activity, this newsletter is dedicated to the QED team’s predictions for the year ahead.
Our team remains energised by the excellent companies and founders we are getting to know in every pocket of the world. We have much to do and are hitting the ground running in 2025!
Cheers,
Nigel
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My fintech predictions for 2025
The Game of Musical Chairs
M&A activity for fintechs is slated to heat up in 2025. We are finally emerging from an era of suppressed activity and can expect increased M&A for fintechs looking to join up for economies of scale or product & geo expansion. Plus, PE firms and LPs are seeking liquidity and encouraging exits. Taken together, we can expect a wave of deals with fintech companies buying one another and, of course, moving toward IPO as the market thaws.
GenAI Adoption
The evolution of GenAI will continue in 2025 and fintechs are incredibly well positioned. Fintechs will continue to leverage GenAI and code production to slash costs in labor-intensive areas like call centres, back-office operations, and loan origination. These productivity gains are the low-hanging fruit that fintechs are best positioned to pick quickly. Startups will increasingly leverage GenAI to reinvent themselves to unleash the next wave of fintechs, in many ways an extension of what we built at Capital One: hyper-data-driven, personalized powerhouses that are loved by the customers they serve. Fintechs are already significantly more well-liked by their customers than legacy banks (>80 NPS vs <20 NPS) and the next era is slated to be even better.
Fintechs Nimbleness as Competitive Edge
As trade tensions simmer, interest rate uncertainty continues, and some currencies experience volatility, fintechs will use their nimbleness to outpace sluggish incumbents in areas like cross-border trade (amid an increasingly uncertain global supply chain), regulatory and compliance automation, and remittances. Policy changes and decreasing regulation will make way for more innovation in fintech and beyond. I will certainly be keeping my eye on wealth management and following the “crypto summer” as areas of keen interest in 2025.
2025 Predictions
Trends the QED Investors team is tracking
You can read the full predictions by clicking here.
Bill Cilluffo, head of early stage international investments Global supply chains
Global supply chains will continue to be in a state of flux, aided by the Trump Presidency. There are a lot of opportunities to take advantage of shifting winds in SaaS, financing and Payments.
GenAI
Generative AI will continue to mostly be a cost-efficiency tool in Fintech. I think we will start to see some early signs of true innovation, but it feels a little way off.
Crypto
Crypto will have some second (or third) wind, aided by the Trump Presidency. Things like Stablecoin-assisted payment rails will really benefit. Sadly, another hype cycle around non-value-added pieces will also have a rebirth.
IPO and M&A
IPOs will begin again. A new administration will likely create tailwinds for a bunch of capital market activity, IPO and M&A.
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Chuckie Reddy, partner, head of growth
Hot Year for M&A
QED Investors has already seen a real pickup in M&A activity in our portfolio in the second half of 2024. One example is that we completed the Mynd-Roofstock merger in May to create a vertically integrated single-family rental (SFR) powerhouse. We believe this combination provides significant scale, revenue synergies (cross-sell), and better customer experience. The combined company will grow faster and be much more likely to be of a size with multiple exit options. There’s a lot of M&A in the pipe that we’ll see materialize in 2025.
There are many companies in our portfolio actively engaged in processes, both buying and combining. Very excited to see those come to bear in 2025. As the industry has now realized, the bar has moved to exit via IPO to upwards of $5B of enterprise value. QED has been very focused on making sure companies have a path to get there. This includes being active in identifying possible combinations inside and outside of our portfolio, which would help to increase the size and scope of our portfolio companies. Increasing size through M&A accelerates the timeline to liquidity.
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Frank Rotman, @fintechjunkie, co-founder, chief investment officer
You are being programmed right now
The old computer sits silent in the corner of your room, its black screen reflecting nothing but darkness. You've heard the warnings: artificial intelligence could be dangerous if trained by those with ill intent. But as you scroll through your social media feed, double-tapping and sharing, have you internalized that another kind of programming is already at work? One that targets not silicon and circuits, but neurons and synapses?
This isn't science fiction. Every notification that pulls your attention, every headline that sparks your outrage, every video that shapes your worldview – these are lines of code being written into your neural architecture. The human mind, that mysterious realm of consciousness we hold so dear, is remarkably susceptible to external influence. We are, in many ways, walking computers with wetware instead of hardware, and our programming updates happen every minute of every day.
Think about your last strongly held opinion. Where did it come from? Was it truly yours, built from careful reasoning and personal experience? Or was it downloaded from the endless stream of content you consume, planted there by someone with an agenda you might not even recognize?
The parallels between computer programming and human conditioning are striking. Just as a programmer can write code to make software behave in specific ways, our behaviors and beliefs are shaped by the inputs we receive. The difference is that human programming happens in the open, often without our conscious awareness or consent.
Read the full article here.
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Amias Gerety, partner
With FDIC and OCC leadership change coming quickly, you'll see an immediate change in tone, that I expect will emphasize crypto first but more broadly emphasize a welcoming posture towards innovation more generally. For example, Jelena McWilliams was proud to be called the "most tech-forward FDIC chair ever". I would expect policy statements on crypto to come out relatively quickly (e.g weeks), with more detailed supervisory guidance to come in a few months, and then new bank charters granted within a year or so.
The Fed leadership will not change in the next year, but they'll likely be amenable to at least some of the policy changes and de novo banks — since the FDIC was the main blocker on those. However, one big issue that relies on the Fed is access to the Fed's payment systems. A tiny number of non-banks and trust companies have this access and it is highly coveted by crypto companies — most notably Kraken and Custodial who sued the Fed. With Republicans in charge, there will be immense pressure on this policy change. The Fed itself will argue that no policy is necessary and that they will consider applications as they come, but that won't satisfy crypto advocates in the House, Senate, and WH.
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Laura Bock, partnerEmbedded fintech
We will continue to see big strides in embedded finance. In fact, QED recently published a report with BCG that predicted that, by 2030, embedded finance will account for $320B in revenues worldwide. We see financial services being delivered more contextually within the platforms that consumers and businesses use day-to-day. And, in support of this, an infrastructure layer will emerge to help companies quickly and easily launch industry-leading products in banking, payments, credit, investing, insurance, and debt management.
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Victoria Zuo, principal
Fintech to thrive amid trade tensions and volatility
Rising trade tensions and market volatility will create a fertile ground for fintech startups to innovate. Businesses will increasingly seek solutions to manage risks such as currency fluctuations, evolving tariffs, and regulatory complexity. Fintechs offering insurance, credit, and hedging tools, along with platforms that automate regulatory compliance for cross-border trade, are well-positioned to capture this opportunity. As global supply chains face disruption, these startups can become indispensable in ensuring smoother operations and financial stability.
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Adams Conrad, principal
Stablecoins will hit critical mass in emerging markets
First and foremost, I am long on U.S. Dollar-denominated Stablecoins because I am long on the U.S. Dollar (and the United States). As globalization thrives and demand for international money movement continues to grow, the demand for stablecoins will too. Blockchains are one of the best ways to give people in emerging markets access to stable, secure payment rails, a critical ingredient to improving financial accessibility; However, the adoption of stablecoins is also influenced by availability.
Fintech must continue to work on ensuring that people have access and trust in the tools they use to interact with stablecoins.
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Alex Taub, principal, growth
Growth in 2025
Growth-stage fintechs will raise larger rounds with more aggressive capital deployment strategies after nearly two years of recalibration. Easing interest rates and a more favorable regulatory environment will reduce pressure across the industry, encouraging fintechs to take bold steps into new markets and product lines.
High-profile fintech IPOs from companies like Klarna, Stripe, and Chime will bring liquidity back into private markets, creating a flywheel effect that revitalizes the exit landscape for growth-stage businesses. Fintech CEOs will apply the lessons from the previous cycle, using fresh primary capital to build more resilient businesses with sustainable growth.
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Shruti Batra, principal
Wealth management
The wealth management industry is undergoing a fundamental transformation, which will continue into 2025. The ‘Great Wealth Transfer’ is underway. That means we’re likely going to see $84 trillion change hands via inheritance over the next two decades as baby boomers transition. As a result, this among other factors will drive more than 70 percent of millennial recipients to change advisors.
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2025 UK & Europe Predictions
Yusuf Ozdalga, partner, head of UK and EuropeThe visible hand of the government vs. the Invisible hand of the market
More regulation is another 2024 prediction that certainly came to pass, both in Europe and the USA, but we expect this to acquire a new flavor in 2025. Specifically, while there will be a lot of regulatory action in places like the EU, the US looks poised to move to domestic de-regulation (lower taxes, more lenient enforcement, etc.) while moving to more regulation (primarily tariffs) in an international context. The net result of these non-market interventions is that market players will increasingly look to (and try to lobby!) governments to act in their favor. So, expect more lobbying and more reading of the political tea leaves in tech circles!
Climate tech
This is a secular macro trend that will not abate anytime soon, and especially in Europe, where the EU sees itself as a global regulatory trendsetter, there will continue to be regulatory as well as consumer-driven tailwinds. Add to this the ever-decreasing costs of producing alternative energy, and the table seems set. The one countertrend here would be more tariffs on Chinese-made solar panels slowing down the pace of cost decreases.
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2025 Latin America Predictions
The Latin American Team: Mike Packer, Camila Vieira and Ana Cristina Gadala-Maria
Blockchain and stablecoins cannot be ignored anymore
Blockchain is set to reshape LatAm's financial systems with practical use cases, from fraud prevention to cross-border remittances and the digitization of government services. Central banks in Brazil and Mexico are also exploring central bank digital currencies (CBDCs). We are seeing incumbents invest more to be prepared for new emerging technologies and be willing to collaborate with startups innovating in the space. The prospect of achieving unprecedented self-verification, combined with flexibility, compliance and global user access enabled by smart contracts, seems almost too good to be true. The enhancements mentioned below make the thesis more believable, streamlining operations, reducing transaction costs and increasing transparency.
Regulatory technology as an alley
Compliance remains a complex challenge in LatAm's evolving regulatory landscape. From all the headlines this year about gambling volumes, fraud transactions and BaaS operating without proper licenses, regulators will be busy in 2025 with a backlog of regulatory updates to get discussed, negotiated and implemented. The Brazilian regulator has done very transparent and collaborative work so far. Still, we expect the regulatory pressure will pick up, and candidly, startups are expecting and understand the need for more clarity as well, hence their demand for technology that will allow them to adjust, comply, report and audit new rules quickly, but also test new products and services as they launch new solutions or new markets. Regtech offers solutions to automate and streamline these processes, ensuring institutions stay ahead of regulatory demands most efficiently and accurately while reducing costs.
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Workplace Wellbeing Predictions
Maryalice Giroux Viljoen, VP of administration and talentAs we dive into 2025, workplace wellbeing continues to take center stage in organizational strategies, reflecting a growing understanding of its connection to productivity, retention, and employee satisfaction. The pandemic aftermath, coupled with shifting workforce dynamics, has reshaped how organizations prioritize wellbeing. Here’s a look at the top trends defining workplace wellbeing in 2025:Mental Health as a Core Priority
Mental health is no longer a side note in wellness programs; it’s a central pillar. In 2025, organizations will be investing in proactive strategies like mental health days, counseling services, and stigma-free work cultures.
Technology-driven solutions, such as AI-powered mental health apps like IonaMind, are also becoming prevalent, offering employees immediate and confidential support. We’re also seeing chatbots offering 24/7 guidance, sentiment analysis to gauge team morale, and predictive analytics identifying burnout risks redefine how organizations care for employees. However, ethical considerations around data privacy remain critical.
Mental health data is deeply personal, often involving sensitive information about an individual's thoughts, emotions, and past experiences. Any misuse or breach of this data could lead to severe consequences, including stigma or discrimination. While it has the potential to revolutionize the field, safeguarding privacy with AI in mental health care is essential to build trust and ensure ethical implementation.
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What's on our mind
Thought Leadership Pieces
The future of financial advice
The size of the wealth management industry is large and growing, and as household wealth has quadrupled over the past 35 years, investable assets have outpaced that growth, increasing 16x. Yet, like other areas of financial services, fintech has only begun to take share. Currently, fintech revenues are sitting at $320 billion, which represents less than 3 percent of the $14 trillion financial services revenue pool, and are expected to grow 5x to $1.5 trillion by 2030.
The wealth management industry represents $62 trillion in assets under management (AUM) and is expected to grow to $85 trillion in AUM by 2028. The industry is going through a significant transformation, driven by the Great Wealth Transfer, the emergence of augmented advice and the rapid growth in alternative assets.
The wealth management industry, both startups and legacy players, is shifting from advisors recommending a traditional 60-40 investment portfolio to providing holistic financial guidance that addresses a wide range of topics, from financing home renovations to optimized tax strategies, estate planning, and more. The long-underserved mass affluent segment (individuals with $100,000 and $1 million in liquid assets), which accounts for approximately one-third of the U.S. households and investable assets, represents a large and untapped segment with massive growth potential for these broader offerings.
At the same time, advancements in AI, particularly in large language models are automating an advisor's middle- and back-office tasks, enabling them to manage significantly more clients and expanding access to financial advice for the mass affluent through a growing ecosystem of AI-driven tools targeted at RIAs. For now, having a human in the loop offers security and on-demand advice when they need it, but is no longer the first or only method of transacting.
The asset management industry has grown up to help investors navigate a two-sided marketplace between savers and investment instruments. But the current marketplace is fragmented and now largely outdated, ripe for innovation and ready to be transformed by AI.
QED Investors has invested in several companies across consumer tech and wealth globally that address critical gaps in financial services. Its investments include:
- Albert, which blends AI and human advisory for personal financial management
- Atomic, which enables customer-facing fintechs and banks to integrate wealth management and trading into their products
- FreeWill, which simplifies estate planning and charitable giving
- Warren, a Brazilian fintech democratizing investment management
- OpenInvest (acquired by JPM), a socially responsible investment asset management platform that aligns customer values with their investments
- CommonStock (acquired by Yahoo Finance), which promotes collaborative stock market insights.
These investments reflect QED's belief in the disruptive potential of wealth tech, and we’re excited to continue supporting the next wave of innovators shaping the future of financial empowerment. In this report, we share our point of view on the ongoing trends we are seeing and investment opportunities. This report is the first installment in a multi-part series where we delve into various facets of the wealthtech industry.
- Shruti Batra, principal
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Fintech's role in climate and energy solutions
As renewable energy adoption grows and climate events increase, fintech will be increasingly important in facilitating, financing, insuring and managing the shift to a decentralized and sustainable energy system.
Climate change increasingly impacts everyone's lives through more extreme weather events, rising utility costs and disruptions to food and water supplies. This, in turn, influences how we manage and power our households. Shifting from fossil fuels to renewable energy sources is essential to reducing greenhouse gas emissions and mitigating the effects of climate change.
QED invested in several companies following this trend and continues to track other opportunities. Each company leverages unique aspects of the evolving energy and climate markets, focusing on renewable energy adoption, technological innovation and customer-centric services to generate revenue.
Here are a couple of ways fintech will continue to play a role:
Flexible financing for consumers:
Financing options for installing home solar panels, batteries and EV chargers. Companies also provide "solar-as-a-service" and lease-to-own models that lower the upfront cost barrier for consumers looking to adopt renewable technologies.
Peer-to-peer (P2P), virtual power plants (VPPs), and energy trading:
Fintech can facilitate P2P energy trading, in which households or businesses with solar panels and battery storage sell excess power to others in their local grid network. This creates a marketplace for distributed energy resources and allows participants to benefit from energy production. Fintech plays a role in aggregating small-scale energy producers (like households with solar panels) into a VPP, which acts like a single power plant in the energy market. Fintech can manage the complex transactions between consumers, distributed energy resource operators and grid managers and provide automated payments for power sold to the grid.
Crowdfunding and peer-to-peer financing:
Democratize investment in clean energy by enabling crowdfunding for solar projects, battery installations and grid upgrades. Individuals and small investors can pool funds to support local renewable projects, making capital more accessible for developers and communities.
Collections, real-time billing and pricing:
Fintech-driven real-time billing systems can manage variable pricing models, where consumers pay different rates depending on demand, supply and specific energy usage patterns. This can incentivize consumers to use energy during off-peak hours, aligning demand with renewable energy production.
Smart contracts, microtransactions, pay-as-you-go energy, grid-linked financial products, decentralized energy management and others:
Fintech is enabling innovative payment and management solutions in energy, primarily through microtransactions and pay-as-you-go models that help households, especially in off-grid areas, pay only for the energy they use. Blockchain-based smart contracts facilitate automated energy transactions, allowing excess energy from solar panels to be sold directly to the grid or neighbors. Distributed ledger technology enables utilities and grid operators to manage a decentralized network of renewable energy producers securely. This would streamline decentralized energy resource transactions, certifications and data management. Additionally, fintechs can help utilities offer unique financial products tied to grid resilience, providing incentives for consumers with backup batteries to support grid stability by supplying stored energy during peak demand.
- Camila Vieira, partner, head of Brazil
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Traveling around the world!
Where the QED Investors team traveled in Q4
London Business School
Nigel Morris joined professor Gary Dushnitsky at the Multiple X conference put on by the Institute of Entrepreneurship and Private Capital at the London Business School. They covered the state of venture, the fintech opportunities globally and the importance of mental health and overcoming failure.
Capital One ELT + Alumni Dinner
Last month, 19 wonderful Capital One alumni gathered at the Home House in London for the Capital One ELT and Alum Dinner. We were proudly represented by Cap One co-founder and QED managing partner Nigel Morris, partner and head of Asia Sandeep Patil, partner and head of UK & Europe Yusuf Özdalga and partner emeritus Miles Reidy. We were also joined by two QED portfolio company CEOs, ClearScore's Justin Basini and Zopa's Jaidev Janardana.
Abu Dhabi Finance Week
QED Investors, BECO Capital, Key Capital, and 9900 Capital hosted a mixer to bring together the fintech community during Abu Dhabi Finance Week. The vibrant energy brought to the event truly made it a memorable evening.
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QED news
As all eyes remain on the IPO market, Nigel Morris sat down with Bloomberg to discuss Klarna’s planned IPO and the potential it has to set the stage for more fintech listings. Nigel believes that “the fintechs - public and private - that are solving real problems and have strong fundamental unit economics will continue to perform well.”
Camila Vieira was promoted to partner, head of Brazil. Camila is a part of the early-stage international team and joined in 2022 as QED's first employee based in São Paulo. She becomes the second principal to earn a promotion to partner, following Laura Bock in 2021.
Mike Packer spoke with TechCrunch about the Latin American fintech market, outlining why it will be a market to watch in 2025. Mike shared his belief that we had already hit the bottom for funding to Latin American Startups midway through 2024, and a bounce-back is coming. He attributes a resurgence in deals to two reasons: LatAm fintech companies that raised in the hype of 2021 are just resurfacing now to raise their next round, and companies, like in the QED portfolio, have hit milestones and are ready to head back out to reach their next level of growth.
Co-founder and partner, Frank Rotman, bylined an article in Crunchbase sharing his insights on startup speed, its importance and strategies to achieve it. He covers generic signs to look for when identifying startup speed and the primary risks startups face that fail to maintain sufficient speed. He also dives into how conducting speed audits, speed drills and having a speed mentor can help startups get it right.
Amias Gerety joined Prateek Joshi on the Infinite ML podcast to discuss AI agents and their ability to make purchases online. During the podcast, Amias and Prateek cover: What happens today when an AI agent tries to make an online purchase; Why AI agents need a separate financial infrastructure to make online purchases; Some of the biggest obstacles AI agents face today; Why the current financial infrastructure is ill-suited for AI agents and Identity verification and fraud detection.
In episode six of the Built Tough podcast, partner and head of Africa Gbenga Ajayi explored the evolving landscape of fintech in Africa. Throughout the podcast, he shared his journey from tech industry roles to venture capital, offering insights into the unique challenges and opportunities in the African fintech sector. He discusses the critical importance of trust in financial services and how innovative fintech solutions are reshaping consumer expectations across the continent.