The next hot fintech trends top VCs are betting on: Embedded finance, finfluencers, and a ‘great rebundling’

Bain Capital Ventures

Paston, an investor at Bain Capital Ventures, also noted that embedded fintech was a clear winner in 2020, identifying it as the top trend of the year. 

It’s also one she expects to continue.

Software companies, already well-equipped with data on their users, are well positioned to roll out financial offering, too. And fintechs that enable that seamlessly have seen a massive boost this year.

“To me, this trend makes perfect sense. The software companies have data-rich relationships with their end consumers, and can therefore better underwrite their end merchants or consumers, but also spin up novel functionalities that other horizontal players may not be able to do,” Paston said. 

And for those software companies, adding financial services to their offerings can boost user retention and loyalty. 

“Especially in the drive for ruthless prioritization throughout COVID, there is a clear ROI for embedding fintech because it helps you reduce churn, it’s an up-sell opportunity, and you can better monetize off of payments, lending, investing, and insurance,” she added. 

Read more: These are the 38 fintechs that investors say are poised to be breakout B2B stars. Meet the startups they think will follow in the footsteps of Plaid and Stripe.

Another area Paston is watching is insurtech.

The space, which was long dominated by traditional players that have significant scale, has seen an uptick of young, agile companies looking to disrupt it. Softbank-backed Lemonade and car insurance startup Root both went public this year, raising $319 million and $664 million in their respective IPOs. 

Meanwhile, Hippo, which focuses on homeowners insurance, raised a $150 million Series E in July, and auto-insurer Metromile plans to go public via an acquisition by a special purpose acquisition company. 

“I think insurance is really in its prime right now,” Paston said.

“I think there’s a lot more focus brought to insuretech as a result on not just the B2C side, but also the B2B side. I think we’re in the first innings of insurtech and insurance innovation, and there’s a lot more to go there,” she added.