rewrite this title How Profitability, Customer Relationships, and AI are Driving Investor Preferences in Fintech – Finovate

CB Insights recently unveiled its 2026 State of Venture Tracker. Among the top takeaways from the data is that “bigger, fewer” continues to define VC investing with deal counts at multi-decade lows and so-called mega-rounds taking up more than 80% of invested capital.

Specifically within fintech, the firm noted that while funding was up over the last 12 months compared to the previous 12 months (and by a significant 20.7%), the second quarter of this year saw a pullback of 8% in funding relative to the first quarter. The number of deals in the last three months was also significantly lower than the previous three months, by a factor of more than 27%.

What’s going on? There are at least three main trends driving investment decisions in fintech as we move into the second half of 2026. Here’s a look at what they are and what they mean for fintechs that are seeking funding.

Fewer Bets, Bigger Convictions

The most distinct trend in fintech funding may be the growing preference for companies that can demonstrate proof of performance. If the mantra of recent years has been “how big could this company get?”, the concern now is whether “this company” can become a profitable enterprise.

A growing number of investors have determined that the strategy of five or so years ago of funding many companies, diversifying bets on success, is no longer viable and that backing firms that are—or seem to be—the most likely winners in a given sector is a much surer route to good exits in a reasonable amount of time.

How long will this trend endure? Some observers have suggested that this shift is more structural than cyclical. This, in part, is less because of changes in fintech and more because of changes in the venture capital industry itself. Limited partners (pension funds, family offices, university endowments) are increasingly focused on careful deployment of capital and realized returns. Similarly, a venture capitalist on our All-Star Investor Panel at FinovateSpring in May noted that many LPs have become concerned about the slowing pace of exits and the resulting liquidity challenges they face.

What to watch for? A better IPO environment including strong aftermarket performance would be helpful, as would lower interest rates. An acceleration in M&A activity could also play a major role in shifting VC attitudes toward what companies get funding. Additionally, keep an eye on deal count versus funding amounts.

Customer Relationships Are Where the Value is

The other interesting trend in VC investing in fintech is a growing preference for companies that are closest to the customer rather than companies that essentially sell tools to them. In other words, challenger and neobanks, crypto-native financial institutions, and digital banking platforms are more attractive to investors right now than bank-enabling firms offering core systems, onboarding, etc.

This largely has to do with the perception among investors that, in financial services, the value is in the customer relationship. As financial institutions modernized over the past decade, it seemed as if funding the companies that were providing the tools to accomplish this—payments and wealth APIs, lending infrastructure, data aggregation—was the best investment—and would remain that way. Now, however, investors are finding greater value in things like deposits, customer relationships, cross-selling, and proprietary transaction data, and those “assets” are found among those companies that “own” the customer relationship.

In this thinking, customer relationships—as represented by deposits, transactions, and so on—are hard to build, but difficult to displace once established. On the other hand, technology can be replicated, or even replaced by new technologies. This is not to say that investors believe that fintech infrastructure is a bad investment. In fact, the success of fintech infrastructure companies has in some ways created a glut of these firms in virtually every category from identity and fraud to payments. This makes it harder for investors to differentiate between companies and contributes to the preference for “waiting for the winners” rather than covering the field with multiple modest bets on many companies in the same business.

AI Uber Alles

The amount of spending on AI is the elephant in the room when it comes to venture funding in general. It is no secret that both AI companies and those companies that are making effective, proven use of AI technologies are attracting the lion’s share of investor dollars right now. In fact, if there is an area where that “growth now, profit later” mentality endures, it is here rather than in the world of payments companies.

Is there anything stopping the AI bullet train? The challenge is that AI companies are producing annual recurring revenue numbers that are significantly beyond what software companies were producing ten years ago—and doing it faster. This combination of capital efficiency and growth is virtually irresistible to venture capital investors. AI also has the advantage of being, at least for now, a horizontal technology that reaches a dizzying array of industries from finance and healthcare to manufacturing and law. Like cloud computing, the internet, and the smartphone, AI has a breadth that means increasingly that every investment partnership has an AI aspect.

There are those looking for storm clouds on the horizon. Some critics have suggested that even if AI proves to be every bit the revolutionary technology its proponents believe it will be, not everyone connected with AI is going to get rich because of it. What happens if many of these AI companies struggle to retain customers or spending on (or support for) infrastructure becomes a problem? What happens if fundamentals fail to live up to what turn out to be peak valuations?

The one hopeful aspect of this for fintech is that AI could play a role in revitalizing areas of the industry, such as financial wellness, that have fallen out of favor with VC investors in recent years. Another venture capitalist on our All-Star Investor Panel at FinovateFall last year concluded her remarks with this observation. From regulatory compliance to smart saving, AI has the capacity to help us solve old and new problems with unprecedented efficiency, precision, and personalization–and to make previously lackluster-seeming investment opportunities potentially worth a second look.

Photo by Mike van Schoonderwalt from Pexels

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