Apple, consumer payments, and investor uncertainty in 2024

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The payments space saw the smallest dip in VC activity over the past two years compared to other fintech subsectors, according to CB Insights and reporting by American Banker. Where wealthtech solutions saw a 61% YoY dip in investment in 2023, payments startups saw only half that decrease, and eclipsed other investment categories with more than $14.1B raised last year. 

In an interview with American Banker, Hugh Tallents, Senior Partner at cg42, concluded that payments firms had an advantage over other fintechs because they could demonstrate their revenue models while simultaneously scaling. VC funding will look at restaurant payments, digital wallets, B2B payments, and BNPL in the coming year, he continued, and investment might also come in the form of acquisitions and private equity activity.

Taking a look at publicly listed tech companies’ payments-focused strategies suggest that payments will remain a cash cow and focus of investment this year across fundraising fora—not just VCs and private markets. However, the types of payments products that succeed in the coming year may change, especially as consumer debt continues to swell; this may shape the specific kinds of payments products investors support in 2024. 

Most notably, Apple, with a seemingly limitless war chest, is refusing to let go of its stranglehold over its payment pipelines. The computing giant announced last week that it would charge developers up to 27% for using non-Apple payment providers; this comes after legal battles with Epic Games forced Apple to open up its App Store payments to outside processors. Apple previously charged developers up to 35% for using Apple’s payment system. 

Apple’s malicious compliance with post-Epic legal rulings showcases how lucrative these payment pipelines remain, even for tech players with myriad revenue streams—including a variety of payment-focused sources of income. Apple Pay, for example, will probably increase its market penetration in the US by 10% in the coming two years; B2C pipelines continue to hum and grow. 

But B2C channels can be fickle. Apple’s stubborn grip on B2B2C payments through its app store suggests in-house uncertainty over the future of consumer health. Might consumer payments in their multiple forms begin to slow down—especially as household debt continues to build and loom?

Those uncertainties may come to a head in the coming year and offer a clearer roadmap for payment incumbents and investors alike. Payment players that focus exclusively on a consumer class or product may see themselves acquired at a steeper discount than anticipated, and swallowed up by B2B solutions looking to diversify their basket of offerings.