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Financial services was the leading sector for venture investment in 2021 with $134 billion invested, marking a whopping 177 percent year-over-year growth. That compares with overall global venture capital investment, which grew by a still astonishing 92 percent.听

With fintech emerging as the leading sector for startup sector investment, here are three trends worth watching in 2022鈥攑lus a few words of caution from investors we spoke with.听

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Fintech apps

鈥淭he desire for personal financial stability and security, amidst all of the economic uncertainty unfolding in the world right now,鈥� is a core focus for San Francisco-based venture firm , said principal and creator economy expert . 鈥淧eople want to have a better sense of not just how much they’re saving, but how much they need to save to be able to reach the milestones that could really change their life.鈥�

Portfolio companies that focus on savings the firm invested in last year include , which builds a roadmap for savings toward buying a home; and , a startup that helps its users set savings goals.

, founder of New York-based , envisions the building of a new tech stack where 鈥測ou have a lot more flexibility in the type of capabilities and services you can offer,鈥� with more specificity around different audiences and their needs.听

Keidan mentioned , which is focused on managing finances for independent contractors, a group that can include 鈥渁 driver of a car, a seller of something online, a creator鈥濃�� anyone who is suddenly required to manage business alongside personal expenses, and withholdings for taxes and invoicing.

鈥淔intech and the creator economy are colliding to create an incredible class of new businesses that are powering the fastest growing sector of small businesses right now: independent content makers,鈥� said Constine.听

, another of Signalfire鈥檚 portfolio companies, provides a credit card specifically targeted to creators, to help pay for production costs upfront and allow payment over time.听

Embedded services will power further growth

To power the growth of these affinity-based financial services, we will see continued growth in embedded financial services beyond where the trend started in payments with 鈥渆mbedded lending, embedded insurance and embedded capital markets businesses,鈥� said of (CTV).

鈥淭he ability to have an infrastructure layer of companies that can offer financial services products to both fintechs and existing financial services firms, but also to allow nonfinancial corporates to monetize their customers through financial services and add a lot of very high margin businesses, is a very powerful opportunity,鈥� said Savage.听

Where once there was one company offering banking as a service, there are now a dozen in the space. There are more companies on the credit card issuing side as well.听

On the other hand 鈥渢he way capital markets function, which is a surprisingly technologically sophisticated set of business processes, is still actually in need of a lot of reinvention,鈥� Savage said.听

There has been a lot of innovation for consumer services, but less so on the enterprise side, he noted.听

One such company is Torch Capital portfolio company , which hosts APIs to allow a fintech company to offer trading solutions. And , a portfolio company of CTV uses artificial intelligence for optimized trading.

B2B payments will become more digitized

Another area that investors have shown a lot of interest in is business-to-business payments. Savage noted that much of the consumer payment space has been digitized, but that hasn鈥檛 happened as much for business payments, which see higher payment volumes.听

, and have innovated helping businesses gain control of employee expenditures. Next will be the 鈥渕arriage of business intelligence with payments,鈥� with 鈥渇inancing products wrapped around it as a way of monetizing, but the underlying function is about business intelligence,鈥� he predicts.听

BNPL will expand into new markets amid concerns

Buy now, pay later platforms, which allow buyers to make purchases on payment plans, first became integrated into payment systems in e-commerce and are now rapidly expanding to other industries. In 2021, around $4 billion was invested in companies described as buy now, pay later, or with installment payment plans up from $1.7 billion in 2020.听

Leading BNPL platforms are partnering with other large companies: coupled up with in 2021, and struck a deal with in 2020 and more recently .听

, meanwhile, is in the process of getting regulatory approval to acquire Australia-based . And last year, announced it is launching a BNPL service as part of Apple Pay, with covering the loans. BNPL platforms are an alternate payment method circumventing the credit card industry, prompting both and to announce their own BNPL initiatives in 2021.听听

BNPL is now moving from e-commerce to other sectors. One such sector is travel, with Silicon Valley-based partnering with airlines and travel brands to offer these experiences. And , headquartered in the U.K., helps consumers split large vacation bills over time.听听

San Francisco-based is an example of the emerging 鈥渃are now, pay later鈥� trend, with the service letting consumers pay for health care expenses over time. Patients can schedule the health care they need and avoid being reported to collections agencies, while hospitals,听 which typically get 15 cents on the dollar, are paid a higher proportion, said Constine, who makes a distinction between pay later shopping for fun and services that are needed.听听

PayZen鈥渦ses an algorithm to assess the finances of patients. That way they can put them on a payback plan that they can actually adhere to, so that they are able to pay for their care upfront,鈥� he said. 鈥淏efore it was just not scalable to be able to build a custom payback plan for every single person with a medical bill. But through AI you can actually build systems that can scale to millions of patients and give them all this custom plan.鈥�

The concern with BNPL platforms as it extends across payments is the impact on the consumer. A recent survey from found that 44 percent of respondents have used BNPL services and more than have missed a payment.听

鈥淲hat does it ultimately mean for consumer financial health to participate in these by now, pay later experiences?鈥� asked Savage. And will prices for merchants come down as this becomes more of a commodity product in the market? For some of these services, there is value in creating a merchant network, according to Savage.听

On Dec. 16, 2021, the requested data over concerns on the impact on consumers.听

Looking forward

In 2022, we expect to see innovation in the infrastructure layer, consumer fintech and business payments, not to mention continued growth in investing in crypto assets. Investments in financial services will continue to be a leading sector for late-stage investments in 2022, as well as newer entrants to the market.听

But will fintech investment beat the massive increase it saw in 2021? That鈥檚 anyone’s guess.

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