Global fintech is experiencing a period of growth and maturity, according to a report by Boston Consulting Group (BCG) and QED Investors titled "Fintech’s Next Chapter: Scaled Winners and Emerging Disruptors." The report highlights the sector's resilience following a challenging funding environment, showing stronger discipline and promising growth prospects.
In 2024, fintech revenues increased by 21%, up from 13% in 2023, significantly outpacing the broader financial services industry. Public fintech companies saw their average EBITDA margin rise to 16%, with 69% now profitable. A significant portion of this performance is attributed to scaled players generating $500 million or more in annual revenue, accounting for approximately 60% of total fintech revenues.
"A class of scaled fintechs is coming of age. Investors are demanding greater maturity, and regulators want more accountability," stated Deepak Goyal, managing director and senior partner at BCG. He added that emerging disruptors are utilizing next-generation technologies like agentic AI to push established players towards continuous innovation.
The report reveals several key findings:
- Fintech revenues surged by 21% in 2024.
- Public fintech profitability improved with EBITDA margins increasing from 12% to 16%.
- AI is reshaping the industry; early-stage fintechs are leveraging AI ahead of larger peers.
- Many private fintechs founded before 2016 remain IPO-ready but patient.
- Fintechs still only penetrate 3% of global banking and insurance revenue pools.
- Challenger banks with over $500 million in annual revenues are growing deposits at a rate significantly higher than traditional banks.
- Private credit is becoming an important factor for fintech lending.
"Fintechs are winning in spaces where traditional banks have largely ceded the competitive ground," said Nigel Morris, managing partner at QED Investors. He noted that these companies leverage digital distribution channels and increasingly use AI, resulting in rapid growth compared to incumbents.
The report outlines strategic imperatives for various stakeholders:
For Fintechs: Focus on fundamentals while embedding AI into business models. Stay alert for M&A opportunities.
For Investors: Diversify capital into underpenetrated areas like financial infrastructure and regions primed for growth. Push for faster AI adoption.
For Regulators: Provide clarity and speed in regulation around AI and digital assets to avoid stagnation.
For Banks: Partner with fintechs where strategically beneficial and embrace AI experimentation.