The global fintech industry is entering a new phase marked by the rise of established fintech companies, the integration of new technologies such as AI, and a focus on sustainable growth. This evolution in the sector is highlighted in a recent report which examines the current state and future trends in fintech.
According to the report, established fintechs are now seen as "winners" from the initial wave of innovation. These companies are expected to operate like mature public entities, dealing with regulatory scrutiny and competition from emerging startups. They must balance efficient capital allocation with innovation to expand their offerings and reach new markets.
Nigel Morris, managing partner at QED Investors, commented on this transition: “Fintechs are winning in spaces where traditional banks have largely ceded the competitive ground, such as banking for lower-income households and buy now, pay later.” He added that these firms are growing rapidly due to digital channels and AI usage.
The report reveals that while only 3% of global banking revenue has been captured by fintechs, there is significant potential for growth through technology adoption. It stresses that fintechs must prioritize sustainable growth over rapid expansion to attract investment when capital markets become more favorable.
Key findings include a 21% surge in fintech revenues during 2024 compared to a 6% increase among traditional financial services. Additionally, profitability improved with EBITDA margins rising from 12% to 16%. AI is already making an impact on product development within early-stage companies.
The report also identifies five trends likely to shape fintech's future:
1. Agentic AI will eventually transform commerce and personal finance.
2. Onchain finance shows promise but faces scalability challenges.
3. Challenger banks may find success by expanding products rather than going global.
4. Fintech lending remains promising but untested through economic cycles.
5. Emerging fintechs could drive growth in B2B solutions and financial infrastructure.
Strategic recommendations for stakeholders include doubling down on core strengths for scaled leaders, investing in underpenetrated areas for investors, ensuring regulatory clarity around digital assets for regulators, and partnering with fintechs strategically for banks.
This comprehensive analysis draws from discussions with over 60 industry executives worldwide alongside extensive research.