Fintech Market

GLOBAL FINTECH MARKET OVERVIEW

The global fintech market is expected to reach USD 1264.6 billion by 2032 from USD 167.55 billion in 2023, growing at a CAGR of 25.18% during the forecast period. This growth is propelled by the rising usage of fintech solutions by both businesses & consumers and increasing consumer preference for the use of mobile banking applications with the great adoption of digitalization in the finance sector. The emergence of the COVID-19 pandemic further propelled the use of digital financial services as many of the consumers seemed to have contactless payments and remote banking solutions to minimize the exposure to the virus. In 2023, North America is expected to capture 34.3% of the total market share.

MARKET OUTLOOK

Fintech encompasses a wide range of services, including mobile banking, insurance, cryptocurrency, and investment applications, which integrate finance and technology. From startups to established firms, they are actively pursuing innovations in the finance and banking sectors to allow revolutionized operations to run smoothly. The adoption of digital financial solutions is prompting financial and technology service providers to collaborate, developing disruptive technologies that respond to evolving consumer expectations. The penetration of e-commerce platforms is a significant driver of fintech market growth. Global e-commerce sales were valued at USD 5.8 trillion in 2023 and are expected to reach USD 8 trillion by 2027. The growing number of people using mobile applications that enable them to pay online using the internet delivers effective transactions without any hurdles. This trend is expected to establish new standards in the fintech industry in the coming years.

The continuous expansion of the banking sectors driven by the latest technologies and the growing adoption of these services among consumers are likely to pose growth opportunities for the fintech market. The development of fintech is attributed to the integration of AI, blockchain, cloud computing, and IoT, enabling faster, more secure, and efficient financial transactions. Redefining traditional financial services is one of the major ways businesses and consumers can embrace digital financial solutions in various sectors, such as payments, banking, and wealth management.

EMERGING TRENDS IN THE FINTECH MARKET

Impact of Artificial Intelligence (AI)

Financial services are greatly transforming with artificial intelligence according to the consumer’s interests towards personalizing interactions. New launches like AI-driven chatbots, fraud detection systems, and robo-advisors are becoming increasingly popular. For instance, Erica, an A.I. chatbot in Bank of America, is handling millions of customer interactions daily by reducing human work on consumers' tasks and encouraging them to focus on complex tasks. Top companies like Zest Finance also enabled using A.I. tools to improve credit scoring models, extending financial services to underserved populations and others.

Role of Blockchain and Distributed Ledger Technology (DLT)

Blockchain technology has a pivotal role in improving security and transparency in financial transactions, with applications ranging from smart contracts to cross-border payments. One of the blockchain-based payment networks, Ripple, has completely reduced the cost and time of cross-border transactions, which are more compatible with traditional methods. The adoption of blockchain technology is esteemed to reduce the risk and enhance the efficiency in real-time applications.

Adoption of Cloud Computing

Many fintech companies are focusing on cloud computing deployment mode to process and store vast amounts of data more efficiently. Managing vast amounts of data as there is a rising number of customers using online transactions is certainly possible with cloud computing techniques, which allow companies to launch digital financial services without significant infrastructure investments. The Royal Bank of Canada has already adopted cloud-based infrastructure to promote excellent service delivery along with operational efficiency.  

Integration of IoT in Fintech

The Internet of Things (IoT) facilitates real-time data collection and analysis through physical devices. The physical device that is connected to the internet can collect the data stored in the cloud database from anywhere. The strong internet connection enables easy payment terminals like smart ATMs and enhances transaction convenience and speed. This technology also has the ability to introduce personalized services based on the previous transaction history, which quietly improves the customer experience.

FINTECH MARKET DRIVERS

Digital Transformation and Consumer Demand

The trend towards the adoption of digital finance services is one of the key driving factors for the fintech market to grow during the forecast period. With the shift towards online banking, digital payments, and investment platforms, the demand for fintech services completely rolled out, and new services in the banking sector are expected to eliminate the growth rate of the market. According to recent data, the number of digital banking users in the U.S. is forecasted to reach 216.8 million by 2025, up from 196.8 million in 2021. Mobile wallets and digital payment systems have become essential tools for financial transactions in regions where traditional banking access is limited.

Technological Advancements

Technological progress, including AI, blockchain, and cloud computing, is transforming the financial services industry. These advancements enable fintech companies to deliver more efficient, secure, and innovative solutions that challenge traditional banking methods. AI is being used to personalize customer service, detect fraud, and automate risk management. For example, AI-driven chatbots like Bank of America's Erica have handled over 100 million interactions, proving effective in managing routine customer inquiries. Blockchain technology, known for its secure and transparent transactions, is expected to grow significantly, from $7.18 billion in 2022 to $163.83 billion by 2029. These technologies not only improve financial transaction efficiency but also open new opportunities for creating cutting-edge financial products.

Financial Inclusion and Accessibility

Fintech is bridging the gap by providing access to financial services for underbanked and unbanked populations. Approximately 1.4 billion adults globally remain unbanked, primarily in developing regions. In Kenya, over 40 million users are already using financial transactions significantly through M-pesa. Likewise, Tala and Kiva provide microloans for companies that lack access to modern banking systems. The growing economy in both developed and emerging countries is attributed to the quick adoption of the formal financing system.

FINTECH MARKET RESTRAINTS

Regulatory Challenges

The multifaceted fintech companies pose significant barriers to the growth of the market. Rules and regulations such as the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States enable companies to navigate data protection requirements. The increasing prominence of digital lending and cryptocurrencies with regulatory misleads has led to the closure of several fintech platforms in China and India. These countries have already imposed strict regulations on digital lending, which has created significant challenges for fintech firms in promoting the market growth rate. In 2021, China completely banned cryptocurrency transactions and stifled innovations in the finance sector, which is likely to degrade the market’s growth rate as well.

Security and Privacy Concerns

Fintech companies handle vast amounts of sensitive financial data, making them attractive targets for cybercriminals. Cybersecurity issues, including data breaches and identity theft, can significantly impact consumer trust and slow down fintech adoption. To maintain consumer trust, fintech companies must invest heavily in robust cybersecurity measures, which can be both costly and complex to implement.

Cybercriminals have an eye on sensitive financial data, which is a specified target for them from the fintech companies. It is highly important for these companies to have a close look at the protection of data from cybercriminals. Data breaches and identity theft in the companies may negatively impact the customer’s value of trust to adopt fintech. A report by Accenture highlighted that the average cost of cybercrime for financial services firms increased by over 40% between 2014 and 2019. High-profile incidents, such as the Equifax data breach in 2017, which exposed the personal information of 147 million people, underscore the vulnerabilities within the financial ecosystem. Therefore, investing in cybersecurity measures costs very high, which will make it difficult for companies to invest such huge amounts to gain the trust of consumers solely to limit the growth rate of the fintech market.

Legacy Systems and Infrastructure

There are still many companies that operate using outdated legacy systems, and it is highly difficult to integrate new technologies with outdated or traditional methods. The reluctance of small- or medium-scale companies to adopt new technologies due to difficulties with the integration methods will degrade the growth rate of the market. According to a 2020 study by Cornerstone Advisors, 70% of community banks and credit unions in the U.S. still rely on outdated core banking systems. Therefore, the risk of the upgradation of the traditional systems that completely disrupt the existing systems may also impede the growth rate of the market.

FINTECH MARKET OPPORTUNITIES

Expansion into Emerging Markets

Emerging markets offer significant growth potential for fintech companies due to the large unbanked and underbanked populations. In sub-Saharan Africa, for instance, around 66% of adults do not have access to formal banking services. Fintech solutions like mobile money and microloans are bridging this gap. Platforms such as M-Pesa in Kenya and Paga in Nigeria are transforming financial accessibility by providing simple, affordable digital financial services. The fintech market in Africa is expected to reach $30 billion by 2025, driven by increasing digital connectivity and supportive regulatory frameworks. Expanding in these regions can boost financial inclusion and create substantial growth opportunities for fintech firms.

Integration with Traditional Financial Services

Huge collaborations between fintech firms and traditional financial institutions represent significant growth opportunities for the fintech market in the coming years. The partnerships between these companies leverage the scope to adopt or integrate new technologies that highly improve digital offerings and customer experience. For instance, the partnership between Goldman Sachs and Apple led to the launch of Apple's card, which blended Goldman’s financial expertise with Apple’s technological strengths. Similarly, platforms like Plaid offer APIs that facilitate seamless integration between banks and fintech services. This kind of collaboration allows fintech companies to tap into established customer bases while helping traditional banks modernize their service offerings.

Innovative Product Offerings

The swift changes in technological advancements provide fintech companies with new opportunities, such as developing new and innovative financial products. For example, decentralized finance (DeFi) platforms offer various services like lending, borrowing, and trading without intermediaries. As of 2022, the total value locked in DeFi protocols surpassed $80 billion, reflecting growing consumer interest in these services. In addition, the emergence of artificial intelligence and machine learning is shaping fintech companies' development of financial advisory tools and risk management systems more effectively, which is expected to open new revenue streams.

FINTECH MARKET CHALLENGES

High Competition

Huge competition between companies, especially due to the rising number of startup companies, will elevate the growth rate of the market. In 2021, over 20,000 fintech startups were operating globally, making it challenging for new entrants to gain traction. It is highly important for the new entrants to compete with large players like PayPal, Stripe, and Square. It is highly necessary for them to deliver superior customer experience to stand out from specific competitors.

User Trust and Adoption

Building trust from customers is one of the major factors that companies need to accomplish. Where. This can only be possible with the personalized or customized financial services that fintech offers. Creating awareness and overcoming all the challenges in the customer’s mind builds a new scope for the fintech market. A 2020 survey by Deloitte found that 45% of consumers in the U.S. were hesitant to use fintech services due to concerns about security and reliability. Overcoming these concerns requires not only robust security measures but also transparent communication and effective customer support.

Talent Acquisition and Retention

The rapid growth of the fintech sector has led to high demand for specialized skills in areas like AI, blockchain, and cybersecurity. However, there is a shortage of qualified professionals to meet this demand. A 2021 LinkedIn report highlighted data science and AI as the most in-demand skills within the fintech industry. This talent shortage creates a significant challenge, as companies compete not only with each other but also with tech giants like Google and Amazon. To attract and retain top talent, fintech firms must invest in employee development and create appealing work environments that encourage innovation and career growth.

IMPACT OF COVID-19 ON THE FINTECH MARKET

The COVID-19 pandemic is highly linked to rising consumer preference towards digital banking systems. Consumers sought contactless payment solutions due to stringent lockdown restrictions, and everyone is instructed to stay at home. People’s choice of digital transactions eventually increased the fintech volume. For example, PayPal and Square reported record transaction volumes during the pandemic, with digital transactions increasing by approximately 40% in 2020. The importance of innovative financial services has come into light during this period, even among low-income households that engraved new opportunities for the market. Specified countries like Africa, where the banking services are minimally low, also saw a surge in demand for contactless payment options. For instance, in 2020, approximately 23% of transactions were made using digital methods.

Fintech companies also played an important role in delivering optimized solutions for people by quickly adopting new technologies, especially during the COVID-19 pandemic period. Government and regulatory bodies posed swift changes in the sector like in managing financial stability, such as regulatory sandboxes and financial incentives.

REPORT COVERAGE

SEGMENTAL INSIGHTS

Fintech Market Insights by Technology

The API segment dominated the fintech market in 2023, capturing 36.2% of the global market share. APIs have a special place in making financial services modern by allowing open banking and enabling seamless integration between financial institutions. Over 60% of financial institutions worldwide use APIs to enhance digital capabilities, making it a key driver of market growth.

The A.I. segment is positioned second in leading the market share with a CAGR of 16.1% during the forecast period. AI's are capable of processing large datasets, providing actionable insights, and automating complex decision-making processes that eventually transform in areas such as data analysis, risk management, and fraud detection. AI-driven interfaces like chatbots are revolutionizing customer service, contributing to the rapid growth of this segment.

The blockchain segment is gaining traction over the growth rate of the market. Blockchain technology is essential in securing and decentralizing financial transactions, which is highly important to gaining trust from customers. Its application in cross-border payments and digital identity verification is expected to drive significant growth in the coming years.

Fintech Market Insights by Service

The payment segment held a market share of 28.7% in 2023 and is likely to gain huge growth opportunities in the coming years. The rising number of people choosing e-commerce platforms with digital transactions evolved to elevate the growth rate of this segment. Global digital payment transactions exceeded 700 billion in 2021, experiencing a 20% year-on-year growth, indicating strong demand for fintech payment solutions.

The fund transfer segment is likely to have a CAGR of 12.8% during the forecast period. The increasing volume of international trade and money transfers is attributed to prompting the growth rate of the market. The fintech services made international transactions highly compatible and safe, which is attributed to elevating the segment’s growth rate to an extent.

The personal finance segment is deemed to have significant growth opportunities in the coming years. The growing interest in financial literacy and personalized financial management tools is specifically to fuel the growth rate of the segment in the coming years. Also, the increasing preference for real-time analysis and tailored financial advice that helps investors make perfect decisions is greatly influencing the growth rate of the market.

Fintech Market Insights by Application

The banking segment accounted for 42.9% of the global fintech market share in 2023, driven by innovations such as mobile banking apps, digital wallets, and peer-to-peer lending platforms. The increasing preference for digital banking solutions due to their convenience and cost-effectiveness is accelerating the growth of this segment.

The insurance segment is expected to have the fastest CAGR during the forecast period. The rising prominence of personalized policy offerings and streamlined claims processing is enhancing the growth rate of the segment. The rising demand to optimize the risk factors in finance to increase customer experience, for example, in insurance policies, is likely to promote the growth rate of the market.

The securities segment is thriving to gain a huge growth rate during the forecast period. Modernized investment policies and increasing support from the government are stabilized to improve the growth rate of the market. In addition, the growing prominence for the adoption of automation portfolio management solutions shall contribute to leveraging the growth rate of the market.

Fintech Market Insights by Deployment Mode

The cloud segment is ascribed to holding the dominant share of the market owing to its properties, such as scalability, flexibility, and cost-effectiveness. Cloud solutions are one of the preferred choices for deploying fintech, which will eventually make efficient and rapid operations.

The on-premises segment remains significant, especially for financial institutions prioritizing control and security. However, challenges related to scalability and costs may limit its growth compared to cloud-based alternatives. The on-premises segment is likely to have a prominent growth rate during the forecast period. In earlier days, the demand for this segment was a huge priority, but the rising number of disadvantages like scalability and costs is slightly degrading its growth rate when compared with the cloud-based deployment.

REGIONAL ANALYSIS

North America: Market Leader with Strong Growth Potential

North America accounted for 34.3% of the market share in 2023. The presence of the top companies in the finance sector with well-developed infrastructure is majorly driving the growth rate of the market in this region. Favorable government schemes, mostly in developed countries like the U.S. and Canada, shall promote huge growth opportunities for the fintech market. These two countries have already adopted blockchain technologies in the banking, finance, and healthcare sectors, which signifies prompting the need for optimized fintech services. The growing use of digital payments and mobile wallets like Apple Pay and Google Wallet are widely used in these countries. The support from both the public and private sectors towards fintech services is creating a prominent environment for companies to adopt these innovative finance services. The availability of venture capital investments has enabled numerous fintech startups to operate functionalities in a more efficient way. The surge in digital payments in the U.S. and Canada is exponentially growing, which is additionally boosting the growth rate of the market. As of 2023, mobile wallets and contactless payment systems have become commonplace, with a significant percentage of the population opting for digital payment solutions over traditional methods. This trend is expected to continue in the coming years, especially in these countries, to escalate the North American fintech market.

Asia-Pacific: Fastest Growing Market

Asia Pacific is attributed to grow at a projected CAGR of 27.45% during the forecast period. India and China are the major countries contributing the highest share of the market owing to the increasing usage of smartphones. The Penetration of high-speed internet connectivity in these countries is solely influenced by the adoption of highly advanced fintech services for smooth digital transactions. The financial services in these countries are driven by open banking policies and regulatory initiatives aimed at promoting financial inclusion and substantially elevating the growth rate of the market. A growing number of startup companies with great support from the government through flexible policies is certainly to outrage the market’s growth rate in Asia Pacific. India, for instance, recorded approximately 89.5 million digital transactions in 2022, reflecting the country’s rapid fintech adoption. China accounts for an 8.34% share of the fintech market during the forecast period. High disposable income, especially in urban cities, and the rising Gen Z population are solely to gear up the growth rate of the market in China.

Europe: Steady Growth with Significant Investments

Europe accounted for 23.7% of the global fintech market share in 2023. The launch of various initiatives by governments to promote digital payments shall fuel the growth rate of the market. European governments have introduced initiatives like the Payment Services Directive 2 (PSD2) and the General Data Protection Regulation (GDPR) to promote open banking and data protection. Prominent fintech companies, including Revolut, TransferWise, and N26, are reshaping the banking and payment landscapes that are lucrative to enhance the growth rate of the market. The launch of tailored banking services with respective to the customer’s preferences shall prominently surge the fintech market’s growth rate in Europe.

COMPETITIVE LANDSCAPE AND KEY PLAYERS IN THE FINTECH MARKET

The fintech market is highly dynamic, with a competitive landscape shaped by both innovation and strategic consolidation. Coinbase and Ripple are prominent in the realm of blockchain and cryptocurrency. These companies are not only competing within their segments but also actively expanding into adjacent markets to enhance their offerings.

The fintech market is shaped by both innovation and strategic consolidation with a huge competitive landscape. Coinbase and Ripple lead the realm of blockchain and cryptocurrency. Companies are putting great efforts into expanding their product portfolio in adjacent markets.

The company's focus on delivering financial services in a diversified way is evident, and there is new scope for advanced technologies to come in the near future, especially in this sector. Stripe’s development and PayPal’s foray into cryptocurrency trading are sophisticated in APIs, which exemplify strategies to capture new customer bases and address evolving digital needs. Technology giants like Apple, Google, and Amazon are highly influenced by adopting new technologies that further led to the launch of Apple Pay, Google Wallet, and Amazon lending. The intensifying adoption of these fintech services is putting new competitive pressure on companies.

The new trend of mergers and acquisitions shall continue to lucratively promote new capabilities and market presence. Acquisitions of Visa and Plaid and Square’s purchase of Afterpay reflect new strategic growth through consolidation. These strategies highlight the importance of launching innovation to maintain a competitive edge in the rapidly evolving fintech ecosystem.

Companies that play a notable role in the global fintech market include

• Lufax
• Klarna
• Nubank
• SoFi
• Rapyd Financial Network Ltd.
• Kreditech
• Kabbage
• Circle Internet Financial Limited
• Mastercard
• Qufeng
• JD Finance
• Cisco Systems Inc.
• Plaid Inc.
• Funding Circle
• Google Payment Corp.
• International Business Machines Corporation (IBM)
• Neo Mena Technologies Ltd.
• Blockstream
• Robinhood Markets Inc.
• PayPal Holdings, Inc.
• N26
• Ant Group
• Revolut
• Square (Block Inc.)
• Adyen
• Bnkbl Ltd.
• Zhong An International
• Avant LLC
• Atom Bank plc
• Oscar Health
• Stripe, Inc.
• Oracle Corporation
• Finastra
• Kabbage
• SoFi Technologies Inc.
• Goldman Sachs
• Fiserv, Inc.
• TransferWise

RECENT MARKET DEVELOPMENTS

Investments and Partnerships

• In September 2024, JP Morgan announced its integrity by investing about USD 250 million in MercadoLibre, a leading e-commerce company in Latin America. The credit profile of MercadiLibre’s fintech subsidiary is aimed to highlight these investments. Companies are particularly interested in tracking the financial and technological capabilities within Latin America.
• In May 2024, fintech companies operating within the Dubai International Financial Centre (DIFC) secured a total of USD 3.3 billion in the Middle East and Africa. The company is all set to underscore the region’s commitment to fostering innovation and entrepreneurship in the fintech space.
• In May 2024, the New Jersey Fintech Accelerator was launched by the New Jersey Economic Development Authority at Stevens Institute of Technology (NJ FAST). The major aim of this launch is to provide mentorship, resources, and networking opportunities for startup companies that are attributed to nurture great innovative services for fintech companies.
• In May 2024, Wipro and Microsoft collaborated together to drive digital transformation in the fintech industry. Wipro already has expertise in using artificial intelligence, whereas Microsoft has prominent cloud computing capabilities; the collaboration of these is certainly to create tailored solutions that are required for the fintech companies.
• In October 2023, the Monetary Authority of Singapore gave a license for Coinbase to expand its range of financial services in Singapore. The company shall establish a dominant mark in Singapore with its strategic moves in the coming years.

Acquisitions and Strategic Moves

• For instance, in 2019, Cognizant acquired Mertisoft, a Dublin-based financial software company, and WorldFirst acquired Australian firm CurrencyVue, which changed the global trading platform. The acquisitions promoted integrated advanced technologies that expanded their service offerings, reflecting strategic efforts.

MARKET SEGMENTATION

This research report of the global fintech market is segmented and sub-segmented based on technology, service, application, deployment mode and region.

By Technology

• API
• Artificial Intelligence (AI)
• Blockchain
• Distributed Computing

By Service

• Payment
• Fund Transfer
• Personal Finance
• Loans
• Insurance
• Wealth Management

By Application

• Banking
• Insurance
• Securities
• Others

By Deployment Mode

• Cloud
• On-Premises

By Region

• North America
• Europe
• South America
• Asia-Pacific
• Middle East and Africa