Boston Consulting Group (BCG) and QED Investors have released a report projecting a sixfold increase in financial technology revenues from US$245 billion to US$1.5 trillion by 2030.
The fintech sector, which currently holds a two percent share of the US$12.5 trillion global financial services revenue, is estimated to grow to seven percent.
Despite a tough 2022, with fintechs losing more than half of their market value on average, the report suggests that this was merely a short-term correction in an otherwise positive long-term trajectory.
The Asia-Pacific region is expected to become the world’s top fintech market by 2030, with a projected compound annual growth rate (CAGR) of 27 percent. This growth will be driven primarily by emerging economies such as China, India, and Indonesia, which have the largest fintechs, underbanked populations, many small and medium-sized enterprises, and a rising tech-savvy youth and middle class.
North America will remain a critical fintech market and innovation hub, projected to grow fourfold to US$520 billion in 2030, with the US accounting for a projected 32 percent of global fintech revenue growth.
The US is projected to account for 32 percent of global fintech revenue growth (CAGR of 17 percent) by 2030. With the country’s larger interchange pool, fintechs can cater to the underbanked low-end market.
Despite having a mature ecosystem, the US has significant inefficiencies and customer-experience pain points in the financial services industry that will drive continuous innovation, especially with the emergence of open banking.
Similar to North America, Latin American markets led by Brazil and Mexico, which have established fintech landscapes, are projected to show a revenue CAGR of 29 percent over the same time frame.
Meanwhile, the UK and European Union combined represent the world’s third-largest financial institution market and are expected to witness significant fintech growth through 2030, led by the payments sector.
The payments sector is projected to grow fivefold to $520 billion, driven by cross-border payments, “payment-plus” models, and the proliferation of use cases driven by real-time payments.
However, the report predicts that it will be the B2B2X and B2B markets that will lead the next era of fintech, with the B2B2X market expected to grow at a 25 percent CAGR to reach US$440 billion in annual revenues by 2030, supported by growth in embedded finance and financial infrastructure.
The B2B fintech market is expected to grow at 32 percent CAGR to reach US$285 billion in annual revenue by providing solutions to credit-starved and poorly served small businesses.
The report highlights the importance of proactive regulatory actions, including measures such as facilitating faster pathways for obtaining banking and payment institution licenses, supporting digital public infrastructure, and creating an open banking ecosystem, to create a level playing field. The report also stresses the significance of incumbents partnering with fintechs to speed up digital transformation.
Deepak Goyal, BCG managing director and senior partner and co-author of the report stated, “The fintech journey is still in its early stages and will continue to revolutionize the financial services industry.
“All stakeholders must seize the moment. Regulators need to be proactive and lead from the front. Incumbents should partner with fintechs to accelerate their own digital journeys,” he added.
For those interested in reading the full report, please click here for the link.
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