Platform Expansion, Embedded Finance, and AI Lead Fintech’s Next Growth Wave

Fintech continues to evolve rapidly, with leaders in banking, payments, and lending expanding horizontally to unlock new revenue and boost profitability.

At the same time, new tailwinds like embedded finance are rising on the back of the proliferation of application programming interfaces (APIs), banking-as-a-service (BaaS), and proprietary data, drawing more companies into the fintech sector.

HSBC’s latest report highlights these developments and outlines where new growth opportunities are emerging across the global fintech landscape.

Building comprehensive finance platforms

One major trend is the transformation of fintech players into comprehensive platforms. As fintech leaders and pioneers continue to mature, their solutions are converging into adjacent verticals and expanding horizontally to evolve into full-stack financial services platforms.

Originally focused on payments, players like Stripe and Adyen now generate a significant portion of their activity from services such as banking and lending. Similarly, digital banking innovators like Revolut and Chime have extended their offerings to include areas like asset management, and lending. The trend is mirrored by digital lending pioneers SoFi and LendingClub, which have broadened their portfolios to offer banking service that have become increasingly central to their businesses.

Fintech relative market strength by product offerings- 2018 versus 2024, Source: HSBC, May 2025

ERP platforms enter fintech

Another trend highlighted by HSBC is the entry of enterprise resource planning (ERP) systems and accounting platforms into financial services. Traditionally back-office system-of-record tools, these platforms now leverage their embedded data advantage to offer integrated financial services, such as payments, cashflow management, and lending, embedded directly into the workflows of platforms used by small and medium-sized enterprises (SMEs).

For example, business software company Intuit offers QuickBooks, a small business accounting platform, and Credit Karma, a credit monitoring and personal accounting service. German software firm SAP provides SAP S/4HANA, an ERP software package for large enterprises, and SAP BTP, a suite of services that includes database and data management, artificial intelligence (AI), and analytics. In New Zealand, Xero, a SME accounting software, is partnered with companies like Gusto, a provider of payroll, benefits, and human resource (HR) management solutions.

Expansion of enterprise offerings, Source: HSBC, May 2025

Across fintech, this trend is also mirrored, with maturing payment platforms leveraging real-time customer insights to expand into adjacent areas like SME lending. Many now issue more loans than dedicated lending fintech companies, illustrating how data and distribution matter more than product origin.

The rise of embedded finance

These shifts are accelerating the rise of embedded finance, a trend that’s reshaping both advanced and emerging markets.

In emerging markets, consumer-facing super-apps like ride-hailing platform Grab, and messaging app Line, are embedding financial services directly into their ecosystems, enabling billions to access financial services seamlessly, and often leapfrogging traditional financial institutions.

In advanced markets, brands with strong consumer reach are embedding financial services into their ecosystems to tap new growth opportunities. For example, Walmart, in partnership with Ribbit Capital, led in December 2024 a funding round of more than US$300 million in fintech startup One Financial to offer the retailer’s 240 million weekly shoppers a full suite of consumer financial services.

Simultaneously, fintech companies are also recognizing the opportunity related to embedded finance. For example, SoFi, which started out in the digital lending space, has evolved into a licensed core technology infrastructure provider through its acquisitions of Galileo and Technisys. Another example is Marqeta, which now offers non-financial companies the ability to embed consumer finance products at scale through its acquisition of Power Finance.

The rise of embedded consumer finance, Source: HSBC, May 2025

Increased consolidation

The rise of fintech platforms and advance of data-rich software players into financial services are creating a new layer of competition, not just between fintech companies and incumbents but also between challengers themselves. According to HSBC, increased cross-vertical competition will drive new challenger alliances and defensive moves from incumbents. Furthermore, as competition grows, pricing and margins will be increasingly under pressure.

Incumbents and industry leaders are responding through acquisitions and horizontal consolidation. In February, Stripe acquired Bridge Network for US$1.1 billion in its biggest acquisition to date. Bridge Network is an integrated stablecoin platform that allows businesses to easily receive, store, convert, issue and spend stablecoins.

FIS announced in April its acquisition of Issuer Solutions to enhance its banking and payments offerings. The purchase will cost US$12 billion, with a total value of US$13.5 billion, excluding US$1.5 billion of anticipated value of tax assets.

AI to drive the next fintech wave

While venture capital (VC) activity in the fintech sector has cooled since the 2021 peak, some verticals remain resilient, largely due to advances in AI. In insurance, for example, AI breakthroughs are transforming back-office business processes through automation and streamlining arduous paperwork for disruptors like Ramp and Tab.

The CFO stack is another fintech vertical attracting VC interest as fintech companies apply AI to automate financial operations.

Conversely, funding has slowed in verticals such as alternative lending, where adoption of AI has been less prevalent.