The fintech industry is evolving rapidly, with an expected valuation of $174 billion in 2023 and projections reaching $188 billion by 2024. This growth builds upon the industry’s revenue in 2017, which stood at approximately $90.5 billion, demonstrating more than a 100% increase over recent years.
Positioned at the forefront of financial innovation, the fintech sector offers numerous growth opportunities as technology reshapes the financial services landscape. Innovations in areas such as digital payments, blockchain, artificial intelligence, and data analytics are driving new business models and revenue streams, enhancing accessibility and interconnectivity within global financial markets. As finance and technology converge, the future looks promising, with a financial environment that is increasingly responsive to the needs of individuals and businesses worldwide.
1. Open Finance
Open Finance is an emerging trend with the potential to redefine the financial services landscape. Building on the groundwork of Open Banking, which facilitates secure access to payment account data, Open Finance broadens the scope to include additional financial services like investments, lending, and insurance. Unlike Open Banking, Open Finance remains relatively unregulated, though upcoming frameworks such as PSD3 (Payment Services Directive 3) and new Payment Services Regulation (PSR) are set to establish standards.
The advantages of Open Finance are significant: it gives consumers greater control over their financial lives and drives the creation of integrated financial solutions that simplify money management for both individuals and businesses. Open Finance also holds the promise of spurring economic growth, enabling collaborations across industries, and promoting inclusivity in finance.
2. Embedded Finance and Banking-as-a-Service
The growth of Banking-as-a-Service (BaaS) and Embedded Finance has been notable in recent years, with non-financial brands offering financial products directly to their customers. This trend has opened up new revenue streams and accelerated time-to-market for financial institutions by allowing them to roll out new products more quickly.
McKinsey projects that BaaS could become a significant player in the UK and the European Economic Area, with the market potentially valued between $90 billion and $105 billion by 2030. BaaS relies on APIs to connect licensed institutions’ financial services with businesses, allowing them to integrate services such as payments, currency exchange, and account information. Core banking system like Advapay’s Macrobank provide the infrastructure to support these seamless connections, which are essential for a thriving embedded finance ecosystem.
3. Open Banking
Open Banking remains a key trend in 2023, transforming how customers interact with financial services. This technology empowers customers by allowing them to securely share their financial information with third-party providers, which can offer a range of personalized financial solutions.
The ecosystem around Open Banking brings together traditional banks, payment firms, and fintech companies, creating a collaborative environment, including core banking systems that leverages data insights to deliver tailored financial services. According to Grand View Research, Inc., the Open Banking market is expected to reach $135.17 billion by 2030, growing at a compound annual growth rate (CAGR) of 27.2% from 2023 to 2030.
4. Buy Now Pay Later (BNPL)
The Buy Now Pay Later (BNPL) trend has gained considerable traction, aligning with consumer demands for flexible payment options. BNPL allows consumers to acquire products or services and defer payment, making it easier to make purchases without upfront costs.
With an anticipated market value of $309.2 billion in 2023 and an expected CAGR of 25.5% during the forecast period, BNPL is poised for rapid growth. This upward trend is driven by the rise of online shopping and the increasing popularity of digital payment options, both of which support the expansion of the BNPL sector.
5. Digital Payments and Wallets
In 2024, digital payments and wallets continue to reshape the way consumers manage and spend their money, pushing traditional cash payments further into the background. As smartphone penetration reaches new heights globally, especially in emerging markets, digital wallets are becoming indispensable tools for convenient, fast, and secure transactions. The demand for contactless payments, accelerated by the pandemic, remains strong, with both businesses and consumers seeking seamless, touch-free options. This shift is not only boosting financial inclusion by providing easy payment methods for the unbanked but is also driving competition among fintech companies and traditional financial institutions. By integrating additional services, such as rewards programs, bill payments, and even micro-investments, digital wallets are evolving into all-in-one financial hubs, setting a new standard for everyday financial transactions in the digital age.
As digital payments and wallets rapidly evolve, global regulators are introducing new regulations and legal frameworks to ensure that financial service providers operate with integrity and accountability. Companies offering digital payment services are required to obtain specific licenses and registrations, such as e-money licenses, payment institution licenses, and MSB (Money Services Business) registration in Canada and others. Additionally, strict compliance with AML (Anti-Money Laundering) and KYC (Know Your Customer) regulations is mandated to prevent fraud and protect consumers. These regulations aim to enhance transparency and legal accountability within the digital finance ecosystem, fostering a safer environment for users as digital payments continue to grow in popularity.
In summary, the fintech industry in 2023 is marked by transformative trends—Open Finance, Embedded Finance, Open Banking, Digital Payments and Wallets and Buy Now Pay Later—that are reshaping financial services, increasing consumer empowerment, and enhancing accessibility and inclusivity in finance. The rapid advancements in these areas indicate a promising future for fintech, as it continues to innovate and expand in response to evolving consumer and business needs.
