Revenues in the financial technology sector are projected to grow sixfold from $245 billion to $1.5 trillion by 2030, said a report by Boston Consulting Group (BCG) and QED Investors. The fintech sector, which currently holds a 2 per cent share of the global financial services revenue of $12.5 trillion, is estimated to grow up to 7 per cent, of which banking fintechs are estimated to constitute almost 25 per cent of all banking valuations worldwide by 2030, the report said.
While the fintechs on average lost more than half of their market value in 2022, the report maintained that the plunge is a short-term correction in an otherwise long-term positive trajectory. “The fintech journey is still in its early stages and will continue to revolutionize the financial services industry as we know it,” said Deepak Goyal, Managing Director and Senior Partner, BCG, while maintaining that regulators need to be proactive and lead from the front. Meanwhile, Nigel Morris, QED Investors managing partner said that fintech segment is expected to grow not only in developed markets in the US and Europe, but also in developing fintech markets in Latin America, Asia, and Africa, where the “inertia and friction is even greater”.
APAC’s growth in focus
Even as APAC is an underpenetrated market with nearly $4 trillion in financial services revenue pools, it is poised to outpace the US and become the world’s top fintech market by 2030, with a projected CAGR of 27 per cent. “This growth will be driven primarily by Emerging APAC (e.g. China, India, and Indonesia), as it has the largest fintechs, voluminous underbanked populations, a high number of small and medium-sized enterprises, and a rising tech-savvy youth and middle class,” the report said. North America is projected to grow fourfold to $520 billion in 2030 and the US will account for 32 per cent of global fintech revenue growth, growing at a CAGR of 17 per cent. The UK and European Union are expected to witness five fold growth through 2030 over 2021. Latin America is projected to show revenue CAGR of 29 per cent over the same time period and this will be led by Brazil and Mexico. Africa is projected to show a fintech revenue CAGR of 32 per cent until 2030 in Africa, with South Africa, Nigeria, Egypt, and Kenya being the key markets.
What will drive the growth?
Even as payments was the driving force during the last era accounting for roughly 25 per cent of cumulative equity funding ($120 billion) since 2000, going forward, the fintech growth will be led by B2B2X and B2B (serving small businesses). B2B2X market which constitute of B2B2C (enabling other players to better serve consumers), B2B2B (enabling other players to better serve businesses), and financial infrastructure players, is expected to grow at a 25 per cent CAGR to reach $440 billion in annual revenues by 2030. B2B fintech market, meanwhile, is expected to grow at a 32 per cent CAGR to reach $285 billion in annual revenue.
Need for regulators to be proactive, not indifferent
Even as the recent crisis in the banking sector has made regulators in the fintech sector more “sensitive to asset/liability management, in addition to creating guardrails, regulators must ensure they are not overregulating the industry and thereby stifling innovation”, the report said.
