Asia-Pacific Is Poised to Outpace the US, Becoming the World’s Largest Fintech Market by 2030, According to New Report
NEW YORK—Financial technology revenues are projected to grow sixfold from $245 billion to $1.5 trillion by 2030, according to a new report released today by Boston Consulting Group (BCG) and QED Investors. The fintech sector, which currently holds a 2% share of the $12.5 trillion in global financial services revenue, is estimated to grow up to 7%, of which banking fintechs are expected to constitute almost 25% of all banking valuations worldwide by 2030.
The report, Global Fintech 2023: Reimagining the Future of Finance, provides a comprehensive overview of fintech’s future landscape globally and explores the latest trends and opportunities in the global fintech market. It also examines the regulatory environment for fintech companies and the impact of emerging technologies. In 2022, fintechs on average lost more than half of their market value, but according to the research, this plunge was merely 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,” says Deepak Goyal, BCG managing director and senior partner and co-author of the report. “Customer experience remains poor. More than half the world’s population remains unbanked or underbanked, and technology continues to unlock new use cases in leaps and bounds. All stakeholders must therefore seize the moment. Regulators need to be proactive and lead from the front. Incumbents should partner with fintechs to accelerate their own digital journeys.”
"This report highlights clearly something that, anecdotally, QED has witnessed firsthand: that fintech's story is in Chapter 2, not Chapter 8, and that much of this powerful narrative is still to be written,” says Nigel Morris, QED Investors managing partner and coauthor of the report. "Fintech sits within financial services which is a massive, profitable industry, and the opportunity ahead of us to democratize access to these services on a global scale is tremendous. We expect to see continued growth not only in developed markets in the US and Europe, but also in developing fintech markets in LatAm, Asia, and Africa, where the inertia and friction is even greater. QED remains more bullish than ever about the future of fintech and its promise to improve the lives of billions of people across the world."
APAC to Become the Largest Fintech Market, Led by Emerging Countries
Historically an underpenetrated market with nearly $4 trillion in financial services revenue pools, Asia-Pacific (APAC) is poised to outpace the US and become the world’s top fintech market by 2030, with a projected compound annual growth rate (CAGR) of 27%. 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. North America, which currently has the world’s largest financial-services industry, will remain a critical fintech market and innovation hub, projected to grow fourfold to $520 billion in 2030, with the US accounting for a projected 32% of global fintech revenue growth (a CAGR of 17%).
The UK and European Union combined represent the world’s third-largest financial institution market and are expected to witness major fintech growth through 2030, estimated at more than fivefold over 2021 and led by the payments sector. Similarly, Latin American markets, led by Brazil and Mexico, which have established fintech landscapes, are projected to show a revenue CAGR of 29% over the same time frame. The report projects a fintech revenue CAGR of 32% until 2030 in Africa, with South Africa, Nigeria, Egypt, and Kenya being the key markets.
While Payments Led the Last Era, B2B2X and B2b Will Lead the Next Era of Fintech Growth
The first part of the fintech journey was led by payments, accounting for roughly 25% of cumulative equity funding ($120 billion) since 2000. And according to the report, the sector will grow fivefold to $520 billion, driven by cross-border payments, “payment-plus” models (bill pay and payment apps offering adjacent services such as wallet services), and the proliferation of use cases driven by real-time payments.
While payments led the last era, B2B2X and B2b (serving small businesses) will lead the next. B2B2X is made up of B2B2C (enabling other players to better serve consumers), B2B2B (enabling other players to better serve businesses), and financial infrastructure players. The B2B2X market is expected to grow at a 25% CAGR to reach $440 billion in annual revenues by 2030, supported by growth in embedded finance and financial infrastructure; while the B2b fintech market is expected to grow at a 32% CAGR to reach $285 billion in annual revenue by providing solutions to credit-starved and poorly served small businesses.
Spread Businesses in the Developed World Will Face Challenges While Playing a Critical Role in Emerging Markets
Spread businesses in developed markets (which include banks and neobanks, lending platforms, mortgage lenders, and credit unions) will face challenges scaling up profitably and will need to start lending on their own balance sheet while accessing lower-cost funds, one method of which is by acquiring a banking license. One significant challenge is incumbent banks are investing heavily in technology to improve their customer experience and value chains, making it difficult for neobanks to differentiate themselves.
With roughly 2.8 billion underbanked (50% of which reside in emerging economies) and an additional 1.5 billion unbanked (75% of which reside in emerging economies) adults in the world, neobanks will play a key role in expanding financial access.
Regulators Must Be Proactive, Not Indifferent
Regulation of fintechs has traditionally been relatively light, non-proactive, fragmented, and, in some cases, even lagging behind. While recent bank crises have made them more sensitive to asset/liability management, in addition to creating guardrails, regulators must ensure they are not overregulating the industry and thereby stifling innovation.
Regulators should consider leveling the playing field via such actions as enabling faster pathways for banking and payment institution licenses, supporting digital public infrastructure, and facilitating an open banking ecosystem.
Fintechs Need to Focus on Fundamentals and Play Offense; Incumbents Should Accelerate Their Own Digital Journeys by Embracing Fintechs
The landscape today is much different than it was in 2021 and early 2022 when so many fintechs were able to attract higher funding. Today, fintechs need to conserve cash and stretch their runways to get through the “funding winter” without resorting to raising money at lower valuations. They should therefore consider strengthening their competitiveness and pursuing aggressive strategies such as talent acquisition, gaining market share by entering new geographies/markets, and exploring M&A opportunities—while also taking an active role in shaping and embracing forward-looking regulations that enhance customer confidence and drive higher valuations.
Historically, incumbents have tried to buy capabilities by acquiring fintechs. To avoid failed acquisitions and shorten fintechs’ time to market, incumbents and fintechs should form “Value-based Partnerships,” which allow the fintechs to remain independent but with a clear commercial arrangement that is to the benefit of both partners.
Download the publication here.
Boston Consulting Group
+1 617 850 3783
+1 518 577-9984
QED Investors is a global leading venture capital firm based in Alexandria, Va. Founded by Nigel Morris and Frank Rotman in 2007, QED Investors is focused on investing in disruptive financial services companies worldwide. QED Investors is dedicated to building great businesses and uses a unique, hands-on approach that leverages its partners’ decades of entrepreneurial and operational experience, helping companies achieve breakthrough growth. Notable investments include AvidXchange, Betterfly, Bitso, Caribou, ClearScore, Current, Creditas, Credit Karma, Flywire, Kavak, Klarna, Konfio, Loft, Mission Lane, Nubank, QuintoAndar, Remitly, SoFi, Wagestream and Wayflyer.
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.