Fintech (financial technology) involves applying new technological developments to create financial products and services. Financial products are provided mostly online and aim at improving and automating the provision and use of services.
As we already wrote in our fintech market overview, more and more new and advanced technologies are cropping up based on artificial intelligence and machine learning algorithms. In this article, the experts at Grapherex will tell readers how innovations in the financial sector have come into our lives. Learn about the volume of the market today, how fintech is accepted in different countries, and what awaits it in the future.
Fintech Market Growth in Numbers
The financial technology sector is soaring to new heights as more and more consumers switch from traditional in-person banking to innovative solutions. There’s a clear rise in the use of wallets, mobile banking, and cryptocurrency. Today, there are more tech-savvy people than ever before. As Fintech users look for more convenient ways to manage their finances, fintech companies step in, offering cutting-edge technologies that transform the way people think about money.
Let’s look at a brief historical market performance. For the last few years, the financial technology sector has been steadily growing by about 30 billion US dollars annually.
- In 2021, the global Fintech market was valued at $105.41 billion.
- By 2022, it had grown to $133.84 billion.
- In 2023, it’s forecasted to reach $165.17 billion.
- By 2026, the industry is estimated to be $324 billion.
- By 2027, the Fintech space is set to surpass $405.58 billion.
- By 2030, the market size is projected to reach $556.58 billion.
Over the next seven years, the growth rate will be approximately 19.5% annually. However, the speed of development may be higher, as, during 2021 alone, the world saw more than 26,000 new Fintech startups. The number of digital payments being made is also rising, with $8.49 trillion in transactions in 2022.
Global Fintech Market Segmentation & Coverage
The North and South Americas are leading the global Fintech adoption. Europe, the Middle East, and Africa (EMEA) will surely catch up soon, and there is a high level of digitalisation in China and Japan. As of November 2021, the division of Fintech startups by region was as follows:
Let’s look at the regions and countries engaged in Fintech in more detail.
North American countries have introduced digital technologies to organise end-to-end credit transactions, significantly improving the personalised and intuitive banking experience.
Companies Engaged in Fintech
There are thousands of companies globally that integrate financial services in their products, and there are those that specialise their businesses in Fintech. Among the most well-known corporations interested in Fintech developments are Bankable, Blockstream, Cisco Systems, Goldman Sachs, IBM, Microsoft, NVIDIA, Oracle, and many others.
Other major players in the Fintech market are Visa, Mastercard, Ant Financial, Stripe, PayPal, Revolut, Ripple, Blockchain.com, and more.
Key Areas of Fintech Use
Today, Fintech is driven by advances in technology and changing consumer expectations. The main spheres where we see continuous growth include mobile payments, digital banking, blockchain, and AI-powered analytics. Digital banking is the largest and most powerful segment within the Fintech space. Its market size is projected to be $16.39 billion by 2030.
There are three categories that we can use to segment the fintech market: applications, technologies, and end-user products.
- Fintech apps: Money transfer, payments, borrowing and loans, insurance, personal finance management, wealth management, and investment.
- Technology for Fintechs: APIs, AI, ML, blockchain, NLP, voice assistants, robo-advisors, data analytics, etc.
- End-user products: Banking, money management, insurance, chatbots, securities, and others.
The key customer loyalty drivers are frictionless payments, according to 24% of Barclays’ 2022 survey respondents, with 20% citing the delivery of a personalised offering. The responses demonstrate a clear focus on user experience, so companies should improve app design and functions, making their services intuitive and convenient. The rise of central bank digital currencies (CBDCs) is also gaining traction.
The 2022 survey respondents across the Americas, EMEA, and APAC regions predict that real-time payments will be the next innovation to appear in the payments market. Some people argue that Fintechs have created the illusion of real-time payments through partnerships with traditional institutions and non-bank PSPs. Others believe they are indeed faster and simpler compared to traditional ways of money transfer.
The Future of Fintech: New Trends
The future of fintech is focused on delivering personalised, accessible, and streamlined financial services. There are several ideas on what could be the next innovation or trend that will disrupt the payments market. According to respondents across different countries, who took part in the survey conducted by Barclays, the leading trends are real-time payments, Central Bank Digital Currencies, and Al-powered transactions.
Core Challenges in Fintech
Fintech disrupts the traditional system and creates new business models that challenge the status quo. That’s why cooperation between Fintech firms and banks or other financial companies is a great way to unlock new opportunities and stimulate innovation in the industry.
Data privacy and security concerns continue to be a major challenge for the Fintech sector, as consumers demand greater transparency and control over their personal data. Services try to improve their security via advanced data protection and encryption mechanisms. Fintechs, then, should find ways to balance innovation with risk management.
Regulation is also a major obstacle for Fintech firms, particularly in terms of compliance and licensing. Financial companies must meet legal requirements, including Anti-Money Laundering Policy (AML), Know Your Customer (KYC) verification, the Payment Card Industry Data Security Standard (PCI DSS), and the General Data Protection Regulation (GDPR).
Sometimes, challenges arise for Fintechs because the target audience is not ready to adapt to global changes. Some people don’t want to switch to digital technologies in their banking activities. The decision of some companies to expand interaction only with digital devices risks alienating not-so-tech-savvy customers.
At Grapherex, we hope that the future of Fintech will be bright, with new solutions related to e-wallets, cryptocurrencies and blockchain. Being a Fintech ourselves, we will work hard to facilitate global digital finance adoption, providing our users with fast and convenient services for daily use.