Boston Consulting Group | May 3, 2023

Despite a swift ascent in the industry, fintechs experienced an average market value loss exceeding 50% in 2022—an apparent short-term adjustment in a generally upward long-term trend, with the sector’s core growth factors remaining unaltered.

• The vast and highly profitable financial services industry faces challenges in innovation and customer experience, while over half the global population is unbanked or underbanked, and technology constantly unveils new possibilities.
• Fintech, currently at a 2% share of global financial revenues, is projected to hit $1.5 trillion by 2030, making up nearly 25% of global banking valuations. The largest growth market will be Asia-Pacific, followed by North America, with Europe, Latin America, and Africa also experiencing substantial progress due to favorable regulations and the absence of legacy infrastructures.
• The next fintech era is anticipated to be dominated by B2B (targeting small businesses) and B2B2X (B2B for all users) solutions, as global SMEs face a staggering $5 trillion in unmet credit needs annually.
  • B2B2X, including embedded finance, accounts for 25% of fintech revenues and will play an increasingly important role in addressing the growing demand for innovative financial services.
  • As traditional players struggle to keep up, spread businesses such as lending platforms and neobanks face challenges in developed markets, where they must secure stable, low-cost deposit sources to reduce capital costs, potentially by obtaining banking licenses.

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• All stakeholders should seize this opportunity:
  • Regulators should proactively pioneer policies fostering a cooperative, secure, and inclusive financial landscape, possibly through intermediate financial licenses (e.g., UK’s e-money license) and digital public infrastructure (e.g., India’s UPI).
  • Traditional players should collaborate with fintechs to expedite digital transformation and satisfy consumer demands.
  • For fintechs, the current “fintech winter” presents a prime opportunity for aggressive strategies, while maintaining fiscal discipline. As the sector undergoes a valuation correction, some investors seize the chance to establish long-term footholds in fintech.

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