As an experienced fintech app design agency, we’ve seen the growth of fintech firsthand. We have witnessed numerous trends that did or did not see the light of day. Analyzing the state-of-the-art innovations that the industry presented over the last few years, especially during its second wave after the pandemic, we have also managed to have a glimpse into its future. So, to answer your question straight away - is fintech a growing industry? Yes, and its growth has only just begun.
What is fintech industry?
Fintech, or financial technology, is a subset of a global financial services sector focusing on integrating modern technology and software into standard financial services for increased effectiveness and automation purposes.
Fintech is typically presented as a complete antithesis of a traditional financial service model, where all the services are carried out offline. Yet, it’s more of a logical continuation of it. And given how immersed in technology our modern world has become, it’s not long now till fintech is considered traditional.
The fintech industry is broad. It covers services like personal finance with digital accounts and bill management tools, payments processing, money transfers, marketplace lending and microlending, crypto exchanges, investment tools, mortgage management, and the newest additions of InsurTech and RegTech, dealing with insurance and regulations, respectively.
When fintech started gaining momentum?
Even though the first traces of the term “fintech” were spotted back in the 1990s, 2008 till 2014 is when financial technology really started picking up speed. Overall, there are a few significant stages in the evolution of fintech. Prior to 2008, the first two stages were all about the development of the first global infrastructure and then, much, much later, the Internet.
From 2008 (the first financial crisis) onwards, due to the disruption of trust in the financial sector and new regulatory changes, the industry has shifted from traditional banks to new alternatives. Next thing we know, blockchain-based currencies have come about, along with a wave of startups, ultra-modern smartphones, and digital banks.
Size of fintech market
The overall size of fintech market in 2022 was estimated at over 115 billion U.S. dollars and is expected to reach eight times this amount by 2030. Measuring the fintech industry growth rate by its compound annual growth rate (CAGR), which shows the revenue growth between two consecutive years, the 26.2% boost is estimated over the next eight years.
Regarding fintech market segmentation, applications like payment and fund transfers will continue to dominate the industry during the next decade, followed closely by loans, insurance, personal finance, and wealth management.
Region-wise, the most prominent markets remain APAC (Asia-Pacific) and the United States, both sharing around 40% of the global market. EMEA region (Europe, the Middle East, and Africa) comes third with 20% of the market share.
What is fintech innovation achieving at the moment?
The most considerable success of fintech and its innovative solutions is how they transform the way financial services are delivered, executed, and consumed. The effect it had on user experience and, subsequently, user expectations was the most impactful. The bar was set really high with the convenience of digital banking, rapid loans, and overall higher quality alongside lower prices and more customized solutions.
Take chatbots and virtual assistants, for instance. Their effectiveness and 24/7 availability allowed people to solve their issues as soon as they appeared, saving valuable time for both them and service providers. Or predictive analytics, made possible with AI integration, brought a level of service personalization previously unheard of.
Although, one significant curb for fintech innovation and the industry, in general, remains. It’s the uncertainty of financial regulatory standards and the legal frameworks with activity- and entity-based rules forced upon the financial sector. Sadly, it directly impacts how fintech companies work and how much room for innovation and service diversification exists.
Where is fintech going?
Ever since traditional financial services have found themselves in a pickle after a recent crisis and financial sector disruption, fintech has managed to pick up and grow itself even more from there. So, let’s see where it is going.
So, the latest fintech era (circa 2019 and still ongoing) is all about disruption, blockchain, machine learning, AI, and mobile- and neo-banking. Here’s what we will see more of in the nearest future:
- Contactless payments and more diversified online payment options;
- Robo-advisers and finance automation in regular payments;
- Embedded finance and banking-as-a-service, both provided by non-financial companies;
- Banking with open API, meaning a consented client data exchange with third parties;
- More support for biometrical security and authentication.
Will fintech replace banks?
Despite the many opportunities fintech presents and the newfound convenience of these new types of financial services, it remains unlikely that fintech will fully replace traditional banks. Not anytime soon, anyway.
So far, people are still hesitant to let go of their trust in conventional financial services and institutions, regardless of how much that trust was broken throughout the last few global crises.
However, banks should be wary of the potential threat of disruption, given the fact that they are not the sole owners of financial data anymore.
Is fintech the future of finance?
Yes, fintech is the future. Nuff said.
Just joking. We won’t leave you hanging like that.
As you may know, the progress of the fintech industry didn’t just come out of nowhere. The last decade brought many technological breakthroughs that directly influenced every aspect of our daily lives, including how we manage our finances. We have tasted the convenience and customization options of fintech, so the demand will only logically increase.
We know for sure that fintech will continue to expand for years to come and what we really should be focusing on is how to successfully integrate the innovations into our personal and professional lives. Conventional practices are holding on for their dear life, so we must adapt to the new market as soon as possible.