2022 proved a tough year for fintechs, which 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.
Asia-Pacific 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 economies such as China, India, and Indonesia that have 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.
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.
The payments 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. But, it will be the B2B2X and B2b (serving small businesses) that will lead the next era of fintech, says the report. B2B2X is made up of B2B2C, B2B2B, 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. 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.
The report says that regulates need to be proactive, 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.
Deepak Goyal, BCG MD and senior partner and co-author of the report says: "The fintech journey is still in its early stages and will continue to revolutionize the financial services industry as we know it. "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."