A new report predicts a resurgence in the fintech sector, highlighting expected revenue growth and increasing merger activities as the market recovers from previous downturns.
A recent report from the consulting firm BCG and fintech venture capital firm QED Investors has provided insights into the expected trajectory of the fintech industry as it moves towards 2025. The findings are optimistic, indicating a potential thawing of the so-called ‘fintech winter’, which has plagued the sector for the past several years. The report forecasts a significant increase in fintech revenue, projecting growth from $300 million in 2024 to an impressive $1.5 trillion by 2030.
Historically, the fintech landscape has experienced considerable fluctuations. Between 2021 and 2023, the valuation multiples for fintech fell dramatically from 20 times revenue to just 4 times revenue. Correspondingly, there was a noteworthy decline in funding, plummeting by 71% over the same period. However, two critical points emerge from this downturn: firstly, the correction appears to be a necessary response to an earlier surge in funding that resulted in an oversaturation of startups, and secondly, identifying successful business models can guide future strategies.
The report highlights that out of 453 digital-native challenger banks globally, only 23 have achieved profitability, with notable examples such as Chime in the United States and Revolut in the UK and Europe, boasting 14.5 million and 40 million customers respectively. These institutions have gained consumer trust through their digital-first approaches and user-friendly banking experiences. For investors, Revolut’s recent activities underscore a positive trend; reports indicate that staff and early investors have sold nearly $1 billion worth of stock since August, following the company’s UK banking licence acquisition, which helped elevate its valuation to $45 billion.
Contrastingly, Chime operates without a banking charter, working in partnership with The Bancorp Bank and Stride Bank to offer FDIC-insured accounts and other essential banking services. Should Chime pursue and succeed in an IPO in 2025, it could catalyse a renewed wave of optimism and activity within the fintech sector, prompting further mergers, acquisitions, and public listings.
According to QED partner Nigel Morris, the prospects for mergers and acquisitions within fintech are also set to rise in 2025, as the market begins to recover. Morris commented in a recent blog post that the industry appears to be exiting a period of stagnation, anticipating a surge in activity as companies seek to consolidate for increased economies of scale or to expand into new markets and product lines. The push from private equity firms and limited partners for liquidity is expected to facilitate this environment, resulting in an influx of deals, along with fintech firms opting for IPOs.
Additionally, the report positions embedded finance as a major contributing factor to anticipated revenue growth, expected to account for 21% or $320 billion of the projected $1.5 trillion by 2030. The evolving role of technology companies in the banking landscape is also noteworthy: Apple is reportedly exploring deeper forays into finance, despite facing challenges with banks like Goldman Sachs, concerning their collaboration on the Apple Card. As consumer reliance on mobile payments continues to grow, the boundaries between financial services and tech appear set to blur further.
Moreover, JPMorgan Chase has begun to leverage its data to create targeted advertising offerings, effectively transforming itself into an ad network. This development reflects a growing trend among financial institutions to integrate marketing strategies into banking services, showcasing the multifaceted changes underway within the sector.
These insights, originating from the Global Fintech Report 2024 by BCG and QED Investors, underscore the shifting tides in the fintech landscape as it heads into 2025, marked by unfolding opportunities and the potential for significant growth.
Source: Noah Wire Services
- https://thebasispoint.com/why-2022-24-fintech-winter-may-finally-thaw-in-2025/ – Corroborates the forecast of fintech revenue growth and the potential end of the ‘fintech winter’ by 2025.
- https://fintech.global/2023/05/03/fintech-revenues-predicted-to-reach-1-5trn-by-2030/ – Supports the projection of fintech revenue growth from $245 billion to $1.5 trillion by 2030.
- https://fintech.global/2023/05/03/fintech-revenues-predicted-to-reach-1-5trn-by-2030/ – Details the decline in fintech valuation multiples and funding from 2021 to 2023.
- https://thebasispoint.com/why-2022-24-fintech-winter-may-finally-thaw-in-2025/ – Explains the necessary correction in the fintech sector due to oversaturation of startups and the importance of identifying successful business models.
- https://www.bcg.com/press/26june2024-prudence-profits-growth-new-formula-for-winning-in-fintech – Highlights that only a few digital-native challenger banks have achieved profitability, such as Chime and Revolut.
- https://www.bcg.com/press/26june2024-prudence-profits-growth-new-formula-for-winning-in-fintech – Mentions Chime’s operations without a banking charter and its partnership with other banks to offer FDIC-insured accounts.
- https://www.bcg.com/press/26june2024-prudence-profits-growth-new-formula-for-winning-in-fintech – Discusses the potential for increased mergers, acquisitions, and IPOs in the fintech sector in 2025.
- https://fintech.global/2023/05/03/fintech-revenues-predicted-to-reach-1-5trn-by-2030/ – Details the role of embedded finance in anticipated revenue growth, expected to account for $320 billion by 2030.
- https://www.bcg.com/press/26june2024-prudence-profits-growth-new-formula-for-winning-in-fintech – Mentions the evolving role of technology companies in the banking landscape, including Apple’s forays into finance.
- https://fintech.global/2023/05/03/fintech-revenues-predicted-to-reach-1-5trn-by-2030/ – Highlights the growth and innovation trends in the fintech sector, including the integration of marketing strategies into banking services.
- https://www.bcg.com/press/26june2024-prudence-profits-growth-new-formula-for-winning-in-fintech – Provides insights from the Global Fintech Report 2024 by BCG and QED Investors on the shifting tides in the fintech landscape.
