Bulls n Bears ::: Global Fintech 2023- Reimagining the Future of Finance

[Bulls n Bears]

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 <http://www.willdale.co.zw/> In just two short decades, fintech-an amalgam
of "finance" and "technology"-has exploded onto the scene, revolutionizing
the financial services industry as we know it. This dynamic sector has been
fueled by the various innovations that have shaped a generation, each one
seemingly more game-changing than the last.

 

The rapid rise of the sector notwithstanding, fintechs on average lost more
than half their market value in 2022-a plunge we believe is a short-term
correction in an otherwise long-term positive trajectory, as the industry's
fundamental growth drivers haven't changed. The overall financial services
industry is enormous and very profitable yet struggles with innovation and
customer experience. More than half the world's population remains unbanked
or underbanked, and technology continues to unlock new use cases in leaps
and bounds.

 

The fintech sector, currently holding a mere 2% share of global financial
services revenue, is estimated to reach $1.5 trillion in annual revenue by
2030, constituting almost 25% of all banking valuations worldwide. With 42%
of all incremental revenues, the largest market is projected to be
Asia-Pacific (APAC), especially emerging Asia (China, India, and Southeast
Asia), where fintechs will help expand financial inclusion. North America,
the largest fintech market, will follow APAC and remain a critical hub for
innovation. Europe and Latin America will continue to experience strong
growth-propelled by supportive regulators-and Africa can leapfrog its way to
a new financial ecosystem, unencumbered by legacy infrastructure.

 

While payments led the last era, we expect that B2b (serving small
businesses) and B2B2X (B2B to any user) will lead the next. Fintechs serving
B2b have ample room to disrupt, as small to mid-sized enterprises (SMEs)
worldwide have an estimated $5 trillion in annual unmet credit needs. As
businesses across industries at large offer more financial services and
incumbents struggle to keep up with the pace of innovation, B2B2X (including
embedded finance)-which already constitutes 25% of all fintech revenues-is
expected to become increasingly relevant in meeting the growing demand for
fintech solutions. Spread businesses (e.g., lending platforms and neobanks),
disrupters that provide apps and software that streamline online and mobile
banking, are most likely to be severely challenged in developed markets,
where they will need to access stable and low-cost sources of deposits in
order to reduce their cost of capital (e.g., by acquiring a banking
license).

 

By contrast, emerging markets are expected to continue to see disrupter,
full-stack models reign as they expand financial inclusion. Large,
underpenetrated segments such as insurance and wealth management will
continue to see disrupter models challenged, but B2B2X (enablers) will be
able to seize significant opportunities. This expectation of growth is not,
of course, without risks-especially regulatory, reputational, and
macroeconomic.

 

All stakeholders must therefore seize the moment. Regulators need to be
proactive and lead from the front to develop policies that create a
collaborative, safe, and open financial ecosystem. Among many potential
actions is creating a path to intermediate financial licenses (e.g., the
e-money license in the UK) and developing digital public-goods
infrastructure (e.g., the Unified Payments Interface, or UPI, in India).
Incumbents should partner with fintechs to accelerate their own digital
journeys and keep pace with consumer expectations. Fintechs may find that
there is no better time than now, during the "fintech winter," to play
offense-while tightening their belts to stay in the game. Some investors are
choosing to build long-term positions within the sector, as fintech
valuations have undergone a correction.

 

This report, co-authored by BCG and QED Investors, is a unique and
comprehensive study that aims to provide a deep understanding of fintech's
future landscape globally, including data-driven projections by segment and
region. We explore the latest trends, challenges, and opportunities in the
global fintech market, with a focus on key regions such as APAC, North
America, Europe, Latin America, and the Middle East and Africa. The report
analyzes the growth of fintech companies across various sub-sectors,
including payments, lending, deposits (including neobanking), insurance,
wealth management, and financial infrastructure. We also examine the
regulatory environment for fintech companies and the impact of emerging
technologies such as artificial intelligence (AI), API-based (application
programming interface) open connectivity, and distributed ledger technology
(DLT). We believe that the insights presented in the report-which are based
on extensive research and interviews with industry experts, fintech
startups, investors, and regulators-will provide valuable information for
entrepreneurs, investors, policymakers, and incumbents in both the fintech
sector and the overall financial services industry.

 

One of the key questions posed by stakeholders in the financial ecosystem
concerns the state of fintech evolution: Have most of the major
breakthroughs in fintech occurred to date, or are we just at the beginning
of the fintech journey? While we at BCG and QED don't profess to having a
crystal ball, we strongly believe that fintech is not just a passing trend
but a foundational force that will continue to transform the financial
landscape for years to come. So buckle up-the fintech journey is just
getting started.-Boston Consulting Group

 

DOWNLOAD THE FULL REPORT
<https://web-assets.bcg.com/66/7e/a36d7eab41e2b4b65c3e687a17f5/bcg-qed-globa
l-fintech-report-2023-reimagining-the-future-of-finance-may-2023.pdf> 

 

Invest Wisely!

 

Bulls n Bears 

 

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