Fintech Sector to Become $1.5 Trillion Industry by 2030, Asia-Pacific to Outpace US at 27% CAGR, Report Says
Revenues in the financial technology sector are projected to grow sixfold from $245 billion to $1.5 trillion by 2030, according to a report by Boston Consulting Group (BCG) and QED Investors. The fintech sector, which currently accounts for 2 percent of global financial services revenues of $12.5 trillion, is projected to grow to 7 percent, with banking fintech estimated to account for nearly 25 percent of all bank valuations worldwide. 2030, says the report.
While fintechs on average lost more than half of their market capitalization in 2022, the report maintained that the plunge is a short-term correction in an otherwise long-term positive trajectory. “The fintech journey is still in its early stages and will continue to revolutionize the financial services industry as we know it,” said Deepak Goyal, managing director and senior partner, BCG, while maintaining that regulators need to be proactive and lead from the front. Meanwhile, Nigel Morris, managing partner of QED Investors said the fintech segment is expected to grow not only in developed markets in the US and Europe, but also in developing fintech markets in Latin America, Asia and Africa, where “inertia and friction are even bigger”.
APAC’s growth in focus
Although APAC is an underpenetrated market with nearly $4 trillion in financial services revenue pools, it is poised to surpass the US to become the world’s top fintech market by 2030, with a projected CAGR of 27 percent. “This growth will primarily be driven by emerging APAC (e.g. China, India and Indonesia), as it has the largest fintechs, voluminous underbanked populations, a large number of SMEs, and a growing tech-savvy youth and middle class, the report says. North America is projected to quadruple to $520 billion by 2030, and the US will account for 32 percent of global fintech revenue growth, growing at a CAGR of 17 percent. The UK and EU are expected to witness a fivefold increase through 2030 compared to 2021. Latin America is expected to show a revenue CAGR of 29 percent over the same time period, and this will be led by Brazil and Mexico.Africa is projected to show a fintech revenue CAGR of 32 percent until 2030 in Africa, with South Africa, Nigeria, Egypt and Kenya as the key markets.
What will drive growth?
Although payments were the driving force of the last era and accounted for about 25 percent of cumulative equity funding ($120 billion) since 2000, going forward fintech growth will be led by B2B2X and B2B (serving small businesses). The B2B2X market comprising of B2B2C (enabling other players to better serve consumers), B2B2B (enabling other players to better serve businesses), and financial infrastructure players is expected to grow at 25 percent CAGR to reach $440 billion in annual revenue by 2030. The B2B fintech market, meanwhile, is expected to grow at a 32 percent CAGR to reach $285 billion in annual revenue.
Need for regulators to be proactive, not passive
Even as the recent crisis in the banking sector has made regulators in the fintech sector more “sensitive to asset/liability management, in addition to creating guardrails, regulators need to ensure that they do not over-regulate the industry and thereby stifle innovation,” the report said.
