According to a Boston Consulting Group (BCG) report, fintech revenues are set to increase 6 times by 2030, from $245 billion to $1.5 trillion. And by 2030, they should also account for 25% of global banking valuations.
Moreover, the fintech sector has received very important funding in recent years. According to BCG, fintech startups have received a record $140 billion in funding by 2021. This funding was halved in 2022, reaching $75 billion, which is still higher than the $50 billion in funding received in 2019 and 2020. Traditional banks are also injecting more and more money into fintechs, to help them develop new tools they can use.
The covid-19 crisis highlighted the importance of digitizing services, particularly banking ones. Banks and financing organizations perceived fintechs as the ideal solution to this problem. Despite a high level of banking mobility, traditional banks still have extensive customer portfolios, and fintechs are offering innovations that meet new customer needs. In fact, according to a PWC study, 82% of traditional financial institutions plan to strengthen their ties with fintechs over the next five years. By integrating fintech solutions, banks can improve their operational efficiency, automate processes, and enhance the overall customer experience.
Traditional banks and fintech companies can form partnerships and collaborations, leading to mutually beneficial outcomes. By joining forces, both parties can leverage their strengths and create innovative financial products or services. This combination allows Fintech to expand their scope to a market that would have taken them years to address. But Fintech also reach previously underserved or unbanked populations through digital platforms and mobile technology and provide innovative tools and user-friendly plateforms to accelerate bank’s digital transformation and help them build customer loyalty. Traditional players, seeing the scale of demand for digital tools, are now engaged in a race for innovation that is largely benefiting fintechs.
As well as responding to new consumer needs, the development of digital and financial tools is enabling traditional banks to collect a maximum amount of data. By integrating fintech solutions, traditional banks can access valuable data and analytics capabilities. This data-driven approach can help banks make more informed decisions, develop personalized products, and improve risk management practices.