The Fintech sector records growth in revenues despite the 70% collapse in financing

The global fintech sector continues to show resilience, with revenues set to grow 14% annually from 2021 to 2023 despite a sharp decline in funding and valuations, according to a new report from Boston Consulting Group (BCG) and QED Investors.

The report, titled “Global Fintech 2024: Prudence, Profits, and Growth”, reveals that although fintech financing has they have plummeted 70% since 2021 and valuation multiples have fallen from 20 times revenue to 4 times, industry revenue has remained robust. Excluding cryptocurrency-related fintechs and those exposed to China, revenue growth reaches 21% annually.

Future forecasts are also satisfactory. By 2030, the entire global fintech The industry is expected to grow fivefold to $1.5 trillion in revenue over the next six years.

Source: BCG

“Profitability and compliance are now the cornerstones of fintech success,” said Deepak Goyal, BCG Managing Director and Senior Partner. “They are essential to attracting ongoing investment, scaling operations and building lasting, valuable businesses.”

Deepak Goyal, CEO and Senior Partner at BCG

While fintech financing yes significantly decreased in recent yearsThe authors of the report say there is no shortage of capital in the sector. The year 2021 was simply a record year and brought a “glut.”

“It has been a sobering three years for fintech,” the report reads. “However, we believe these challenges are part of the short-term correction—a moderation of investor enthusiasm—that we discussed in last year’s report, and that these challenges are now starting to ease.”

An independent report by KPMG, highlighted by Finance Magnates in Februaryrevealed that 2023 saw the poorest fintech funding results in five years. Global fintech investment fell to $113.7 billion in 2023, a substantial decline from $196.3 billion in 2022.

4 key trends for the future of fintech

The study, which drew insights from interviews with more than 60 global fintech CEOs and investors, identifies four key trends shaping the future of the sector:

• Integrated finance is expected to become a $320 billion market by 2030, of which nearly half will be accounted for by the small and medium-sized business segment.
• Connected commerce is emerging as a potential game changer for banks, offering new revenue streams and greater customer loyalty.
• While open banking continues to be relevant, it is expected to have a more significant impact on advertising than traditional banking services.
• Generative AI is delivering immediate productivity gains in areas such as coding, customer service and digital marketing which will be followed by product innovation.

Nigel Morris, managing partner at QED Investors, highlighted the sector’s potential, saying: “With an annual global profit of $3.2 trillion on a base of $14 trillion in total revenue, the financial services sector is huge and ripe for innovation.”

According to the report, the fintech market is expected to see a significant increase in IPO activity, especially in the UKas investors will return to the market in 2024, after a very weak 2023. BCG data indicates that the number of investments in fintech companies this year has already exceeded the previous year’s total investments.

According to a new report from Boston Consulting Group (BCG) and QED Investors, the global fintech sector continues to show resilience, with revenues growing 14% annually from 2021 to 2023 despite a sharp decline in funding and valuations.

The report, titled “Global Fintech 2024: Prudence, Profits, and Growth”, reveals that although fintech financing has they have plummeted 70% since 2021 and valuation multiples have fallen from 20 times revenue to 4 times, industry revenue has remained robust. Excluding cryptocurrency-related fintechs and those exposed to China, revenue growth reaches 21% annually.

Future forecasts are also satisfactory. By 2030, the entire global fintech The industry is expected to grow fivefold to $1.5 trillion in revenue over the next six years.

Source: BCG

“Profitability and compliance are the pillars of fintech success today,” said Deepak Goyal, managing director and senior partner at BCG. “They are essential to attracting continued investment, scaling operations and building enduring, valuable businesses.”

Deepak Goyal, CEO and Senior Partner, BCG

While fintech funding does significantly decreased in recent years, the authors of the report say there is no shortage of capital in the sector. The year 2021 was simply record-breaking and brought an “overabundance”.

“It has been a sobering three years for fintech,” the report reads. “However, we believe these challenges are part of the short-term correction—a moderation of investor enthusiasm—that we discussed in last year’s report, and that these challenges are now starting to ease.”

An independent report by KPMG, highlighted by Finance Magnates in February, revealed that 2023 saw the poorest fintech funding results in five years. Global investment in fintech fell to $113.7 billion in 2023, marking a substantial decline from $196.3 billion in 2022.

4 key trends for the future of fintech

The study, which drew insights from interviews with more than 60 global fintech CEOs and investors, identifies four key trends shaping the future of the sector:

• Integrated finance is expected to become a $320 billion market by 2030, of which nearly half will be accounted for by the small and medium-sized business segment.
• Connected commerce is emerging as a potential game changer for banks, offering new revenue streams and greater customer loyalty.
• While open banking will continue to be relevant, it is expected to have a more significant impact on advertising than traditional banking.
• Generative AI is delivering immediate productivity gains in areas such as coding, customer service and digital marketing which will be followed by product innovation.

Nigel Morris, managing partner of QED Investors, highlighted the sector’s potential, saying: “With annual global profits of $3.2 trillion on a $14 trillion base of total revenue, the financial services sector is huge and ripe for innovation.”

According to the report, the fintech market is expected to see a significant increase in IPO activity, especially in the UKas investors will return to the market in 2024, after a very weak 2023. BCG data indicates that the number of investments in fintech companies this year has already exceeded the previous year’s total investments.

Source