The World Economic Forum and the CCAF launched the Future of Global Fintech research initiative to collect more empirical data to understand the global market trends, generate regional fintech insight, and assess how global fintech activities are impacting consumers, businesses, and financial inclusion.
The research examines 227 fintechs across five sectors and six regions, aiming to bolster market development and inform future regulation. The report comes at an interesting time, as fintechs strive to grow whilst grappling with significant macroeconomic challenges.
We’ve summarised the key findings below and looked at what they mean for the fintech sector.
- The global fintech industry is demonstrating strength and resilience
In the wake of unprecedented challenges brought forth by the COVID-19 pandemic, the global fintech industry has not only weathered the storm but emerged stronger and more resilient.
Despite the upheavals caused by the pandemic, fintechs have shown significant growth, with customer acquisition rates soaring above 50% across different industry verticals and geographical regions.
The US, Canada, and MENA regions emerged as frontrunners and demonstrated the most substantial growth rates within the industry. At the heart of this surge lies an insatiable demand from consumers, driving the expansion and diversification of fintech offerings globally.
- Global fintech growth challenges
Despite this buoyant atmosphere, challenges loom large on the horizon for fintechs. With global inflation and interest rates on the rise, fintech firms find themselves grappling with an increasingly complex financial landscape. Over half of global fintech respondents said that the macroeconomic environment was the major factor hindering growth.
Funding, essential for fueling innovation and expansion, presents its own set of challenges, casting a shadow of uncertainty over the future trajectory of fintech growth. Among the respondents, 40% said that the poor funding environment was the main factor hindering fintech growth.
Opinions are divided when it comes to the impact of the fundraising environment on fintech growth. While some firms view the current landscape as a hindrance, others see it as an opportunity for innovation and adaptation.
- Fintechs are mostly positive about the regulatory environment
The majority of surveyed companies view the regulatory landscape as adequate, with many citing it as a crucial support for their operations and growth. However, regulatory compliance remains a thorny issue for some, with cumbersome licensing and registration processes posing significant barriers to entry and expansion.
Fintechs in APAC and Europe perceived their regulatory environment to be marginally better than fintechs in other regions, with the regulatory environment being perceived as a key driver of fintech growth in APAC.
Fintechs in the MENA region had the highest regulatory concerns, with 42% indicating that existing regulation was either excessive and restrictive, inadequate, or non-existent and not needed for their fintech activities.
- Fintechs are creating a more inclusive financial system
One of the most promising trends highlighted by the research is the expansion of fintech services to underserved segments of the population. Fintech firms are increasingly focusing on providing tailored financial solutions to emerging markets and developing economies, where traditional banking services may be inaccessible or inadequate. This inclusive approach not only addresses a critical societal need but also unlocks new avenues for growth and innovation within the fintech ecosystem.
Fintechs can act as a vehicle to widen access to finance for traditionally underserved populations irrespective of the region. Fintech has been an important agent in advancing financial inclusion and the industry is showing a desire to harness new technologies to contribute to various social development goals (SDGs).
The fintech sector also showed stronger female executive representation than the finance industry on average. This makes the fintech sector look more like the technology sector regarding female executive representation. However, on average, of the fintechs surveyed the female executive proportion was reported as 33%, showing we still have a long way to go.
- AI is key for future industry development
Looking ahead, the future of the fintech industry is poised for further evolution, with artificial intelligence (AI), open banking, and embedded finance seen as the key drivers of innovation.
Fintech firms recognise the transformative potential of these technologies, envisioning a future where financial services are more accessible, efficient, and personalised than ever before.
Out of eight options, AI was consistently cited as the most relevant topic for the development of the fintech industry over the next five years, with 72% of respondents finding it the most relevant, 23% citing it as relevant, and only 5% as the least relevant.
Embedded finance, the digital economy, and open banking were all nearly tied as the second most relevant factors for the fintech industry in the near future.
The way forward
The global fintech industry stands at a critical juncture, poised for unprecedented growth and innovation. While challenges abound, the resilience and adaptability of fintech firms continue to fuel optimism for the future.
By leveraging technological advancements, embracing regulatory frameworks, and addressing the needs of underserved populations, fintech companies have the potential to overcome the macroeconomic and fundraising challenges, reshape the financial landscape and drive inclusive economic growth on a global scale.
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