Global Fintech Report 2023 Reimagining The Future of Finance g1

Global Fintech 2023
Reimagining the
Future of Finance
May 2023
By Deepak Goyal, Rishi Varma, Francisco Rada, Aparna Pande, Juan Jauregui, Patrick Corelli,
Saurabh Tripathi, Yann Sénant, Stefan Dab, Yashraj Erande, JungKiu Choi, Jan Koserski, and
Joseph Carrubba
QED Investors: Nigel Morris, Frank Rotman, Matt Risley, and Sahej Suri
Contents
03 Introduction 26 A Tale of Two Cities on Spread

Businesses
04 Fintechs Have Come of Age

30 Insuretech and Wealthtech
Opportunities Are Mostly
08 Industry Fundamentals Remain
in B2B2X
Strong
32 The Path Toward Growth Carries

14 Fintech Revenues Will Grow
Risks, and Requires Action
Sixfold by 2030
42 About the Authors

20 While Payments Led the Last
Era, B2B2X and B2b Will Lead
the Next
Introduction
F
“ intech”is a word that’s barely a generation old. But in that In order to grasp where the fintech industry is going, and to
nanosecond of historical time, this amalgam of “finance” understand its importance for a very diverse set of stakeholders,
and “technology” more specifically, the array of products it’s critical to take stock of how fintechs have evolved.
and services that fintech companies have brought to life has
had an impact on the daily lives of billions of people.
For the past two decades, the fintech industry has been
shaped by the rise and rapid adoption of transformative
technologies and the applications (“apps”) they enable. A
key to success during this journey has been the ability of
fintechs to identify and ease the points of friction customers
have often had with traditional financial institutions (FIs).
Many fintechs have delivered high-quality, service-focused
digital experiences, provided access to unbanked and
underserved customer segments, and introduced cost-
effective ways of operating through a more efficient
infrastructure and simplified processes.
BOSTON CONSULTING GROUP + QED 2

Key Highlights
Peak valuations of Nearly 80% of adults

fintechs in 2021 reached globally are either
a 20X revenue multiple underbanked or unbanked
Global FS revenues Annual fintech revenues will

will reach $22 grow six-fold to reach $1.5
trillion by 2030 trillion by 2030
Payments fintech In 2022, only 20 out of 453

revenues will reach digital challenger banks
$520 billion by 2030 were profitable globally.
3 PUBLICATION TITLE
Fintechs Have Come of Age
W
hile fintechs were perceived as largely tangential Over the past decade, fintechs have attracted more than
to the financial services industry until about five $500 billion in funding. More recently, since 2019, they have
years ago, the pandemic served as a catalyst for received roughly 20% of global venture capital outlays since
broad consumer adoption of digital financial services. As a 2019—attracting large amounts of capital from generalist,
result, fintechs have now become mainstream in certain technology private investors and hedge funds—beyond the
segments, especially payments and transaction banking, financial services specialists who had historically funded
which have been fundamentally transformed by players these businesses. Such funding was fueled at times by a
such as Stripe, Square, Alipay, and a few others. Some frenzy of speculation in sub-segments such as crypto, and
fintechs, such as PayPal in the US, Nubank in Brazil, and its supporting technologies. Crypto accounted for more than
PayTM in India, have become household names. Today, $50 billion in funding in 2021 and 2022 combined, or
there are roughly 32,000 fintechs globally. roughly 75% of all crypto funding received through 2022.
At their peak in 2021, fintechs represented roughly 9% of all

financial services valuations globally, with public valuations
reaching $1.3 trillion—a multiple of 20 times annual revenue
compared with the historical, pre-2018 multiple of six times
annual revenue. (See Exhibit 1.) Also in 2021, the mega-fintechs
PayPal and Ant Financial were among the top-10 financial
services companies in the world by market capitalization.

Exhibit 1 - In Q2 2021, Peak Valuations Reached an Inflated
20x Revenue Multiple
Q1 2017 – Q4 2022, average revenue multiples for public fintechs (simple average, market Cap/LTM revenues)
20x
18x 18x
17x
14x 13x
12x
–79%
10x 10x
9x 9x 9x
8x 8x 9x
6x 7x
6x 6x
5x
4x
Q4 2017 Q2 2018 Q4 2018 Q2 2019 Q4 2019 Q2 2020 Q4 2020 Q2 2021 Q4 2021 Q2 2022 Q4 2022
Avg. LTM
$1.3B 1.3 1.3 1.3 1.3 1.3 1.3 1.4 1.4 1.3 1.2 1.2 1.2 1.4 1.5 1.6 1.8 1.8 1.9 1.9 2.0
Revenues
Avg.
$9.9B 10.3 9.8 10.7 8.7 10.9 11.5 9.7 9.8 8.4 14.5 15.5 18.7 18.4 18.4 17.5 13.8 9.9 6.0 6.0 5.6
Valuation
Sources: Fintech Control Tower, Capital IQ, BCG analysis.

Note: The Public Fintech list considers market capitalization and revenues for each quarter from 85 public fintechs from different geos and segments.
The Last 12 Months Have Been Humbling, These dynamics have occurred owing to rising interest rates
But the Correction Will Be Short Term that have raised the cost of capital and essentially stopped
the supply of zero-priced funding. This rise has resulted from
Since April 2022, however, fintech exuberance has been persistent inflation, which in turn was caused by a variety of
dealt a strong dose of reality, with valuations plummeting factors including geopolitical tensions, supply-chain issues,
across all segments and geographies by an average of and recovery from the pandemic. The consequent shifts in
more than 60%—all while revenue growth has continued the financial landscape have been felt both by fintechs and
(albeit at a slower pace). New funding has decreased by investors, and fintech CEOs are now targeting profitable
43%, with early-stage companies still seeing venture capital growth as their top priority. (See Exhibit 3.)
infusions, but later-stage companies witnessing steep
drops in funding rounds. Series C+ companies have faced We believe that the challenges fintechs have recently faced
the toughest challenges. (See Exhibit 2.) represent a short-term correction in an otherwise long-
term growth story, as the fundamentals of the sector hav-
en’t changed. Essentially, we are witnessing a shakeout
and tempering of enthusiasm for growth-stage (series B-D)
companies that have unclear product and/or market fits.
5 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

Exhibit 2 - Since 2021, Funding Levels for Later Stages (Series C+) Have
Dropped More Drastically than for Earlier Stages (Seed/Series A/B)
2020–2022, Average Funding ($B) by Stage
$B
30 –48%
–72%
–38%
–48%
22.8
–37% 21.5
20.1
20 18.6
15.5
12.6 11.8
–24%
9.7 9.6
10 8.9
7.6
6.1 6.6 6.0
5.4
4.6 4.6
2.7
0
Seed/Angel Series A Series B Series C Series D Series E+
2020 2021 2022
Sources: Fintech Control Tower, BCG analysis.
Additionally, as is typical for nascent industries, profitability Currently, fintechs are employing different playbooks to
in fintech has not come easily—even for highly valued, survive the funding winter, with many focusing on unit
conventionally “successful” late-stage companies. Of the economics as opposed to unbridled revenue growth at any
roughly 85 public fintechs BCG analyzed across all regions cost. Some are raising debt to avoid down rounds. Many
and segments in 2022, less than half (45%) were are also switching their focus toward the LTV (lifetime
profitable1—despite shareholder pressure for public value) element of the LTV-to-CAC (customer acquisition
companies to deliver a healthy bottom line. cost) ratio as a tracked metric. Most are prioritizing longer-term
sustainable revenues, monthly recurring customers, and
Now, however, overvaluations have become more difficult to investments in innovations that are core to their reve-
justify without strong fundamentals—such as good unit nue-generating products and services. We expect that, by
economics, recurring revenues, patents, strong brands, and focusing on the basics, some will emerge stronger and
loyal customer bases. Some of this filtering is good for the more resilient, well-positioned to become the future
industry, as weaker business models are becoming stressed leaders of the financial services industry.
and effectively being weeded out.
1. At the operating margin level

Exhibit 3 - Fintech CEOs are Focused on Strengthening Business
Fundamentals and Driving Profitable Growth Over the Next 12–18 Months
% of CEOs who selected following % of CEOs that selected the following among
challenges faced by fintechs in the next their top actions to take in the next 12-18 months
12–18 months among their top 3 to get through aforementioned challenges
Customer Customer acquisition 30%

15% 44%
acquisition
Managing Costs 29%
Need to expand 11% 41%
product feature set
Product Innovation 25%
Slowdown in
9% 31% 17%
economic growth Regulatory/Compliance
Payments
Challenges scaling Partnerships 14%
10% 23% companies
business model are 15% less
likely to list
higher New Products 12%
Higher interest
11% 23% interest rates
rates as a challenge
Hiring/Talent 12%
Managing credit
risk or fraud 5% 22% Lenders are
Expansion 12%
20% more
likely to list
Need to credit risk as a
Focus on Core 10%
reduce costs 1% 11% top challenge
Fundraising 10%
Difficulty
fundraising for OpEx 4% 7%
Revenue/Pricing 9%
Need to expand 4%
product feature set Underwriting 8%
First Choice Second or Third Choice
Sources: BCG/QED Future of Fintech survey (N=81), conducted across fintech CEOs and C-Suite leaders in February 2023; BCG analysis.
Q. What are the top 3 challenges facing your company in the next 12–18 months?
Q. What are the top actions your company is taking to address challenges over the next 12-18 months?
Note: Responses collected as free-form text and then sorted into discrete categories?

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Industry Fundamentals Remain Strong
D
espite the turbulent interlude, the fundamentals of the Another factor is the overall customer experience in finan-
fintech industry remain sturdy for various reasons, cial services (including the insurance sector) has historically
notably that the financial services industry remains been among the lowest-ranked compared with other indus-
fertile ground for disruption. A number of factors are relevant. tries. Although incumbents have made progress over the
past few years, they still significantly underperform fintechs.
First, the financial services industry is one of the largest The average Net Promoter Score for the banking industry in
and most profitable segments of the global economy, the US stands at 23 (out of 100)—compared with some US
representing $12.5 trillion in annual revenue pools and fintechs whose scores reach as high as 90. (See Exhibit 5.)
creating an estimated $2.3 trillion in annual net profits or
additional value—based on one of the highest average
profit margins across all industries of 18%. (See Exhibit 4.)

Exhibit 4 - Financial Services is One of the Most Profitable Sectors of the
Global Economy
Net Margin (%) by Industry, Global
18%
17%
15%
Represents a
$2.3T profit pool 12%
~10%
10%
Banks have a 9% 9% average
30% net margin net margin
7% 7%
Insurance has a
6%
6% net margin
4%
3%
FI RE Energy Consumer Mining Manufact. Utilities TMT Pharma Healthcare Other Retail
Sources: NYU Damodaran, Federal Reserve Bank of St. Louis, BCG analysis.
Note: Others includes construction, education, hospitality, air transport.
Further, there is more than ample room for growth in the Phase One: Digital Disruption (1998–2008). With the
fintech sector, especially in emerging markets, given that 1.5 increasing availability and adoption of internet-enabled
billion adults globally are still unbanked, with an additional devices, financial services went digital for the first time. This
2.8 billion adults underbanked (defined as not having a credit challenged the legacy systems of national and regional FIs.
card, using data from the World Bank Financial Inclusion Proj- Digital offered greater convenience and accessibility to
ect). The total represents more than half the world’s popula- consumers, eliminating pain points. Online banking, lending,
tion. Moreover, almost 44% of adults globally are still heavily and e-commerce (notably through marketplaces such as
dependent on cash for major transactions, while 89% use a Amazon and eBay) gradually became mainstream. Online
mobile phone or smartphone. (See Exhibit 6.) payments, with players such as PayPal leading the charge,
emerged as the largest area of innovation, disrupting the trans-
There is also still significant room for growth in digital usage action-banking industry. . Digital lenders, such as Capital One,
in banking—currently at about 39%, compared with 98% in led a wave of innovation in lending using data and analytics.
computer software. The figure dips as low as 17% on average
for countries in the Middle East and Africa. (See Exhibit 7.) Phase Two: Mobile and Social Adoption (2009–2014).
Following the 2008 financial crisis, amid new regulatory scruti-
Lastly, it is important to note that although the fintech ny and shifting consumer behaviors, the “wait-and-see” per-
sector is coming of age, it is still at a very early stage of spective of incumbent banks opened the door for fintechs. A
development, representing less than 2% of annual financial credit boom and rapid innovation in mobile and cloud al-
services revenues globally—or roughly $245 billion out of lowed consumers to access financial services in real time,
$12.5 trillion, with ample room to grow. We think of fintech’s spurring the hypergrowth of disruptive players. An intentional
chronological evolution in terms of phases—defined periods focus on user experience/user interface (UX/UI) and the
of time in which one or more trends came to the fore. introduction of APIs eliminated many points of friction during
both the onboarding process and, later, the customer’s digital
journey. Social media and data analytics began to play a key
role, allowing companies to gather granular information.
Fintech success grew by providing digital-first solutions with a
high degree of personalization.

Exhibit 5 - Customer Experience (Measured Through NPS) Across Value
Chains is Relatively Poor for Incumbent Financial Institutions
NPS score aggregates, major U.S. financial institutions
58
52
30 29 28 28
23
23 23 22 22 21 20
14 11
4
U.S. Navy USAA TD Charles American PNC Chase Fifth U.S. Citibank Marcus Truist Bank of Wells
Banking Federal Bank Schwab Express Bank Third Bank America Fargo
Average CU
NPS score aggregates, Major fintechs with U.S. operations
83 90 84 83 79 77
Fintech with U.S. SoFi OneDeck Affirm LendingClub Funding Circle

Op. Average
Sources: Forrester - The US Net Promoter Rankings, 2022/Customer Gauge Benchmarks in Financial Services 2022.
Phase Three: Relevance and Scale (2015–2021). The Phase Four: Looking Ahead (2022 and Beyond). We
fintech industry grew rapidly alongside smartphone adoption, foresee a more proactive regulatory environment paving
with a step-function acceleration during the COVID-19 pan- the way for supportive infrastructure investments (e.g.,
demic. Consumers now expect all financial services to be digital public goods) and unlocking innovation in parts of
available online 24/7. Fintechs such as Ant Financial, Nubank, the world that are still seeking to expand financial inclusion.
PayTM, Square, Stripe, and some neobanks became house- Moreover, the stage is set for new technological disruptions
hold names in the evolving landscape. Fintechs grew, owing to such as generative AI and DLT, which are already making
expanded customer access to financial services, new de- their presence felt. Despite tall challenges, fintech CEOs
mand-generation channels, updated UX/UI, and reduced remain optimistic in the long term. (See Exhibit 8.)
costs. Fintech funding surged to $440 billion between 2014
and 2022. Amid a low-interest-rate climate and easy availabili-
ty of capital, valuations spiked, as did the number of compa-
nies and amount of talent in the industry. The sector experi-
enced increased competition for market share and a flurry of
mergers and acquisitions (M&A) activity.

Exhibit 6 - A Majority of Adults Remain Unbanked or Underbanked Globally
% of Adult Population with a Bank Account (i.e., % of "banked" population in the world and major countries)
5%
23% 20%
23%
40%
43%
68%
42%
50% 55%
52%
52%
27% 35%
27% 25%
5% 8%
World North America Europe APAC LATAM MEA
Unbanked 1,546 15 54 820 164 493

adults (M)
Underbanked 2,829 83 357 1,787 199 403

adults (M)
Cash
44% 21% 23% 59% 60% 58%
Usage (%)
Mobile
89% 93% 96% 85% 87% 83%
Penetration (%)
Unbanked Underbanked Banked
Sources: World Bank Financial Inclusion Project, 2021 Data.

Note: “Underbanked” defined as % of adults without a credit card; mobile penetration defined as % of adults who own a mobile phone; cash usage
defined as % of adults who made a utility payments using cash only.
New Technologies Are Emerging, but Their *Generative AI. This new frontier in artificial intelligence
Impact Has Yet to Play Out has created a step change in the human-digital interface
that is natural-language based. It provides not only
Multiple innovative technologies, some of which touch the high-level customer service, but also will aid incumbents
realm of the futuristic, are either entering the fintech arena by helping them leapfrog their own technical constraints.
for the first time or strengthening a nascent presence. For instance, Stripe is already using GPT-4’s enterprise
Their impact will likely be felt not only by all types of finan- beta to carry out operational tasks such as streamlining
cial services players—which must get a firm handle on UX, triaging customer issues, and combating fraud. In the
their capabilities to optimally leverage their potential use future, generative AI will facilitate so-called digital financial
cases—but by society at large. Among these technologies concierges, which will complete tasks such as paying bills,
are generative AI; API-based open connectivity; DLT; sending remittances, checking budgets, disputing charges,
quantum and edge computing; and embedded-hardware and the like—in lieu of human interaction. Generative AI
Internet of Things (IoT) and biometrics. can also be used to simulate cyberattacks and generate
decoy data that will help train models to protect FIs. This
technology will enable the hyper-personalization of finan-
cial products and services, analyze vast swaths of data to
identify patterns, and facilitate human decision-making. It
will also bring significant efficiencies to customer-service
and administrative centers in labor-intensive industries
such as insurance and wealth management.

Exhibit 7 - There is High Potential to Increase Digital Banking Adoption,
Especially in Emerging Markets
2021, global digital share of consumption channels by category1
98%
Computer
software 100%
Event 61%
tickets 86%
Consumer 39%
1.5x
banking 58%
Clothing and 27%

Deep dive on regional gaps
Footwear 48%
Personal 17% 80% of North America

uses Digital Banking
care 35%
Food and 3% 17% of Middle East & Africa

uses Digital Banking
drink 10%
2021 2024E
Sources: Forrester Research, World Bank, BCG analysis.

Note: Consumer banking estimated as the % of adults that used a mobile phone or the internet to check their bank account balance.
1
Forrester’s 2021 US online retail forecast
*API-Based Open Connectivity. Open banking 2.0 has *Distributed Ledger Technology. As a global block-
the potential to create seamless modular access and permit chain-based infrastructure, DLT can be used to create a
the standardization of interfaces for banks, corporates, and worldwide transactional and settlement platform using
governments. Such entities will be able to plug in through stablecoins—akin to an alternative payments network. The
APIs to gather customer data, access and provide advanced platform is predicted to be fast, inexpensive, transparent,
financial services, and facilitate collaboration between FIs borderless, and secure, thus eliminating the need for inter-
worldwide. APIs could also be used to amass data from mediaries and reducing the time and cost of settling pay-
various unrelated sources such as social media, news, and ments. DLT also offers a secure, tamper-proof, global iden-
personal devices to create highly accurate risk assessments tity-verification system that protects the privacy of the
for use in credit underwriting, fraud detection, credit scoring, individual while also facilitating Know Your Customer
insurance underwriting, and the like. (KYC) authentication. This technology supports the cre-
ation of a decentralized supply chain platform that enables
businesses to obtain financing more efficiently through a
shared ledger of transactions that reduces the risk of fraud.
A key unlock is the tokenization of complex, real asset
classes (including regulated digital currencies). Moreover,
self-executing (smart) contracts can verify and execute the
terms of an agreement between a buyer and a seller. Final-
ly, Central Bank Digital Currencies (CBDCs), on top of DLT,
can provide a standardized and interoperable digital cur-
rency that can be used across different countries and
currencies. CBDCs can thus help blaze a trail for real-time
settlement infrastructure that enables instant ac-
count-to-account (A2A) and cross-border payments.

Exhibit 8 - Fintech C-Suite Leaders are Wary in the Short Term, But
Optimistic in the Longer Term, as Fundamentals Remain Strong
12 month 3 year
optimism outlook Global NAMR LATAM EUR APAC optimism outlook Global NAMR LATAM EUR APAC
All Segments All Segments
Payments Payments
Accounts/neo-banking Accounts/neo-banking
Lending Lending
Insurance Insurance
Wealth & Investments Wealth & Investments
Infrastructure/Regtech Infrastructure/Regtech
>10% above average >10% below average Average +/- 5% 5-10% above average 5-10% above average
Q. How optimistic are you about the future prospects of your company in the next 12 months?
Q. How optimistic are you about the future prospects of your company in the next 3 years?
*Quantum and Edge Computing. The unprecedented *Embedded-Hardware IoT and Biometrics. The Inter-
power and speed capability of the qubit—or quantum bit, net of Things—networking capability that allows informa-
the smallest unit of information in a quantum computer, tion to be sent to and received from objects and devices
existing in a superposition of two states (1 and 0), and such as fixtures and kitchen appliances using the inter-
settling on one state or the other only when a measure- net—can be used to develop highly personalized financial
ment of the state is made in order to retrieve the output of products such as energy-efficient mortgages and home
the computation—will enable quantum computing to solve insurance. Similarly, advanced smartwatches can monitor
extremely complex problems in a fraction of a second— health statistics, with the resulting behavioral changes by
benefiting portfolio selection, asset allocation, and overall users leveraged to tailor health insurance policies down to
business optimization programs. Other use cases include the risk of specific diseases. IoT devices can also be used to
ultra-sophisticated underwriting, anti-money-laundering trigger automatic financial transactions, which can be
initiatives, anti-fraud neural nets in real time, synthesis of especially practical if combined with smart contracts.
massive amounts of global data, and the development of Another use case is facial recognition, which is already
next-gen encryption and financial cybersecurity technolo- being deployed at scale in some countries—for example in
gies. BCG estimates that such technology could ultimately supermarkets, where the software is plugged into consum-
bring roughly $70 billion in annual, additional operating ers’ bank and credit card details at checkout counters.
income to the global banking industry.
Nonetheless, taking all of the above into consideration,
how is the fintech sector likely to evolve in the remaining
part of Phase Four and beyond?

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Fintech Are Projected to Grow
Sixfold by 2030
C
urrently, the global $12.5 trillion financial services Fintechs are forecast to represent a meaningful and ex-
industry is concentrated in North America and APAC, panding element of this growth. Despite the short-term
with a relatively even split between banking and correction we have witnessed, annual fintech revenues are
insurance. By 2030, global banking and insurance revenue projected to grow more than sixfold from 2021 to 2030 to
pools are expected to reach $21.9 trillion, a 6% compound reach $1.5 trillion2. (See Exhibit 11.) Banking fintechs’ reve-
annual growth rate (CAGR). Payments and deposits are expected nues—lending, deposits, payments, and trading and invest-
to be the fastest-growing segments, with APAC and Latin ments—are projected to grow from 4% to 13% penetration (at
America seeing the most expansion. (See Exhibits 9 and 10.) a 22% CAGR) of banking revenue pools by 2030, and are
expected to represent one-fourth of global banking valuations.
Insuretechs are projected to grow from a 0.3% to 2% market
penetration (a 27% CAGR) of insurance revenue pools.
However, the shape of this expansion will play out

differently both by geography and by segment.
2. Our forecasts consider a combination of proprietary revenue pool data, internal benchmarks and models, segment and regional trends, interviews
with fintechs, VCs and incumbents, equity research projections, and penetration analyses by segment and region.

Exhibit 9 - Global Financial Services Revenues Will Reach $22 Trillion by
2030, With a Relatively Even Split Between Banking and Insurance
Revenues ($T)
+6% CAGR
21.9
10.2
12.5
5.7
11.7
6.8
2021 2030
Banking Insurance
Sources: BCG banking and insurance revenue pools, BCG analysis.
Asia-Pacific Is Projected to Be the Largest China and India, with active fintech markets, have an
Fintech Market by 2030 opportunity to leapfrog the intermediate stages of fintech
development more-developed financial markets have
The drivers shaping the fintech space have performed undergone, especially if they can benefit from supportive
differently across regions over the past 20 years—leading regulation. Before COVID-19, two of the top-10 tech compa-
to diverging levels of maturity—determined mainly by nies in the world by market value, Tencent and Alibaba,
differences in available funding pools, sources of talent, were based on the east coast of China. Furthermore, the
local regulatory postures, and technology adoption. Each majority of fintech revenues in the APAC region currently
region is therefore in a different chapter of the overall originate in China, so we expect that the country will
fintech journey, with various stakeholders seeking to find remain a regional leader in the years to come. We believe
creative solutions to pain points in their own domains—or that established fintech giants will continue to dominate
to localize and implement approaches that have proved domestic markets—in which they are already leaders in
successful elsewhere. Innovation typically plays out with a innovations such as so-called superapps—and we expect
marquee firm in one geography developing and adopting a to see many new local champions emerge.
new disruptive model, followed by the emergence of repli-
cations in other regions that generally insert local variants. India is undergoing major fintech activity with the emer-
gence of local champions such as PayTM and Razorpay.
Historically underpenetrated, Asia-Pacific will rise. APAC, There is a clear opportunity in the country for fintechs to
historically an underpenetrated market with strong incumbents provide financial-services access to India’s 190 million
and large revenue pools (nearly $4 trillion), is poised to outpace unbanked adults, especially as smartphones are ubiqui-
the US and become the world’s top fintech market by 2030, a tous while bank accounts are not. The Indian regulator is
projected CAGR of 27%. (See Exhibit 12.) This growth will be taking an active role in shaping the market through such
driven primarily by local champions in emerging APAC that vehicles as UPI, Aadhar, Rupay, and Digilocker. We expect
will solve access issues, thus facilitating financial inclusion. major fintech revenue growth in India to be spurred by
Separating emerging APAC (e.g., China, India, and Indonesia) expanding GDP (a CAGR of 7% per year), the rise of the
from developed APAC (e.g., Japan and South Korea), most growth educated middle class, younger demographics coming of
is expected to come from the former, as it has the largest age, and increasing fintech penetration. Further areas of
fintechs, voluminous underbanked populations, a high number growth will be in lending, neobanking, and wealthtech.
of SMEs, and a rising tech-savvy youth and middle class.

Exhibit 10 - Payments and Deposits Will Be the Fastest Growing Segments,
With Asia-Pacific and Latin America Experiencing the Most Expansion
Growth by segment Growth by geography

Revenues ($T) Revenues ($T)
Growth multiple (X) Growth multiple (X)
1.7x
11.7 1.7x
2.0x
8.1
7.6
+4.9
+3.3
1.5x
4.3 +3.7
1.6x
2.2x 2.3x 1.5x
3.5 +1.5 2.0x 1.8x
2.3 2.2 6.8
2.2 +1.3 4.8 3.9 1.0 0.9
+1.3 +0.7 2.8
+1.2
2.2 1.5 +0.5 +0.4
1.0 1.0 0.5 0.5
Payments Lending Deposits Trading & Insurance North Europe APAC Latam Africa
Investments America
2021 2030
Sources: BCG banking and insurance revenue pools, BCG analysis.
North America will continue to be a critical fintech Europe will grow, supported by regional expansion.
market and innovation hub. Led by the United States, The UK and European Union combined represent the
North America currently has the world’s largest financial- world’s third-largest FI market and is expected to witness
services industry, with an annual revenue pool of nearly $5 major fintech growth through 2030, estimated at more
trillion, and possesses the most mature innovation ecosys- than fivefold over 2021 and led by the payments sector.
tem in terms of venture capital firms, entrepreneurs, talent This FI market is dominated by incumbent banks and
pools, universities, and access to funding. The US will contains relatively low fintech penetration (1% of financial
account for a projected 32% of global fintech revenue growth services revenues). Regulators are relatively forward-look-
(a CAGR of 17%) through 2030, supported largely by the ing, for example, with open banking, open finance, and
proliferation of B2B2X and B2b businesses, the expansion passporting. This regional fintech sector is projected to
by monoline fintechs into additional products and services, post a revenue CAGR of 21% in the runup to 2030, bol-
and the country’s interchange pool. This pool, which stered by continued growth across so-called payment-plus
weighs in at anywhere from five times to more than 17 (ecosystems of value-added services on top of traditional
times that of EU markets on a per-transaction basis, allows payments infrastructure), embedded-finance, and B2b
fintechs to serve the low end of the market, which is players. Additionally, open banking is expected to foster the
relatively underbanked by larger incumbents. Furthermore, creation of new products and services, further contributing
although the US has the most mature ecosystem, open bank- to the sector’s growth.
ing has yet to play out, and there are significant inefficiencies
and customer-experience pain points in the financial services
industry that will spur ongoing innovation.

SPOTLIGHT #1
Razorpay4
Founded in 2014 in India, Razorpay started as a pay-

ment-gateway aggregator aimed at helping businesses
accept online payments through multiple channels. Like
many other payment players, Razorpay expanded its offer-
ing to include a broader range of financial services includ-
ing current accounts, payouts, business loans, and payroll
services, among others. Today, Razorpay serves more than
8 million merchants and processes $80 billion in total
payment volume per year.
Razorpay has become one of India’s most valuable fin-

techs by providing a seamless, user-friendly experience for
merchants and users. It has accomplished this by building
a platform designed to easily integrate with e-commerce
platforms, accounting software, and point-of-sale systems.
The company has also introduced innovative features that
adapt to the needs of the Indian market—including UPI
payments and digital wallets—allowing it to differentiate
itself. Razorpay has further executed inorganic opportuni-
ties (seven acquisitions to date) to improve its operations,
expand its product portfolio, strengthen its value
proposition, and grow internationally.
4. Razorpay website, the Times of India, Ycombinator.
19 PUBLICATION TITLE

Exhibit 11 - Annual Fintech Revenues Will Grow Six-Fold to Reach $1.5
Trillion by 2030, Heavily Skewed Toward Banking Segments
Fintech Revenues ($B)
+22% CAGR
1,500
Fintech Penetration of Fintech Penetration of
Banking Revenues (%) Banking Valuations (%)
3x
25%
3x
1,300
13%
9%
4%
245
225 2021 2030 2021 2030
200
20
2021 2030
Banking Insurance
Sources: Capital IQ, Pitchbook, Company’s investor presentations, desktop research, BCG analysis.
Latin America will see accelerated fintech penetration. Africa and the Middle East can leapfrog incumbents
Similarly, Latin American markets, led by Brazil and by adopting new technologies. In Africa, although cash
Mexico, which have established fintech landscapes, are is still king, fintech could be a vehicle to solve the access
projected to show a revenue CAGR of 29% over the same issue, as most of the population is still either underserved
time frame. These countries have attracted interest from by banks or fully unbanked. As the youngest and fast-
institutional investors and witnessed rising adoption of est-growing region globally—with a median age of roughly
advanced technologies across industries. Innovation 19 and projected population growth of an additional 1.2
growth is expected to accelerate, as an inflow of native billion people by 2050—demographic shifts and earn-
professionals trained and employed abroad have returned ing-power increases will deepen the need for financial
home to build up the local fintech ecosystem. Government access. We expect some degree of leapfrogging in technol-
action in facilitating fast retail payment systems and ogy, particularly when it comes to cashless payments. In
digitization is continuing in the region. Nigeria, 73% of adults have a smartphone, but a mere 2%
have credit cards.
Brazil’s fintech space is growing rapidly with the emer-
gence of players such as Nubank and Creditas. The regula- Accordingly, most Africans’ first interaction with the financial
tor is one of the most forward-looking in developing mar- services sector may be through their smartphones—present-
kets, as witnessed by sandbox creation, the PIX ing major fintech opportunities in payments and lending for
instant-payment system, and the 2018 setup of nonbank regional champions with full-stack attacker models. Histori-
“payment institution” licenses. We expect embedded cally, telco-fintech players, such as M-Pesa, developed by
finance and digital payments to surge, backed by strong Vodafone’s subsidiary Safaricom, have led much of the seg-
expansion in retail e-commerce (up by 36% in 2022). ment’s growth in the region. Such players are expected to
maintain their major role, alongside grassroots fintechs. We
project a fintech revenue CAGR of 32% until 2030, with South
Africa, Nigeria, Egypt, and Kenya being the key markets.

Exhibit 12 - Fintech Penetration, Historically Highest for Payments,
Will Grow Across the Board by 2030, Especially in Latin America,
Asia-Pacific, and Africa
Fintech penetration (% of financial services) by segment
2.5x
24%
3.5x
3.5x 11% 3.5x 2x
10%
7% 7% 6% 6.5x
2% 3% 2% 3%
0.3% 2%
Total Payments Lending Deposits Trading & Insuretech

Investment
Fintech penetration (% of financial services) by region
4.5x
4x 13%
3.5x 2x 7x
4x 8%
7% 6% 7%
4%
2% 3% 2% 3%
1% 1%
Total North Europe APAC Latam Africa

America
2021 2030
Three Models to Engender Internationalization The Emergence of Local Champions. Segments and
markets with onerous regulatory constraints or high capital
Looking ahead, in a global sense, we expect a geographic requirements will be fertile ground for the emergence of
expansion of fintech ideas to develop mainly through three local champions, some of which will attempt to replicate
models: the emergence of local champions, the rise of successful models from geographies where fintech has
multinational fintechs, and the expanding role of big techs. reached a more advanced stage of development. One
example is ClearScore, which built a successful model like
that of Credit Karma, but tailored it to the UK market.
Other players will build ideas from the ground up. All fin-
techs will be subject to local parameters—such as local
health care laws for insurance companies and local guide-
lines concerning banking licenses—but will feature more
homegrown innovation.

Exhibit 13 - Asia-Pacific Will Be Largest Fintech Market by 2030, and Latin
America and Africa Will Be the Fastest-Growing Regions
Growth by Region
Revenues ($B)
Growth multiple (X)
8.5x
4x 600
520
+530
+395 5.5x
190 12.5x
125 13x
+395 65
125 +115
35 70 +60
10 5
North America Europe APAC Latam Africa
2021 2030
The Rise of Multinational Fintechs. Few fintechs, PayP- Big-Tech Expanding Its Footprint. Big techs such as
al being one, have managed to successfully build a multi- Google, Meta, Tencent, Apple, Ant Group, and Amazon are
national business. But this status quo is poised to change looking to further integrate financial-services apps (espe-
within some subsegments, such as KYC/AML (Anti-Money cially in low-regulation segments such as payments) into
Laundering), cross-border payments, wealthtech, and the their offerings through local partnerships, and eventually
like. This is especially true for fintechs in the B2B2X space, bring them out globally. Indeed, big tech is already active in
a nascent but expanding business model in which multiple the financial-services ecosystem, such as in payments and
businesses combine to blend their expertise and savoir faire lending to SMEs. This handful of very powerful companies,
to construct products and services aimed at a targeted by virtue of their ubiquity, massive customers bases, and
customer base. Multinational fintechs s will likely evolve depth of customer data, are well-positioned to bring fin-
across countries that possess similar economic profiles tech-related offerings to their trusting, global audiences.
and consumer needs. Typically, a J curve is encountered They will advance either in the form of customer-facing
when trying to enter a new geography, as a similar con- superapps—a somewhat problematic scenario, owing to
sumer base means less need to tailor products to a new government scrutiny on potential antitrust issues—or by
customer base or to learn local customer-acquisition meth- providing analytics to incumbents from the vast consumer
ods. One large merchant acquirer tried to enter the Indian datasets they possess. We have seen recent breakthroughs
market, but ultimately withdrew owing to regulatory chal- in this direction, such as Brazil’s central bank permitting
lenges and fierce local competition. The same player then Meta’s WhatsApp to include a payments offering for SMEs.
succeeded in Canada and the UK.

While Payments Led the Last Era, B2B2X
and B2b Are Expected to Lead the Next
T
he first part of the fintech journey was led by payments, As globalization advances further, the need for better cross-border
representing 40% of all fintech revenue in 2021. Since payment solutions will increase. It’s also wise to build redun-
2000, payments fintechs have accounted for roughly 25% dancies into the system for occasions when main payments
of cumulative equity funding ($120 billion). Yet, this is still a story “rails” encounter problems. DLT, once proven fully viable, could
with significant room to grow, especially in promising sub-seg- significantly disrupt this space. Blockchain companies such as
ments such as those addressed below. Overall, payments will Ripple, via its RippleNet payment network, are already work-
remain the largest fintech segment in 2030. (See Exhibit 13.) ing on partnerships with various FIs and payments providers
around the world to facilitate real-time, cross-border payments.
Cross-Border Payments. Each year, over $20 trillion is moved
across countries by large corporations, incurring $120 billion in Real-Time Payments. Real-time payments (RTPs), through
transaction costs each year. The market is as large as it is complex. which a wire transfer is credited to the recipient’s account in a
For instance, international remittances involve large-scale physical matter of seconds, is another growth area. The use of RTPs in
cash management, multiple currencies, and several FIs. While the the US surged by 42% in 2020 and will be further supported by
SWIFT and Visa/Mastercard legacy systems have proven robust FedNow, an instant payment service being developed by the
and reliable, it’s nonetheless important to continue exploring new Federal Reserve. A similar platform, called Target Instant
and innovative payments infrastructures that can expand access, Payment Settlement (TIPS), is being implemented in the
reduce costs and complexity, and enhance security. Cross-bor- European Union. In Asia, the People’s Bank of China launched
der remittance businesses such as Remitly, Wise, and Xoom its RTP system in 2010, and it has become the most widely used
have increased access to international money transfers. payment method in the country. Other successful RTP infra-
structure examples include India’s UPI and Brazil’s Pix.

Exhibit 14 - Payments Will Remain the Largest Fintech Segment in 2030
Growth by segment
Revenues ($B)
Growth multiple (X)
5x
6.5x 520
400
+420 10x
10x 3.5x
200
+340 155 145 8x
80 +180
+140 +105
100 +70
60 40
15 10 20
Lending Deposits Payments Investments Financial Infra Insurance
2021 2030
A2A RTPs, facilitated by infrastructure enhancements, will address by themselves. The model of fintechs collaborating with
lead to a surge in data collection from consumers and SMEs, incumbents, rather than competing with them—addressed in a
creating a treasure trove of data that can be used to personal- previous BCG/QED white paper—translates into lower risk
ize next-gen credit models and provide even better financial for investors and therefore a greater willingness to invest.
services. As consumers transact more online and directly with B2B2X already represents a fast-growing segment, and there
each other, reliable RTPs will become ubiquitous. is still room for it to spread its wings. The market is expected to
grow at a 25% CAGR to reach $440 billion in annual revenues by
Payment-Plus. Furthermore, in the so-called Payment-Plus 2030. (See Exhibit 14.) There are many areas in which B2B2X
model, payments processors are uniquely positioned to leverage fintechs can play a major role, such as the below.
two-sided marketplaces to deliver a flywheel effect, offering
omnichannel services. Payments companies can therefore on- Embedded Finance. Embedded finance will see promising
board consumers to additional value-added or subscription- based new use cases in adjacent industries such as transportation
services such as billing and invoicing, tax automation, revenue and healthcare, and in leveraging new hardware innovation
recognition, and Banking as a Service (BaaS)—involving treasury linked to the Internet of Things. Biometric authentication meth-
capabilities, card issuing, and business financing. This model can ods such as facial scanning may become more widespread in
virtually create a mini-superapp ecosystem of financial services. order to safeguard transactions and data. Point-of-sale-embed-
ded lending, embedded insurance, and similar offerings will also
find wider adoption, leading to an increase in cross-sell rates.
B2B2X Is Expected to Power the Next Phase of Growth Uber, for instance, already provides a range of services to drivers
and couriers within its app, including a debit card, cashback
B2B2X comprises B2B2C (enabling other players to better serve rewards, and real-time earnings tracking. The role of fintechs will
consumers), B2B2B (enabling other players to better serve busi- become more prominent than ever to enable such use cases.
nesses), and financial infrastructure players. The latter provide
customer-segment-agnostic technology solutions that support the Financial Infrastructure. Infrastructure “as-a-service”
operations of FIs or enable the delivery of financial services. companies that work across segments—especially in areas
such as cybersecurity, customer acquisition, lead generation,
With many banks unable to innovate at a rapid pace—owing to underwriting, KYC, UX, data and analytics, and risk manage-
such hindrances as unwieldy legacy processes and systems, a lack ment—will become more prominent and will enable a variety
of appropriate talent, and competing internal priorities for tech of use cases among both fintechs and incumbents. One
funding—fintechs have an opportunity to fill the gap and enable caveat is that emerging markets may continue to lean
incumbents to compete more efficiently. Incumbent C-suites will toward attacker models because incumbents have yet to
focus on bending the cost curve, as lower economic growth will be disrupted to the same extent as more-mature markets,
exert pressure to cut costs. Enabler fintechs can focus on providing and have not begun to invest heavily in IT.
value as specialists meeting needs that incumbents are unable to

SPOTLIGHT #2
Wise3
Wise was founded in 2010 in the UK with the goal of making

international money transfers more affordable and accessible.
Today, the company has operations in 170 countries, supports
50 currencies, and serves more than 5 million individuals and
300,000 SMEs in a profitable way. Wise has thrived against
incumbents supported by the success of startups such as
PayPal, which helped build public trust in online payments.
Wise offers a faster, cheaper, and more convenient alternative

to traditional banking standards for individuals and SMEs
to move money internationally. Roughly 90% of transfers
are handled within 24 hours, with 50% of them instant—
compared with two to five business days through traditional
channels. The average fee is 0.64% compared with the
standard 3%.
Wise has found better ways to serve its customers by

expanding its portfolio to include multi-currency accounts,
debit cards, and business accounts. Such value adds
increase usage of their core product and help individuals
and SMEs manage their money, which ultimately creates
more loyalty. Its partnerships with FIs, especially involving
payroll and HR platforms, have lent it credibility and
expanded its reach.
3. Wise website and results presentation.

Reinventing Value Chains. Mortgage-tech companies It goes without saying that SMEs need basic credit for day-
provide a clear example of value chain disruption. Over to-day, cash-flow management and capital investments. Yet,
the past decade, we have seen a proliferation of improved many are credit starved. In the EU, for example, roughly 20%
customer and employee experiences in the mortgage- of SMEs report that access to financing is their most urgent
origination process. But the cost per loan (~$10,000) and concern. The pandemic forced legions of SMEs to either
the cycle time from application to close (45 days) has not reduce worker hours or resort to layoffs. Although the Pay-
changed. With the current mortgage-industry downturn, check Protection Program in the US helped these companies
there will be increasing pressure to find high-quality leads manage short-term liquidity, over 30% of SMEs globally
in a highly competitive market. The goals will be to finally closed during the pandemic. In any financial crisis, SMEs are
reduce the cost and cycle time per loan, automate among the first to face bank crackdowns on credit lines.
decision-making, ensure effective and efficient compliance
in a (slightly more) distressed environment, and diversify The potential for fintechs with SMEs is vast, especially in areas
away from being totally dependent on home financing as such as payments and lending. It can be more lucrative to serve
a revenue source. New emerging companies such as SMEs than individuals, as the sizes of the loans are larger, the scale
TrustEngine, Indecomm, Valligent, and Brace are attempting is broader, and there is typically more information available
to solve these points of friction. In addition, companies that enables visibility into their full financial picture. According
addressing large issues around home affordability and climate to the International Finance Corporation, unmet financial
risk will find significant opportunity over the next decade. credit needs for the world’s SMEs total over $5 trillion annually.
B2b Is Projected to Be the Next Massive Space Currently, winning in B2b occurs primarily through independent
to Be Disrupted software vendors (ISVs), especially in the US and other developed
economies. Fintechs are becoming embedded “as-a-service”—
B2b, or the segment of fintechs that caters to SMEs, represents an offering within ISVs that addresses the needs of a particular
an enormous space for growth, as SMEs are an underserved industry, customer type, or use case. One example is Toast,
segment that accounts for close to 70% of jobs and GDP global- which provides accounting software to the restaurant industry.
ly, according to the World Economic Forum. B2b fintech reve-
nues are projected to grow at a 32% CAGR to become a $285 The goal for fintechs is to become vertical champions,
billion market by 2030. There are roughly 32 million SMEs in utilizing additional distribution channels, opening new revenue
the US, 63 million in India, and 40 million in Nigeria—with streams, and providing end-to-end customer journeys. The
more than 400 million in total globally. In Africa, SMEs provide number of European payment service providers (PSPs) plug-
over 80% of all jobs across the continent. ging into ISVs has recently been growing at a CAGR of 86%,
even during the fintech winter, and certain fintechs are becom-
ing industry specialists themselves for new customer niches.
Exhibit 15 - B2b2x and B2B Will Be the Fastest Growing End Customers
Growth by End Customer
Revenues ($B)
Growth multiple (X)
Driven by b2b-serving
4.5x SMEs (70% of revenues)
650
7.5x 11x
440
410
+500
+380 +375
150
60 35
B2C B2B2X B2B
2021 2030
Sources: Capital IQ, Pitchbook, company’s investor presentations, desktop research, BCG analysis.

A Tale of Two Cities on Spread
Businesses
S
pread businesses earn a profit by exploiting the differ- In developed markets, neobanks will be challenged—
ence between the fees or interest charged for finan- and will need access to lower-cost funds by potentially
cial products and what they are charged for enabling acquiring bank licenses. Neobanks in developed markets
the transaction. These businesses include banks or neo- face several challenges in scaling up profitably. One signifi-
banks, lending platforms, mortgage lenders, and credit cant challenge is the narrowing gap in customer experience
unions. The spread size varies based on market conditions, between themselves and incumbent banks, as the latter are
a borrower’s creditworthiness, and the type of financial investing heavily in technology to improve their customer
product or loan offered. experience and value chains, making it difficult for neobanks
to differentiate themselves. For instance, JP Morgan an-
nounced in 2022 that it would increase its technology bud-
get to $12 billion (out of which it spent $9.4 billion on
non-compensation technology operating expenses), focusing
primarily on the implementation of new digital products and
services, infrastructure modernization, and digital transfor-
mation of existing processes. (See Exhibit 15.)

Exhibit 16 - Large Banks Realize the Importance of Investing in
Technology, With It Spending (As % Of Opex) For Some on Par With
Leading Fintechs’ Revenues
IT spend (total and as a percentage of operating costs), major banks, big-tech, and fintechs
$Bn % of Opex
45
21%
19%
17% 16%
39.5 14% 9.4
13% 13%
11%
12% 12% Average
8.6
10% 10% large bank
6.3 IT spend
7% as % of
6% 6%
5 3.4 Opex
3.3 3.2 2.8 2.8
2.6
1.8 1.4 1.7
0.4
Google PayPal SoFi J. P. Citibank Bank of Wells Goldman Capital BNY Santander RBC Societe Scotiabank
Morgan America Fargo Sachs One Mellon Generale
% of Operating Costs IT Expenditure Range of displayed IT Spend (as % of Opex) values
Source: 2022 company annual reports.
Another challenge is neobanks are typically attracting In emerging markets, neobanks are critical for
lower-LTV customers with their “no fees” or “lower fees” expanding access. Neobanks will fare much better in
value propositions, which are harder to monetize and emerging markets, as these businesses play a key role in
require a significant volume of transactions and customers expanding financial access. As previously mentioned, there
in order to generate profits. are roughly 2.8 billion underbanked adults in the world
(50% of which reside in emerging economies), and an
Neobanks in the US have benefited from the regulatory additional 1.5 billion are unbanked (75% of which reside in
arbitrage from the 2011 Durbin Amendment, which imposes emerging economies). Furthermore, incumbents in emerg-
an interchange cap on debit-card transactions for banks with ing markets have not yet been disrupted and do not offer
assets over $10 billion. As a result, many neobanks, includ- accessible products that cater to most of their populations.
ing Chime and Current, have partnered with sponsor banks In some emerging markets, regulators are supportive,
(each with assets under $10 billion) for deposits and other viewing neobanks as partners that provide a solution for
banking services. However, this model is not scalable, as it financial inclusion and accelerate their moves toward
requires expensive, indefinite partnerships with sponsor cashless economies.
banks, which earn a percentage of the spreads and profits
over time.Furthermore, a payments-only revenue model Similarly, lending platforms will need to move
adopted by some neobanks is a low-margin business with toward owning banking licenses. Over the past few
intense competition. According to BCG’s Fintech Control years, various lending platforms such as BNPL, student
Tower, a mere 5% of over 450 global digital challenger lending, and unsecured lending have performed well,
banks were profitable in 2022. (See Exhibit 16.) owing to near-zero interest rates. These platforms typically
fund themselves through securitization of assets or issuing
Thus, to build a sustainable and profitable business model, commercial paper, which works well when interest rates
neobanks will eventually need to begin lending on their own are low. However, as interest rates have risen, it has be-
balance sheets to earn additional interest income and gener- come increasingly expensive for them to secure funding,
ate reasonable profits. To do this, they need to find a reli- which is not a sustainable business model. One way for
able, low-cost source of deposits. One pathway, as neo- these lending platforms to secure a reliable source of
banks such as SoFi have found, is to acquire a banking low-cost funding is to own or acquire a banking license. We
license and, with it, a complete balance sheet. Some neo- have seen examples of this trend, such as Lending Club’s
banks across many geographies have already taken this step. acquisition of a smaller bank with a banking license.

SPOTLIGHT #3
Nubank5
Founded in 2013 in Brazil, Nubank started as a no-fee

credit card provider but has expanded to a variety of new
customer-centric financial offerings—such as easy-to-use
mobile banking, personal loans, and insurance. At the end
of 2022, Nubank had 75 million customers (up 38% year-
on-year) across Brazil, Mexico, and Colombia; $4.8 billion
in annual revenues—making it the largest neo-bank in the
world—and a 35% ROE (vs. a 13% average for traditional
banks in the US).
Benefiting both from an environment with few strong

incumbents and a large population not served by tradition-
al banks, Nubank eliminated a major customer pain point
by offering a completely fee-free credit card with no hidden
charges. It also doubled down on its beachhead products—
prioritizing the Nu Account, which has a cross-sell rate of
85%, and no-fee credit cards, with a cross-sell rate of
55%—and gained market superiority before expanding into
further offerings and geographies. Investing heavily in
technology, Nubank pursued a completely consumer-cen-
tric approach, focusing on a great customer experience,
convenience, reliability, and transparency.
5. Nubank website and results presentation.

Insuretech and Wealthtech
Opportunities Are Mostly in B2B2X
T
he global insurance industry is massive, earning $7 Limited Opportunity as a Disrupter. The insurance
trillion in revenues in 2021, and is projected to grow industry is complex, with high regulatory granularity that
to $11.6 trillion by 2030. However, despite huge varies from country to country (and at times state to state,
revenue pools and relatively poor customer service, fintech as in the US and Australia). It has a lower level of profitabil-
penetration in the industry, or so-called “insuretech,” ity than the banking industry does. Such conditions make
represents a miniscule portion, at 0.3%. The insuretech scaling full-stack disrupter models challenging, owing to
opportunity is focused mainly around property and frequent changes and a disintermediated value chain.
casualty (P&C) insurance, and is mostly in B2B2X. Underwriting income is minimal, particularly if the goal is
to become a distributor, with investment income being the
The largest window is in P&C. Of the three main sub- dominant revenue stream. This revenue model is capital
segments of insurance—life, P&C, and health—the largest intensive and less open to the rise of tech-led disruptors.
window for fintechs lies within P&C, as these products are
mostly bought by individuals, have a shorter duration of
purchase, and have a higher frequency of policies (e.g., in
home rental and auto). By contrast, life insurance is the
most difficult to penetrate, as durations can last more than
30 years, while health insurance is typically bought by
employers rather than by the individual.

Exhibit 17 - In 2022, Only 20 Out of 453 Digital Challenger Banks Were
Profitable, 11 of Which Are in Asia-Pacific
Aprila Tinkoff
Based on publicly available data
Bank Bank
WeBank MYBank
Starling OakNorth
Bank Bank XWBank aiBank
Zopa
Redwood
Revolut
Bank Rakuten Bank Jibun Bank
Paypay Bank Sony Bank
NU Bank
Kakaobank
Challenger banks—
bunq Jago Bank Non-FI & consortiums
Bank of the PayTM Challenger banks—
Free Payments Bank fintech banks
Source: BCG Fintech Control Tower.
Enabling Incumbents to Be Leaner, and Reducing Moving up the ladder into the mass-affluent, HNW and
Time to Market. Perhaps the most significant opportuni- UHNW segments will remain extremely difficult. These
ties in the insurance industry are in tech enablement of segments are heavily dependent on human trust and
human processes and judgment, IoT, and AI for better advice as well as the need for access to illiquid products
underwriting and claims and distribution through broker- and alternatives such as lending on invested capital. They
ages. Examples include Reserv, a data intelligence-based also represent most of all wealth (90% in the US), but
claims platform, and Newfront, a modern insurance bro- consist of a relatively small group of individuals (20% of
kerage platform. Insuretech segment revenues are expect- households in the US), making these segments challenging
ed to grow at a 27% CAGR to reach $200 billion in 2030, to access through traditional customer acquisition methods.
with a projected 2% penetration. Furthermore, these markets are dominated by large incum-
bents with well-oiled, branding-driven distribution networks.
In Wealthtech, Targeting B2B2X Provides Some In this arena, completely digital interfaces have not matched
Opportunity the human element of trust and judgment required for
larger investments. Those B2B2X players that provide
So-called wealthtech innovation began with robo-advisors innovative, comprehensive, technical, or analytical tools
(e.g., Betterment) pursuing mass-market segments, in a such as AdvisorEngine (acquired by Franklin Templeton in
sense democratizing investing for a set of consumers not 2020), and serve scaled businesses catering to mass-
served before by incumbents. The second phase of innova- affluent segments, will see the most growth.
tion was built on value-added services such as trading and
cryptocurrencies offered by companies such as Robinhood.
However, the addressable market for wealthtech disrupters
is limited, generally catering to the mass-market segment.
Moving up the value chain to the mass-affluent space (up
to $3.5 million in net worth) is a possibility, but it is still a
small market, since most global wealth is concentrated in
high-net-worth (HNW) and ultra-high-net-worth (UHNW)
individuals and organizations.

SPOTLIGHT #4
Open Banking in the UK

via the OBIE Standards
The UK’s Open Banking Implementation Entity (OBIE) was

established in 2017 by a consortium of the nine largest banks
in the country. Its inception made the UK a global leader in
open banking, which currently enables more than half the
UK’s small businesses and more than 7 million individuals to
make over 1 billion successful API calls per month.
Open Banking (OB) in the UK has witnessed a significant

growth since its inception, reaching $50 billion in total
purchase value in 2022, mainly boosted by a regulator’s
decision to roll it out as a payment method. This was made
possible by the government’s partnership with EcoSpend—
the world’s first embedded open banking system—which
allows consumers to make A2A “pay-by-bank-account”
instant payments. Pay-by-bank-account has also been
seamlessly integrated into government payments, includ-
ing PAYE, corporation tax, capital gains tax, and the like.
The UK currently serves as a testbed for the benefits of
OB, and UK businesses have seen that it not only is faster
and safer, but also significantly reduces transaction costs
for key market players (e.g., merchants).
BOSTON CONSULTING GROUP 32

The Path Toward Growth Still Carries
Risks, and Requires Action
S
ignificant risks and uncertainties remain, especially At the same time, the ecosystem must find a balance, as po-
concerning regulation, data privacy, competition from tential regulatory overreach can also hinder growth and innova-
big tech, and interest-rate volatility. tion, with rigid regulations leading to higher costs, slower ap-
provals, and reduced investment. For instance, some have
First, the lack of comprehensive regulation and oversight in the criticized the European Union’s MiFID II directives—intended
fintech industry, to varying degrees by industry and region, can to improve transparency and accountability—as overly burden-
lead to trust uncertainty among customers and prospects, some, particularly on smaller financial firms.
which in turn can result in a low adoption rate for fintech
solutions. For example, the fall from grace of the cryptocurrency Fintechs also face reputational risks, which can stem from
exchange FTX due to a lack of liquidity and mismanagement of different factors. One such risk is related to data breaches and
funds—unconstrained by regulatory oversight—has had the mishandling of sensitive data. Fintechs that collect large
far-reaching consequences for the crypto industry, eroding amounts of sensitive data in an unregulated manner are at a
consumer confidence in the entire segment in the short term. higher risk of data breaches, which can result in severe and
long-lasting reputational harm, causing a loss of customer trust
and loyalty, and potentially leading to legal consequences.

Moreover, the entry of big-tech companies into the fintech In cases where regulators have truly been forward-thinking,
industry can drive prices down and eliminate competition, the result has often been a positive event for fintechs (e.g.,
creating a monopolistic environment that negatively impacts PSD2 in Europe, so-called Fintech Law licenses in Mexico,
smaller fintech startups, overall innovation, and consumers. fintech sandboxes in Brazil, and UPI in India). It’s import-
Combining this dynamic with a higher interest rate environment ant to note that regulators have typically taken an active
that can pressure funding and therefore stifle innovation creates role in addressing the most basic B2C banking services,
a tall set of challenges. Fintech startups may struggle to compete because direct customer funds are at stake.
with traditional FIs that have access to cheaper funding sources.
To encourage future growth, regulators will need to lead
Ultimately, however, the fintech future is bright provided that from the front proactively to develop and enforce policies
all stakeholders heed the call to action and collaborate effec- that protect consumers but do not stifle innovation. One
tively and cooperatively for the greater good. There are essen- example is open banking, where Europe is the leader.
tially four groups of stakeholders in the fintech universe: Transferring information from one FI to another needs to
regulators, fintechs themselves, incumbents, and investors. be easier in order for the ecosystem to become more
The growth and success of the fintech sector will depend efficient and gain the ability to access the data needed for
largely on how these four stakeholders are able to work to- all financial products, including areas such as account
gether for the long-term benefit of the global financial ser- opening and KYC. This will happen in one of two ways: by
vices sector and the billions of customers it serves. regulatory push, or by innovating into a use case that truly
unlocks the value of open banking. Experience shows
that open baking unbundles the value chain, spurring
Regulators: Time to Be Proactive, Not Indifferent innovation and more choices for customers. India,
Australia, and Brazil are also strong in open banking,
Until only recently, regulation of fintechs has for the most especially in the payments arena.
part been relatively light, non-proactive, fragmented, and,
in some cases, lagging behind—which in many cases has Regulators should also encourage faster payments, both
worked to the advantage of fintechs. But the future growth domestic and cross-border, and more- rapid settlement.
of fintech will require regulators to act with urgency and Countries with faster payments infrastructures have seen
thoughtfulness in a more holistic way. considerable innovation in money movement. Further-
more, issuing additional licenses—or at least providing a
Currently, regulators are often just “reacting” to the latest roadmap for fintechs with clear requirements for obtaining
predicament. The recent series of bank crises (e.g., SVB a banking license—in countries around the world can help
and Crédit Suisse), along with massive financial frauds bank-adjacent companies fully integrate into the finan-
(e.g., Wirecard and FTX), have made regulators more sensi- cial-services ecosystem. In certain situations, regulators
tive to asset/liability management. However, while creating could create (or distribute more) payment-institution li-
guardrails, they must also take care not to overregulate the censes (similar to the e-money license in the UK), which
industry and stifle innovation. place a lower burden of regulatory scrutiny on fintechs but
provide them with the relevant benefits.
In addition, regulators must create guardrails and regulate

breakthrough areas such as crypto and DLT. Clear data-pri-
vacy and storage guidelines (similar to the General Data
Protection Regulation, or GDPR, guidelines in Europe) are
becoming more and more necessary worldwide in order to
protect consumers and fintechs alike.

Investing in Digital Public Infrastructure (DPI). Bank- Fintechs: Tighten Belts in the Short Term, But
ing is a prime example of an industry that requires a sturdy Seize the Moment to Play Offense
infrastructure to enable market participants to interact.
This is not a new idea, as SWIFT, along with the Visa and The short-term agenda is obvious: it’s not about growth at
Mastercard networks, have enabled banks to transact with any cost, and unit economics matter. Many fintechs were
each other and with merchants, governments, and con- fortunate enough to attract higher funding under the bluer
sumers for decades. skies of 2021 and early 2022, but they now need to con-
serve cash and stretch their runways, retrenching to get
Yet, the rise of new technologies has created a need for through the funding winter without the need to raise mon-
next-gen infrastructure that can facilitate complex transac- ey at lower valuations or risk running out of cash.
tions in a more digital world. With the rise of open banking,
such infrastructure will enable FIs and other players to In order to conserve cash, fintechs can take several actions.
share data and services securely and transparently, result- First, they should focus on their core business and avoid
ing in greater innovation and improved customer experi- any non-core projects. This will help them allocate their
ence. Building such so-called digital public goods or DPI resources more effectively and prioritize their spending.
will thus become essential for creating a level playing field Fintechs should also consider resizing their organizations
that enables all relevant stakeholders, both large and to the minimum needed. Fintechs should price their prod-
small, to interact seamlessly. ucts and services for value, ensuring that customers are
willing to pay for the quality they receive. Lastly, they
DPI specifically refers to technological infrastructure should optimize their LTV-CAC (ratio of customer Lifetime
systems that facilitate the delivery of essential services Value to Customer Acquisition Cost) by focusing on acquir-
and benefits to the general public, including digital ID and ing customers who are likely to stay with them in the long
verification, digital payment rails (for transactions and term and generate higher revenue.
money transfers), digital data exchange, and digital access
to information systems (across sectors such as healthcare and However, as BCG research shows, downturns are also the
financial services). DPI can reduce costs for all stakeholders in time for market leaders to widen the gap between them-
the ecosystem, enable innovative, industry-specific applica- selves and the rest of the field. As the late Formula One
tions to be integrated, and promote economic expansion. driver Ayrton Senna famously once said, “You cannot
The concept of DPI has been instrumental for rapid growth overtake 15 cars in sunny weather… but you can when it’s
in emerging economies such as Singapore, India, and raining.” Therefore, playing thoughtful offense is critically
Estonia, and is often enabled through strong public- important. Fintechs should consider strengthening their
private partnerships. competitive moats and pursuing aggressive strategies such
as talent acquisition, gaining market share by entering new
The combination of digital identity, an API-enabled pay- geographies/markets, and exploring M&A opportunities
ments network allowing for real-time settlements, and while valuations are more reasonable. There are several
access to innovators to build use cases is a powerful solve in examples of fintechs that have successfully expanded
almost all geographies. Different markets are taking differ- during crises, including PayPal, which emerged as a winner
ent approaches to this end state, depending on their starting post the dotcom bubble.
point and degree of regulatory activism. For example, the US
has largely been market led and is therefore the furthest We also believe that fintechs should not avoid regulation,
away from enabling this combination. However, the value of but rather take an active role in shaping it. Embracing for-
this infrastructure is also highest in large markets where ward-looking regulations can enhance customer confidence
cash is still dominant, such as Indonesia and South Africa. and drive higher valuations for fintechs. Furthermore, fin-
techs should prioritize Compliance by Design internally to
Also in the US, systems such as The Clearing House’s RTP prepare for successful partnerships with established FIs.
and FedNow enable financial institutions to provide more-ef- There are three factors to consider: end-to-end use case
ficient payment services to businesses and individuals. compliance, organizational accountability, and tech stack/
Additional opportunity lies in the development of an open data lake compliance. Indeed, fintechs need to create a
interface layer on top of these systems—one that can en- compliant operating model from the outset, define end-to-
able many innovative applications and use cases to bypass end value streams, build cross-functional delivery teams,
the adoption network effects currently necessitated by streamline and continuously monitor processes, and foster
closed systems. Financial institutions, merchants, data risk/return dialog across the entire organization.
providers, and consumer applications could all plug into and
benefit from such a combined infrastructure and thereby
improve efficiency, lower costs, and unlock new use cases.

SPOTLIGHT #5
India Stack
India Stack is a forward-looking collection of digital tech-

nologies set up by the national government as part of a
public-private partnership between the Reserve Bank of
India and a consortium of banks that is aimed at support-
ing the digitization of the Indian financial system. This
comprises:
• The identity layer, providing a unique digital identity to

every Indian citizen through the Aadhaar system and
enabling KYC for banking services and biometric and
e-sign capabilities via its Aadhar credentials.
• The payments layer, including UPI for real-time and

P2P/P2M payments, and the Aadhaar Enabled Payment
System for biometric-based payments.
• The data layer, which allows individuals to share their

data with others in a secure and controlled manner. The
account aggregator framework is set to democratize
financial services with a robust data sharing mechanism
with consumer consent.
More than 1.3 billion Indians are enrolled in Aadhar, which

is the largest biometric identity system in the world. UPI
has over 150 million active monthly users (2021) and
processed $1.25 trillion in transactions in FY 2021–2022. It
is still growing fast, processing 7.5 billion transactions in
February 2023 (compared with roughly 230 million cred-
it-card transactions in the same month), up 66% from 4.5
billion a year earlier.
One of the key success factors for UPI was the enablement
of private innovation in the app layer demonstrated by India
Stack starter app BHIM. Most people utilize one (or multi-
ple) third-party apps that plug into the UPI API, resulting in
an ecosystem of entities offering value-added services cen-
tered around UPI (tech giants such as Google Pay, embed-
ded payments in apps such as Uber, local street vendors,
and the like). The government intends to expand the reach
of India Stack to more areas of the economy such as health-
care, education, and agriculture, replicating the UPI model
of private innovation within systemic supervision.
In addition, a partnership with Singapore’s PayNow enables

instant transfers between the two countries, opening the
door for future partnerships. Other countries are already
working toward emulating the system (FedNow in the US is
similar, but less capable).

Finally, the basics matter, such as product-to-market fit. buy these capabilities by acquiring fintechs. While there have
Fintechs without a clear thesis are now getting weeded out. been some examples of successful integrations, these are more
They must realize that, fundamentally, it is important to have a the exception than the rule. Incumbents such as J.P. Morgan and
“product-to-solve-pain-point” mindset first and foremost, as Fifth Third, and early fintechs such as Visa and Mastercard, have
well as a critical feature set, a reliable go-to-market strategy, strong track records of creating value via fintech acquisitions.
and a rising LTV-CAC ratio. New initiatives should be customer
led and capable of solving a true “point of friction”—otherwise The failure of most fintech acquisitions by incumbents can be
they simply won’t succeed. attributed to various reasons. One of the most common is a
cultural mismatch between the incumbent and fintech. Slow
decision-making owing to conservative policies and deep hier-
Incumbents: Accelerate Digital Journeys by archies within incumbents could lead to major dissatisfaction
Embracing Fintechs at the pace of innovation. Often, acquirers face difficulties
retaining top talent due to traditional compensation structures
Incumbents, by and large, find it difficult to be disruptive that do not incentivize risk-taking. Additionally, the companies
innovators. They are often held back by a lack of appropriate could face significant integration challenges due to lack of
talent, conservative internal processes, and almost no tolerance modular, API-based incumbent tech stacks. Thus, if the incum-
for failure, which are essential ingredients for disruptive innova- bent decides to acquire a fintech, it is prudent to “ring-fence”
tion. They are also often burdened by massive tech debt. Smaller such acquisitions and allow them to retain their autonomy,
local and regional banks are truly at a disadvantage because they distinctive culture, and entrepreneurial spirit.
cannot keep up with the investments required for innovation.
In our view, the most practical route is for incumbents and
However, embracing fintechs as sources of capability can serve fintechs to move toward what we call “Value-based Partner-
as a win-win for both, and be a highly effective way for incum- ships,” which allow the fintech to remain independent but with
bents to shorten their time and cost to market, sometimes by a a clear commercial arrangement that is to the benefit of both
factor of three or even five. Historically, incumbents have tried to partners. However, two elements are critical to invest in now to
Exhibit 18 - Fintechs (Especially B2b2x) Believe Partnerships Are

Important, Primarily to Acquire Customers and Improve Product Offerings
Fintech executives indicated the following level % of fintech executives who selected the following as
of importance for partnerships on a scale of 1-10; top reasons to enter into partnerships, split by fintech
split by fintech type and segment type (B2X, B2B2X)
All 7.8 42%

Customer acquisition
B2X 7.7 or service 59%
B2B2X 8.1 55% Neo-banks are:

Enhance existing
products 41% 20% more likely
to partner to
Payments 7.8 39% enhance existing
New product
products
Accounts/neo-banks 7.4 innovation 55%
Lending 7.9 Technology or 42% 30% less likely

data services 27% to partner to
Insurtech 7.6
enhance user
Wealthtech
5.8 5.8 27% experience
User experience
Infrastructure 7.9 32%
B2X B2B2X
Note: Material partnerships are defined as partnerships that have a significant impact on business performance, excluding standard agreements
with key infrastructure players (i.e., Visa/Mastercard, ACH services, etc.).
Q. Thinking about your company’s most recent material partnerships, what functional or produce areas were these partnerships intended to benefit?
Q. Thinking about your company’s most recent material partnerships, please rate the following on a scale of 1-10: How important were these
partnerships to your company’s success?

SPOTLIGHT #6
Pricing Strategy Matters:

A Leading Mortgage-Tech Player
A leading mortgage info services player switched from

one-time, transaction-based fees to a subscription pricing
model, targeting government agencies, lenders/servicers,
and other market participants. BCG designed a monthly
subscription pricing model, projected billing outcomes, and
conducted sensitivity testing, identifying benefits for both
the client and its users. The successful transition to a
subscription pricing model resulted in a shift toward
recurring revenues, which are valued at higher multiples.

Exhibit 19 - Fintechs Are Somewhat Unsatisfied With Their Current
Partnerships Due to the Tech Stack and Organizational Preparedness
of Partner Companies
Fintechs indicate the following Net Promoter % of Fintech executives who indicated the following areas
Scores for partnerships and preparedness of in which their partner companies were least prepared
themselves vs. partners
NPS1 –31 –51 2

N=55 Technology stack 47%
11% 13%
27% Organizational
structure
42%
24%
47%
Commercial terms 40%
47%
64% Culture 18%
42%
25%
Product offering 15%
How Your The The Customer acquisition
satisfied company’s preparedness preparedness and service
11%
are you partnerships? of the other of your
with: company? company? Talent 5%
Promoter Passive Detractor
Source: BCG/QED Future of Fintech survey (N-55), conducted across fintech CEOs and C-Suite leaders in February 2023; BCG analysis.
NPS is calculated as the % of promotors (rated >/=8 on a 10-point scale) minus the % of detractors (rated >/=6 on a 10-point scale)
1
Q. Thinking about your company’s most recent material partnerships, please rate the following on a scale of 1-10: How satisfied are you with your com-
pany’s partnerships? How prepared was your company to enter these partnerships? How prepared was the other company to enter these partnerships?
Q. Thinking about your company’s most recent material partnerships, in which functional areas were the companies you were engaging with least
prepared to enter the partnership?
ensure that future partnerships work: incumbents must move Venture capital firms also need to help their portfolio compa-
toward a modular, API-based technology architecture; and nies tighten their belts and become more professionalized,
fintechs must embrace Compliance by Design, minimizing the and to pursue long-term competitive moats over short-term
future need for retroactive or reactive compliance measures vitality. At the same time, it’s important for VC and private
that can be costly and disruptive. (See Exhibits 17 and 18.) equity firms to help and encourage their portfolio companies
to be proactive and play offense. This includes enabling their
Investors: To Play Long or Short? portfolio fintechs to prioritize investments that drive long-
term value, and leveraging the fact that there will be great
As we have discussed, fintech is a long-term growth story. The talent-acquisition opportunities—allowing winners to solidify
fintech winter is just one season, and a sunnier spring and their lead by taking advantage of these opportunities..
summer should follow. The correction the sector has
undergone indicates that valuations are more reasonable.
With many quality middle-stage companies in need of capital,
some investors are choosing to invest given the current envi-
W e are in the early stages of a 25-year (or longer)
growth journey. There will be some potholes and
unexpected turns and twists in the road. But fasten your
ronment. This is also a time to support and remain committed seatbelts, as the fintech revolution is just gathering speed.
to existing investments that have clear product-market fits.

SPOTLIGHT #7
A Partnership Success
Story: Treasury Prime
(a BaaS Fintech)
Treasury Prime (TP) is a major BaaS platform serving

different stakeholders, including banks, business, and
fintechs. Using TP’s products, banking partners have seen
a 5% to 10% increase in deposits within the first 12 to 18
months of the partnership going into effect, without
changing any systems or processes. Treasury Prime
sets up value-based partnerships across the following
three operational pillars:
• Commercial. TP ensures that there is full alignment

with the client on the objective and scope of the
agreement. The parties agree on value distribution
in principle at the beginning, encouraging fast
expansion as opportunities arise.
• Organizational. TP contractually requires partners to

make an ongoing commitment through the partnership,
which includes identifying an empowered partnership
team and developing a clear RACI model in concert
with the partner, with senior leaders approving from
both sides. TP staffs a dedicated implementation team,
including project manager, engineering resources, and
relationship lead, and defines clear ownership guidelines
(i.e., TP handles the software, but the bank must be
responsible for all banking and compliance processes).
• Technical. TP’s goal is to require zero technical

resources from the partner bank. Its systems interact
with core providers’ existing APIs via a detailed
integration plan, clear service-level agreement (SLA)
guidelines, and regular reviews by both partners.

About the Authors
BCG
Deepak Goyal, [email protected], Yann Sénant, [email protected],

Managing Director and Senior Partner, NYC Managing Director and Senior Partner, PAR
Rishi Varma, [email protected], Stefan Dab, [email protected],

Managing Director and Partner, NJY Managing Director and Senior Partner, BRU
Francisco Rada, [email protected], Yashraj Erande, [email protected],

Project Leader, NYC Managing Director and Partner, MUM
Aparna Pande, [email protected], JungKiu Choi, [email protected],

Consultant, NYC Managing Director and Partner, SIN
Juan Jauregui, [email protected], Jan Koserski, [email protected],

Consultant, NYC Managing Director and Partner, FRA
Patrick Corelli, [email protected], Joseph Carrubba, [email protected],

Consultant, NYC Managing Director and Partner, NY
Saurabh Tripathi, [email protected],

Managing Director and Senior Partner, MUM
QED Investors
Nigel Morris, [email protected], Matt Risley, [email protected],

Co-Founder and Managing Partner Partner
Frank Rotman, [email protected], Sahej Suri, [email protected],

Co-Founder, Partner, and CIO Chief of Staff

Acknowledgments
This report is a joint initiative of Boston Consulting Group The authors would also like to thank their BCG colleagues
(BCG) and QED Investors (QED). The authors would like to for their valuable contributions to this report. In particular,
thank the members of BCG and QED for their contributions to they thank Inderpreet Batra, Harsha Chandra Shekar,
the development and production of the report. In addition, the Aaron Cormier, Boris Goutkin, Evan Hunter, Micah Jindal,
authors are extremely grateful to all Fintech survey, 1-on-1 Rahel Lebefromm, Marshall Lux, Michael Marcus, Reihan
discussion, and panel discussion participants for their valuable Nadarajah, Kamila Rakhimova, Hanjo Seibert, Steven
contributions toward the enrichment of the report. Thogmartin, and Michael Zhang, the numerous local ana-
lysts from the Financial Institutions Knowledge Team, the
Furthermore, the authors extend their sincere appreciation Banking and Insurance Revenue Pools team, the Fintech
to Gbenga Ajayi, Tommy Blanchard, Laura Bock, Bill Cillufo, Control Tower team, the Data & Research Services, and the
Adams Conrad, Amias Gerety, Christian Limon, Ashley editorial, PR, marketing and design teams.
Marshall, Lauren Morton, Tim O’Shea, Yusuf Ozdalga, Mike
Packer, and Sandeep Patil, from the QED team for their
contributions to enriching the report.
For Further Contact
If you would like to discuss this report, please contact

the authors.
Boston Consulting Group QED

Boston Consulting Group partners with leaders in business QED Investors is a global leading venture capital firm
and society to tackle their most important challenges and based in Alexandria, Va. Founded by Nigel Morris and
capture their greatest opportunities. BCG was the pioneer Frank Rotman in 2007, QED is focused on investing in
in business strategy when it was founded in 1963. Today, disruptive financial services companies worldwide. QED is
we work closely with clients to embrace a transformational dedicated to building great businesses and uses a unique,
approach aimed at benefiting all stakeholders— hands-on approach that leverages its partners’ decades
empowering organizations to grow, build sustainable of entrepreneurial and operational experience, helping
competitive advantage, and drive positive societal impact. companies achieve breakthrough growth. QED has invested
in more than 200 companies, including 28 unicorns, across
Our diverse, global teams bring deep industry and functional 18 countries. Notable investments include AvidXchange,
expertise and a range of perspectives that question the Betterfly, Bitso, Caribou, ClearScore, Current, Creditas,
status quo and spark change. BCG delivers solutions Credit Karma, Flywire, Greensky, Kavak, Klarna, Konfio,
through leading-edge management consulting, technology Loft, Mission Lane, Nubank, QuintoAndar, Remitly, SoFi,
and design, and corporate and digital ventures. We work Wagestream, and Wayflyer.
in a uniquely collaborative model across the firm and
throughout all levels of the client organization, fueled by the
goal of helping our clients thrive and enabling them to make
the world a better place.
© Boston Consulting Group 2023. All rights reserved. 5/23
For information or permission to reprint, please contact BCG at [email protected]. To find the latest BCG content
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Global Fintech 2023

03 Introduction 26 A Tale of Two Cities on Spread

04 Fintechs Have Come of Age

32 The Path Toward Growth Carries

42 About the Authors

BOSTON CONSULTING GROUP + QED 2

Peak valuations of Nearly 80% of adults

Global FS revenues Annual fintech revenues will

Payments fintech In 2022, only 20 out of 453

At their peak in 2021, fintechs represented roughly 9% of all

BOSTON CONSULTING GROUP + QED 4

Sources: Fintech Control Tower, Capital IQ, BCG analysis.

5 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

2020 2021 2022

Sources: Fintech Control Tower, BCG analysis.

1. At the operating margin level

BOSTON CONSULTING GROUP + QED 6

Customer Customer acquisition 30%

First Choice Second or Third Choice

7 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

9 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

Net Margin (%) by Industry, Global

BOSTON CONSULTING GROUP + QED 10

NPS score aggregates, Major ﬁntechs with U.S. operations

Fintech with U.S. SoFi OneDeck Aﬃrm LendingClub Funding Circle

11 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

Unbanked 1,546 15 54 820 164 493

Underbanked 2,829 83 357 1,787 199 403

Unbanked Underbanked Banked

Sources: World Bank Financial Inclusion Project, 2021 Data.

BOSTON CONSULTING GROUP + QED 12

2021, global digital share of consumption channels by category1

Clothing and 27%

Personal 17% 80% of North America

Food and 3% 17% of Middle East & Africa

Sources: Forrester Research, World Bank, BCG analysis.

13 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

All Segments All Segments

Wealth & Investments Wealth & Investments

BOSTON CONSULTING GROUP + QED 14

However, the shape of this expansion will play out

BOSTON CONSULTING GROUP + QED 16

Sources: BCG banking and insurance revenue pools, BCG analysis.

17 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

Growth by segment Growth by geography

Sources: BCG banking and insurance revenue pools, BCG analysis.

BOSTON CONSULTING GROUP + QED 18

Founded in 2014 in India, Razorpay started as a pay-

Razorpay has become one of India’s most valuable fin-

4. Razorpay website, the Times of India, Ycombinator.

19 PUBLICATION TITLE

Fintech Revenues ($B)

BOSTON CONSULTING GROUP + QED 20

Total Payments Lending Deposits Trading & Insuretech

Fintech penetration (% of ﬁnancial services) by region

Total North Europe APAC Latam Africa

21 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

BOSTON CONSULTING GROUP + QED 22

03 Introduction 26 A Tale of Two Cities on Spread

04 Fintechs Have Come of Age

32 The Path Toward Growth Carries

42 About the Authors

BOSTON CONSULTING GROUP + QED 2

BOSTON CONSULTING GROUP + QED 4

5 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

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7 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

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13 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

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17 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

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39 GLOBAL FINTECH 2023: REIMAGINING THE FUTURE OF FINANCE

BOSTON CONSULTING GROUP 40

41 PUBLICATION TITLE