BOSTON–A “fintech spring” is underway with the coming of age of a “class of scaled fintechs,” according to a new report.
The report, titled “Fintech’s Next Chapter: Scaled Winners and Emerging Disruptors”, from Boston Consulting Group and QED Investors, said the winning fintechs are those that have combined new technologies and business models with an “unrelenting focus on profitable growth.”
“As they continue to entrench themselves into the financial services landscape, they will increasingly be expected to act like mature public companies, navigating increased regulatory scrutiny, public earnings cycles, and intense competition from upstarts,” the report states. “This will require much sharper capital allocation and continuous optimization of their business models in relatively pedestrian domains such as risk management and pricing. Balancing these imperatives with the need to stay agile and innovative will be a key challenge as they seek to expand into product adjacencies and new geographies over the coming years.”
According to the report, success also means up-and-coming fintechs will need to seek new competitive ground by addressing pain points thus far “unresolved” by banks or established fintechs.
‘Ripe for Automation’
“For example, B2B workflows in areas such as payments and accounting still involve many manual, slow, and costly processes ripe for automation and streamlining,” the report states. “There are also opportunities in areas where fintechs have already gained a foothold. In lending, for instance, they have made some headway in personal unsecured loans, but there is still significant unmet demand for credit from both consumers and businesses.
In many respects, there has never been a better time to be a fintech founder or investor. Only 3% of global banking and insurance revenue pools have been penetrated by fintechs.”
According to the analysis, “many holes” remain to be filled by fintechs.
“Most notably, AI, which while just beginning to take root as a productivity lever, promises to fuel even greater innovation on the product side,” the report observes. “However, as we established in our 2024 report, fintechs will not be able to successfully pursue these opportunities with a ‘growth at all costs’ mindset.”
A Potential Reckoning
The yardstick for success, the report forecasts, is “sustainable growth.”
When capital markets reopen—if perhaps
later than some might hope—there will be a reckoning with this reality,” the report cautions. “Investors will only welcome players with strong unit economics; and as they recycle capital back into the private markets, earlier-stage fintechs will also be required to demonstrate sustainable growth. While fintechs have dramatically reconfigured the financial services landscape over the last two decades, many opportunities remain.”
BCG and QED Investors said the report is based on conversations with more than 60
fintech executives and investors from across the globe and by their own experience, research, and primary analyses.
The report shares five forecasts of trends that will shape the next chapter of fintech development.