Like most industries, financial institutions had to cope with major disruptions over the course of the Covid-19 pandemic. As the sector recovers from those challenges, however, there is a silver lining. The sudden need for an expansion in digital services has prompted significant developments in financial technology, as well as faster adoption of these technologies by companies and consumers around the world.
This growing demand for FinTech services has major implications for the sector moving forward. FinTech recruiting has become more challenging, for one thing, as the need grows for professionals who have both strong technical skills and a high level of financial industry knowledge. Here are some other recent developments likely to impact the sector’s evolution.
Increased Scrutiny and Regulatory Oversight
With any newly-developed technology, government regulation of how it’s utilized and what protections should be offered to consumers usually takes a little while to catch up. This has been the case for FinTech over the past few years. The Consumer Financial Protection Bureau announced in April of 2022 that it would soon start conducting examinations of nonbank financial companies, a power given to the CFPB by the Dodd-Frank Act but one rarely used since the law’s 2010 passage.
While this announcement only affects one aspect of the FinTech industry, its implications for the future are wider-reaching. This step could be the first sign that the CFPB is expanding its purview and increasing its oversight across the sector. It will behoove business leaders moving forward to pay close attention to how these announced examinations play out over the coming months and make whatever adjustments are necessary to ensure they remain in compliance.
Continued Growth in Consumer Fintech Use
Research from McKinsey & Company shows that 42% of financial decision makers use at least one FinTech product and roughly 6% of those were first-time adopters during the pandemic. Overall, consumers downloaded financial software 26% more often in 2021 than in 2019, and FinTech investments grew by 144% in 2021 over 2020 according to research by Venture Scanner.
By and large, this increase in FinTech use is driven by Millennials, and is a trend the upcoming Zoomers are likely to continue. All told, the industry is predicted to reach $500 billion in global revenue by 2030, with a growth rate roughly three times faster than the financial services industry as a whole.
This is an overall positive for companies and professionals that develop and sell financial technology, indicating there will be ample customers for these products and services in coming years. It also means organizations need to be prepared for even more growth, and for those struggling to keep up with customer demand, now is the time to streamline your processes and expand your capability so you’re ready to seize future opportunities as they come.
More Activity and Focus in Underdeveloped Markets
North America has historically been the largest market and this held true in 2021. There are more than 10,000 FinTech startups in North America, with a total worth of roughly $112.5 billion. The EMEA region (Europe, Middle East, and Africa) was a close second in number of startups but less so in dollars invested, with investments in 9,300 startups reaching a value of $9.8 billion by the end of 2021.
In 2022, emerging companies are increasingly looking outside these competitive, crowded regions. The Asia Pacific market has been growing quickly, driven largely by fast-rising demand for commercial blockchain technology and similar options in Singapore, and is expected to become the largest global FinTech market by 2028. Latin America and the Caribbean have also seen substantial market growth, increasing by 112% from 2018 to 2021.
All of this suggests the FinTech market in coming years will be more balanced globally as these developing regions catch up to the larger but slower-growing North American and European markets. This opens up opportunities for both startups and established companies looking for a way to outpace their competition.
The Future of FinTech
Regions like Latin America and South Asia are hardly untapped markets, but they have higher demand and more growth potential. Combined with the increased regulatory scrutiny in the United States, this makes these developing markets very attractive for both startups and expansions moving into the latter half of 2022. Business leaders who aren’t yet ready to explore global markets should still keep their eye on these developments, as they are likely to represent a larger share of worldwide FinTech investments in coming years.