Fintech’s Next Frontier: From Disruption to Sustainable Expansion

How AI, Inclusion, and strategic partnerships are redefining the global fintech landscape

Introduction

Fintech companies have undergone a remarkable transformation over the past 20 years. Once viewed as challengers to traditional banks, they are now embedded in the core of the global financial system. The COVID-19 pandemic gave the sector an unexpected boost, accelerating digital adoption and innovation. Now, as growth levels off, the focus has shifted to responsible scaling, deeper partnerships, and smarter regulation. The World Economic Forum’s latest Future of Fintech report tracks this evolution and outlines what lies ahead.

You can access the full report HERE

Transition to Sustainable Growth

The fintech sector is moving beyond its initial growth surge into a phase of sustainable development.

• Customer growth slowed to 37% in 2022–2023 (down from 55% in 2020–2021).

• Revenues and profits remain strong, growing at 40% and 39%, respectively.

• Only 18% now cite macroeconomic conditions as a challenge, down from 56%.

• Fintechs are deeply involved in financial inclusion:

  • 57% serve MSMEs

  • 47% serve low-income groups

The Role of Artificial Intelligence in Fintech

AI is becoming a key pillar in fintech operations, delivering value across business functions.

• 80% of fintechs are adopting AI tools.

• Main use cases include:

  • Customer service

  • Process automation

• Benefits from AI:

  • 83% report better customer experiences

  • 75% report reduced costs and higher profits

• Challenges remain:

  • Bias in algorithms

  • Deepfake threats

  • High implementation costs

Partnerships and Collaboration in Fintech

Fintechs are increasingly turning to traditional financial institutions as strategic partners.

• 84% collaborate with incumbents.

• Most common collaboration forms:

  • API integrations (52%)

  • Infrastructure support (48%)

• Drivers of these partnerships include:

  • Credibility (34%)

  • Product innovation (34%)

• Regulatory sentiment is improving, with 62% satisfied with the current framework.

Keep up to date with my range of CPE-accredited online training courses on Illumeo

Financial Performance and Growth Metrics

The sector’s financial fundamentals remain strong despite slowing user acquisition.

• Average revenue growth: 40%

  • LAC leads at 46%; SSA trails at 23%

• Profit growth averages 39%

  • LAC and North America both at 45%

• High-performing verticals:

  • Digital banking and savings (67%)

• Slower growth in:

  • Digital capital raising (18%)

• Fintechs in advanced economies show stronger profit growth (41%) than those in EMDEs (36%).

Customer Segmentation and Market Dynamics

The focus has shifted toward deeper engagement with diverse customer segments.

• 57% of fintech clients are MSMEs

• 47% are low-income populations

• 41% are women

• These segments are particularly profitable in emerging markets.

• The industry is maturing: long-term relationships now take precedence over fast user acquisition.

Factors Supporting Fintech Growth

Key enablers of fintech expansion are gaining strength.

• Consumer demand is seen as supportive by 90% of fintechs (up from 51%).

• 54% cite skilled talent availability as a growth driver.

• Main barriers include:

  • Macroeconomic uncertainty (18%)

  • Digital literacy gaps (14%)

• Regulatory concerns have decreased significantly—from 47% to 11%.

Fintech Partnerships with Incumbents

Collaborations with traditional institutions are now critical to scaling operations.

• 84% of fintechs partner with incumbents.

• Key partnership mechanisms:

  • API integration (52%)

  • Technology providers (41%)

• Other partnership types:

  • Funding agreements (36%)

  • Co-branded products (22%)

Motivations Behind Fintech Partnerships

Strategic alliances are driven by practical, not competitive, motivations.

• 48% seek better tech capabilities.

• 34% aim to boost market credibility.

• 33% look to gain access to funding and customers.

• Only 17% see competitive advantage as a main motivation.

Perceptions of the Funding Environment

Opinions on funding availability are mixed and region-dependent.

• 47% see an improvement in funding conditions.

• 38% report a deterioration, especially in developing markets.

• Key funding success factors:

  • Strong business models (66%)

  • VC availability (64%), especially in SSA (85%)

• Only 19% say regulation affects funding significantly.

Plans for International Expansion

Fintechs are looking outward but face notable regulatory hurdles.

• 55% aim to enter new markets within 12 months.

• Highest ambition in:

  • MENA (67%)

  • Europe (64%)

• Top barrier: regulatory complexity (68%).

• Digital banking and savings fintechs are most likely to expand (58%).

• SSA fintechs more cautious: 42% have paused expansion plans.

Regulatory Environment Perceptions

Views on regulation are broadly positive, though regional differences persist.

• 62% view the environment as “adequate and appropriate”.

• Concern over restrictive policies is higher in LAC (20%) and SSA (22%).

• Clarity of regulation is praised by 82% of fintechs.

• Wealthtech (70%) and digital lending (65%) report high regulatory satisfaction.

Effectiveness of Regulatory Support Mechanisms

Regulatory tools get mixed ratings on effectiveness.

• eKYC and simplified due diligence: 50% effective

• Fast retail payment systems: 46% effective

• Lower ratings for:

  • Digital infrastructure (29%)

  • Open banking frameworks (29%)

• 22% call for better standardisation in data sharing.

Customer Segments Targeted by Fintechs

The industry continues to focus on inclusive finance as a growth strategy.

• 57% of fintechs serve MSMEs

• 47% serve low-income individuals

• SSA leads in inclusion efforts:

  • 62% MSME clients

  • 68% low-income clients

• Revenue from low-income users is growing—up 17 percentage points YoY.

• Women make up 41% of fintechs' customer base.

• MSME service is strong in digital lending (70%) and insurtech (60%).

AI Adoption in Fintechs

AI is being embedded into core operations to enhance performance.

• 80% of fintechs are using or implementing AI.

• Key areas:

  • Customer service (37%)

  • Process automation (34%)

• 74% report better profits post-AI integration.

• 92% of digital banks improved customer experiences via AI.

• Cost of AI remains a key challenge (87%).

Risks and Barriers to AI Implementation

Adopting AI is not without its risks and obstacles.

• 84% cite data breaches and privacy as major risks.

• Other challenges:

  • High implementation costs (87%)

  • Data access and quality (69%)

  • Regulatory uncertainty (77%)

  • Lack of trust (74%)

  • Market instability (60%)

Importance of AI in Fintech Development

AI is seen as the key engine of future fintech evolution.

• 74% of fintechs say AI is the most relevant trend for 2025–2030.

• AI’s importance is recognized across all verticals.

• In digital banking, payments, and insurtech, relevance ratings exceed 75%.

• Only digital capital raising ranks regional interoperability above AI.

Regional Interoperability's Role in Fintech

Cross-border interoperability is gaining importance.

• 53% say it’s the second most relevant trend.

• Especially critical in:

  • Digital payments (78%)

  • Capital raising (67%)

  • Wealthtech (57%)

Embedded Finance and Open Banking Trends

Integrated financial services are reshaping the market.

• 52% see embedded finance as highly relevant.

• 49% say the same for open banking.

• These trends are strongest in:

  • Digital banking

  • Digital lending

• 93% acknowledge open banking’s growing impact.

Big Data, Cloud Solutions, and Blockchain

Fintechs continue to invest in data and cloud, but blockchain sees less enthusiasm.

• 46% rate big data and cloud as relevant.

• Blockchain and DeFi are less prioritized—only 32% see them as essential.

• 20% say blockchain is not currently a priority.

Sustainable Finance and CBDC Perspectives

Environmental and CBDC initiatives are not top concerns for most fintechs.

• Only 31% rate sustainable finance as highly relevant.

• CBDCs viewed as crucial by just 23%.

• 30% consider sustainability a lower priority.

Impact of Open Banking and Digital Public Infrastructure

Open banking and public digital systems play a key role in fintech growth.

• 67% say they’ve benefited from open banking frameworks.

• 60% want improvements in:

  • Integrated eKYC

  • AML platforms

• Also important:

  • Payment system efficiency

  • Open data initiatives

Current Issues and Potential Outcomes

Fintech is at a strategic turning point. Growth has slowed, but financial inclusion, profitability, and AI-driven innovation are trending positively. However, regulatory divergence and the high cost of AI adoption remain major obstacles. Global expansion plans are tempered by compliance complexity. If fintech firms, regulators, and investors align around common goals—especially in data sharing, cross-border standards, and customer trust—the industry could become a transformative force for global financial access and resilience.

Conclusion

The fintech industry has moved from startup hype to real-world impact. Its focus on underserved communities, strong financial performance, and embrace of AI mark a new chapter of responsible innovation. With global collaboration, smarter regulation, and a continued drive for inclusion, fintech is poised to shape the future of finance—securely, intelligently, and equitably.

Join the conversation—your insights are welcome.

Take your expertise to the next level. Whether you're focused on fintech, banking, operational risk, global payments, or blockchain, my CPE-certified Illumeo courses deliver real-world insights grounded in decades of experience as a banker, business analyst, and trainer. If you found this podcast valuable, you'll gain even more from the structured, practical training in these online courses. Click the “My Illumeo Courses” link below to explore.

My Illumeo Courses