Author: McKinsey & QED Investors
Compiled by: Yuliya, PANews
Editor's Note: In the past few years, anyone who could tell a good story and burn money to attract customers could secure large investments in fintech. But now, times have changed.
A recent report by McKinsey and QED states that the fintech industry has moved beyond its period of unchecked growth and officially entered its "fifth era," characterized by intense competition for profitability and compliance. While fintech currently accounts for only 4% of the global financial market (earning $650 billion annually), its profit growth rate is 3.5 times that of traditional banks. In the coming years, it will remain a super-breeding ground for billion-dollar giants.
(This report was co-authored by Jon Steitz, Max Flötotto, Uzayr Jeenah, Vikram Iyer, and Edward Allanson of McKinsey Financial Services, and Nigel Morris, Nick Gasbarro, Amias Gerety, and Adams Conrad of QED Investors.)
Key Data Overview
Market Size and Forecast: Total fintech revenue is projected to reach $650 billion by 2025 (4% of total financial services revenue). If recent growth rates continue, the market size is expected to reach $2 trillion by 2030 (9% of total financial services revenue).
Since 2023, capital invested in fintech has increased by more than 40% annually.
Top valuations: Five companies are already valued at nearly $100 billion, making them “cornerstones”.
More than 50% of fintech acquisitions are initiated by fintech companies, rather than by traditional institutions or sponsors.
Digital assets: The total value of stablecoin transactions reached $35 trillion in 2025, but only 1% ($390 billion) was related to "real payments".
The U.S. received 21 banking license applications in 2025, more than the total for the previous four years.
Business model evolution: 13% of fintech revenue comes from “horizontal” software companies that empower traditional institutions to digitize from the inside out, growing 25% faster than direct competitors.
I. Industry Status Quo: High Growth and Regional/Sectoral Differentiation
In 2025, the global fintech market generated approximately $650 billion in revenue, representing a year-on-year increase of about 21% compared to 2024 (an average annual growth rate of 23% over the past four years), far exceeding the growth rate of the traditional financial services industry, which has a market size of $15 trillion (an average annual growth rate of 6%). Nevertheless, fintech companies only account for about 4% of total financial services revenue, indicating that the market still has enormous room for expansion.
Regional differentiation, with Latin America experiencing the fastest growth.
North America: The largest market, with revenue of $310 billion. The business is expanding into capital markets (21%) and insurance (15%).
Latin America: Fastest growing region, with revenue of $60 billion (8% penetration). Average annual growth of 40% over the past five years, with lending business surging by an average of 50% annually since 2021. The market is highly concentrated, with the top three giants (Mercado Pago, Nubank, PagBank) accounting for 48% of the region's total revenue.
Asia Pacific: Revenue of US$150 billion (penetration rate of 3%). Growth slowed from 23% to 15% due to regulatory impacts. Revenue focus shifted from loans (down to 29%) to payments (up to 40%).
Europe: Revenue of $110 billion (penetration rate of 2.6%). The market is the most fragmented, with the top three companies (Adyen, Klarna, Revolut) accounting for less than 20%.
Vertical market differentiation
Payments: The largest vertical, with $250 billion in revenue (18% year-over-year growth and 19% penetration in 2024-2025). Companies like PayPal and Stripe are capturing the fastest-growing global transaction flow, encompassing digital, embedded, cross-border, and platform-based business payments.
Loans: Total revenue was approximately $120 billion (up 19% year-over-year), concentrated in underserved markets such as Latin America, Asia Pacific, and Africa. Global players like Nubank and WeBank are scaling by embedding credit into digital platforms. This sector has the lowest concentration, with the top three companies accounting for only 16% of total revenue.
Insurance and capital markets: each accounting for approximately $80 billion, growing rapidly but with a low base. Insurtech is growing the fastest (37% since 2021), but its overall penetration rate is still below 1%.
Customer structure and sub-sectors: B2C accounts for 47%, and B2B accounts for 41%. In the wealth technology sub-sector, the leading effect is significant, with the three major cryptocurrency platforms , Bakkt, Binance, and Coinbase, accounting for approximately 30% of the total revenue in this sector .
Capital Markets: Presenting a "Barbell" Investment Profile
IPO Rebound: 31 new listings were announced in 2025, raising nearly $14 billion (four times that of 2024), accounting for 12% of the total market capitalization of the top 100 global IPOs. Notable examples include: Klarna (raised $1.3 billion/valued at $11 billion), Circle (raised $1 billion/valued at $20 billion), and Chime (raised $800 million/valued at $11 billion). The total market capitalization of listed fintech companies reached a record high of $850 billion (202 companies in total).
Investment polarization: Capital is concentrating at both ends. Late-stage large-scale deals increased by 22% annually, with early-stage VCs accounting for 37%; while the share of mid-stage growth equity capital plummeted from 45% in 2019 to 25%.
Giants expand: Revolut, Robinhood, Stripe and others are approaching the 100 billion mark in valuation, with Stripe making a strong entry into the digital asset field through the acquisition of Bridge and Privy.
Customer trust surpasses that of traditional finance
McKinsey's 2025 Retail Banking Survey shows that, for the first time, customers trust fintech companies more than traditional banks. Customers generally perceive fintech companies as more innovative, more transparent in terms of fees, and offer better overall value. Overall, fintech companies receive a Net Promoter Score (NPSSM) 2.5 times higher than their traditional counterparts (often exceeding 50 or even 70 points).
II. Four Core Trends Shaping the Future
Trend 1: AI is driving the transformation of fintech
AI is reshaping industry economics in four key ways: commoditization (product development cycles are shrinking from years to weeks), democratization (such as April Tax Solutions embedding tax logic and Midas providing affordable wealth advice), and decoupling and disintermediation.
The giants are doing the opposite: It is worth noting that large-scale companies such as Coinbase, Nubank, Revolut and Robinhood are using AI to move in the opposite direction (by aggregating products and leveraging their scale advantages to become intermediaries for horizontal fintech companies).
Winner Prediction:
Pioneer traditional institutions: Traditional institutions that adopt AI early, both internally and in a client-facing manner, are expected to improve their return on tangible equity (ROE) by up to 4 percentage points.
The "second AI" disruptors: Companies that already possess deep domain expertise, proprietary data, or distribution channels will find AI a powerful tool to accelerate product development.
Current Application Status: Fintech companies are boldly deploying AI-powered customer service agents such as Decagon, Loriket, and Sierra. Traditional institutions that are slow to adapt and large-scale enterprises that rely solely on outdated technologies for their competitive advantage will face the risk of being phased out.
Trend Two: The Rise of Digital Assets
After a decade of experimentation, digital assets have shed their speculative guise and become investable infrastructure for traditional financial institutions. The irrational boom of 2020-2022 has ended, and market focus has shifted to stablecoins and tokenized deposits, which are reshaping money transfer, storage, lending, and investment, and are projected to achieve high double-digit growth across all sectors by 2030.
Bitcoin: Viewed as an alternative to fiat currency and gold. As of Q1 2026, over 60% of Bitcoin was held in wallets for more than a year, representing approximately 3% of the global investable gold value.
Stablecoins : Currently, the total issuance is $300 billion, with a circulating value of $40 trillion. The market capitalization is projected to reach $2 trillion to $4 trillion by 2030 (a CAGR of 40%). Despite an annual transaction volume of $35 trillion, only 1% ($390 billion) represents actual end-user payments; the remainder is primarily for trading and arbitrage. Real-world applications include global remittances ($90 billion, less than 1% of the global $100 trillion), B2B payments ($226 billion), and capital market settlements ($80 billion, 0.01% of the global $200 trillion). Furthermore, emerging markets seeking to hedge against currency volatility (such as Argentina and Nigeria) have also generated significant demand.
Tokenized deposits: effectively addressing the "cash leg" bottleneck in institutional settlements. JPMorgan Chase's JPMD and Kinexys (processing $2-3 billion daily) and Citi's token service (expected to support $100-140 trillion in traffic by 2030) are leading this trend.
RWA (Real-World Asset) tokenization: projected to reach $2 trillion by 2030. Bank of New York Mellon, Goldman Sachs, and others are integrating digital asset custody into their core platforms.
Ecosystem integration: Klarna and PayPal have developed various payment stablecoins; Stripe (Bridge) has launched stablecoin cards in more than 100 countries; Visa and Mastercard directly settle USDC; AI agents have even begun to use micro-payments based on stablecoins to autonomously purchase computing resources, indicating the arrival of a machine-based business era driven by programmable money.
Trend 3: The License Battle (Embracing the Compliance Moat)
Fintech companies are no longer seeking regulatory arbitrage, but are instead proactively applying for banking licenses as a strategic tool to unlock cheap funding, expand their product lines, enhance customer trust, and solidify their competitive advantages.
Data shows that 21 new license applications were filed in the United States in 2025, with processing times reduced by 40% (Paycom took 421 days, while Erebor Bank took only 125 days).
Participants include Nubank, Circle (First National Digital Currency Bank), Stripe (Bridge), Fidelity, PayPal, Monzo, Zilch (which acquired AB Fjord Bank), Revolut, Flutterwave, KakaoBank, and Airwallex.
Potential risks: After obtaining a license, companies will face direct regulatory pressure, and the valuation logic may be reset—shifting from high-premium technology stock multiples to traditional bank price-to-book ratio multiples.
Trend 4: The Rise of "to B" Fintech
"Horizontal" fintech companies (those that enable traditional institutions to access digital software/infrastructure rather than directly providing consumer services) are attracting a disproportionate share of investment. Typical examples include Omilia (AI solutions), Vitesse (digital claims processing), and Alloy/Footprint (compliance automation).
Data shows that this model already accounts for 13% of the industry's total revenue. In the UK Insurtech sector, the proportion of funding raised by horizontal companies has skyrocketed from 25% in 2021 to 91% in 2024.
III. New Secrets to Success and Institutional Response Strategies
Four Characteristics that Shape Future Winners
Economics: Saying goodbye to "blind growth" requires balancing high growth with reliable unit economic efficiency. Raman Bhatia of Starling Bank points out: "Technological barriers are decreasing, but business model barriers are increasing."
Distribution and Trust: In an era where AI makes products easily replicable, having customer relationships and long-term accumulated trust is the ultimate competitive advantage.
Product quality: It needs to achieve substantial breakthroughs in economy, speed, and risk, rather than merely focusing on UI improvements. ClearScore's Justin Basini emphasizes that competitive advantage increasingly depends on product fundamentals.
Risk and Resilience: Compliance Capabilities Become a Core Differentiating Advantage. Clear Junction's Dima Kats believes, "Perhaps the best investment fintech companies can make right now is in compliance."
Responses from traditional institutions
Investment/M&A: Building defenses through capital. JPMorgan Chase plans to invest nearly $18 billion in technology by 2025; Visa has invested in/acquired over 50 companies and formed partnerships with approximately 90 in the past five years.
Reinventing Yourself : Leveraging innovations in AI and cross-functional fintech to rapidly modernize core legacy systems.
IV. Forecast: Six Major Growth Drivers for the Next Wave
Digital asset infrastructure and networks: With the implementation of the GENIUS Act and other legislation, wallets, deposit and withdrawal channels, compliance tools, and programmable settlement will become the foundational layer.
Agent AI focused on financial services: targeting the multi-billion dollar pool of contact center, operations, and compliance costs, providing automated ROI.
Data infrastructure: Reshaping credit and risk decisions by leveraging open banking, real-time payments, and alternative data (payroll, rent).
AI-driven wealth advisory services: serving the mass affluent class with assets between $100,000 and $1 million (like Robinhood's cross-industry expansion), unlocking the largest underserved market.
Horizontal Insurtech: Leveraging AI to unlock unstructured data (claims notes, satellite imagery) to achieve personalized, real-time risk pricing.
Identity and Trust Infrastructure: Building a universal and portable KYC/KYB/AML compliance layer to solve the industry's most expensive redundancy pain point.
*Risk Warning: Companies that rely solely on technological barriers built up over the past 5-10 years, as well as deposit-taking fintech companies that depend on interest rate spreads, will face immense survival pressure in the face of AI adoption and high-interest competition.
