Fintech as a Service Market Expected to Reach $1432 Billion by 2032—Allied Market Research

According to a new report published by Allied Market Research, titled, “Fintech as a Service Market By Type (Banking, Payment, Lending, and Others), By Technology (Artificial Intelligence (AI), Blockchain, Robotic Process Automation (RPA), Application Programming Interface (API), and Others), By Application (Fraud Monitoring, KYC Verification, Compliance & Regulatory Support, and Others) and By End User (Banks, Financial Institutions, Insurance Companies, and Others)". The fintech as a service market was valued at $268.41 billion in 2022, and is estimated to reach $1,432 billion by 2032, growing at a CAGR of 18.5% from 2023 to 2032.

Financial technology refers to the provision and maintenance of financial technology by a third party that allows anyone to provide financial services. This involves providing APIs to other financial market participants as software that can be integrated into their systems. Many traditional lending institutions have been exploring fintech technologies to help them utilize innovative business operations and financial procedures. The growth of digital payments, digital loans, insurance, wealth management, and robo-advisory has raised the demand for technology-backed banking.

Furthermore, many traditional lending organizations turn to fintech technologies to help them leverage innovative business functions and financial processes. Using a fintech-as-a-service platform enables financial institutions to optimize their end-to-end operations, ensuring proper execution of a commercial service provided on-demand over the Internet within a specified timeframe. FaaS solutions ensure legal compliance with banking regulations and the use of appropriate security solutions such as strong authentication.

The increase in use of digital payments is driving the growth of fintech as a service market. This trend is expanding due to the growing use of smartphones and other mobile devices, as well as the increasing popularity of online shopping for digital payments. Furthermore, as a result of the lower rates and improved security provided by these payment methods, larger companies are adopting digital payments. Thus, this factor driving the fintech as a service market trends. In addition, open banking initiatives drive the growth of fintech as a service market.

However, as people rely more on digital financial services, there are growing concerns about data privacy and security. Cyberattacks and data breaches hinder clients' trust in fintech companies and hamper the industry's expansion. Furthermore, despite the growth of fintech services, a significant portion of the population still lacks access to digital infrastructure and financial literacy. Particularly in emerging countries, this digital gap limits the adoption of fintech as a service solutions. On the other hand, open banking and the digitization of financial services are anticipated to provide lucrative growth opportunities for fintech as a service market in the upcoming years.

By application, the compliance & regulatory support segment acquired a major share in 2022. This is attributed to the necessity for fintech firms to address complex regulatory challenges while staying competitive and building trust with customers and stakeholders. However, the fraud monitoring segment is anticipated to be the fastest-growing segment during the fintech as a service market forecast period. This is attributed to the rise in demand for enhanced security, the need for regulatory compliance, and the rising popularity of digital transactions among consumers.

Region-wise, North America dominated the fintech as a service market share in 2022. This is attributed to rising investments in fintech technology as well as a change in North American banking towards online and mobile banking. However, Asia-Pacific is considered to be the fastest-growing region during the forecast period. This is attributed to widespread awareness of the benefits of fintech as a service platform in Asia-Pacific countries such as China and India. Furthermore, the rapid expansion of digital payment systems promotes the fintech as a service market growth in the region.

The COVID-19 pandemic drove the adoption of financial technology and positively impacted the fintech as a service market size. With lockdowns and restrictions in place, people relied more on digital financial services, leading to increased demand for fintech solutions. The pandemic accelerated the adoption of online payment platforms, digital wallets, and contactless payment methods. Financial institutions also used fintech technologies to automate processes and offer remote services. As a result, new players entered the fintech as a service industry, which saw tremendous growth and innovation as a result of the growing demand for digital financial solutions and services.     

Key Findings of the Study

• On the basis of type, the payment segment accounted for the highest fintech as a service market share, in terms of revenue in 2022.
• On the basis of technology, the artificial intelligence (AI) segment attained the highest market share in 2022.
• On the basis of region, North America generated the highest revenue in 2022. 

The key players operating in the fintech as a service market analysis include Adyen, Finastra, FIS, Fiserv, Inc., Mastercard, OpenPayd, PayPal, Inc., Rapyd Financial Network Ltd., Revolut Ltd, and Stripe, Inc. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.