Bryan Zhang, executive director and co-founder of the Cambridge Centre for Alternative Finance at The University of Cambridge Judge Business School presented research on the future of global fintech, conducted in conjunction with the World Economic Forum.
The study gathered data from 227 fintechs across five industry verticals – digital lending, digital capital raising, digital payments, digital banking & savings and insurtech – and six regions – Asia-Pacific, Europe, Latin America and the Caribbean, Middle East & North Africa, US and Canada, and Sub-Saharan Africa.
The key areas that were investigated include fintech business demographics, market performance, market growth factors, regulatory perceptions, customer engagements and fintech activities with societal as well as economic benefits.
Officially launched at a press conference in Davos during the WEF’s Annual Meeting with a panel including the governor of the Bank of Ghana, ‘The Future of Global FinTech: Towards Resilient and Inclusive Growth’ finds that artificial intelligence (AI) will be the most relevant topic for the development of fintech in the next five years, according to 70% of respondents.
Embedded finance, the digital economy, and open banking were all nearly tied as the second most relevant factors at 53%-54%. Fintechs also clearly cite a lack of incentives or mechanisms to contribute to environmental and inclusion goals, and 41% emphasise the need for sustainable finance schemes and a further 31% cite the existing schemes as ineffective.
The CCAF and WEF research also revealed that 51% of fintech firms cite consumer demand as the main growth driver, yet in the Latin American and the Caribbean region, almost 70% of surveyed fintechs cited it as the major supporting factor. Other major factors supporting fintech growth are availability of a skilled workforce (39%) and a favourable regulatory environment (38%).
56% cited macroeconomic factors as the top hindrance to growth. However, the Latin American and the Caribbean experienced the largest regional drop in funding and surveyed fintechs in this region disproportionally find the funding environment to be a hindering factor to growth. Conversely, in the Sub-Saharan Africa region, fintechs find their funding environment to be more conducive for growth than not, with 52% rating it as a supporting factor.
Further to this, 55% find the development of digital regulatory and supervisory infrastructures effective in supporting growth. Growth in fintech is also being seen as financial services and products are being driven into underserved segments, with female (39%), low-income (40%), and rural or remotely located (27%) customers constituting a substantial portion of fintech customer bases.
However, regional differences apply, with female customers in the Middle East and Northern Africa accounting for 54% of the overall transaction values. On the other hand, European fintechs report the lowest proportion of female transaction values, at 28%.
Drew Propson, head, technology and innovation in financial services, World Economic Forum, says: “It is highly encouraging to see fintech performance remain strong after the pandemic, with average global customer growth rates above 50% from 2021-2022, however, identified headwinds such as a difficult macroeconomic climate and decreased fintech funding cannot be ignored. Overcoming these challenges and realising sustained social and economic benefits from the fintech industry will require continued data gathering to better understand pain points and committed support from public and private sector actors within financial services.”
Bryan Zhang, executive director and co-founder, Cambridge Centre for Alternative Finance, adds: “As the global fintech industry continues to grow and evolve, it is imperative that the pace of regulatory and supervisory innovation match that of financial innovation. This report highlights the importance of having an appropriate and adequate regulatory environment that is conducive for the scalable and sustainable development of fintech. The study findings also indicate the enormous potential of digital financial services to widen access to finance for consumers and SMEs by providing more accessible, affordable and personalised financial products and services.”