The financial services industry has undergone a remarkable transformation over the last decade, driven by extensive growth and innovation within the fintech sector. Every year, numerous fintech startups emerge, pushing the boundaries of what’s possible in financial services, with the average annual growth rate (CAGR) of fintech companies in the Americas from 2018 to 2024 being approximately 14.92%.
Fintech’s journey is just beginning. Despite the rapid advancements, according to BCG and QED, fintech is only 3% done, with 97% of the opportunity still ahead of us. Currently, fintech’s revenues stand at $320 billion, a mere 3% of the financial services market. This figure is expected to surge to $1.5 trillion by 2030, highlighting the massive potential still untapped. Consumer banking has also shifted significantly, as many young US consumers opt for so-called “neobanks,” like Chime as their primary checking account providers. In 2022, 78% of U.S. adults preferred mobile or online banking.
The banking industry is one industry being disrupted by fintech both on a consumer and institutional level, pushing traditional banks to innovate and adapt their services to keep pace with digital advancements. As McKinsey’s research finds, of the top 100 banks by assets and other digitally advanced banks, four out of five have now partnered with at least one fintech company. That is up from 55 percent just two years ago. Moreover, most banks are not stopping at a single partnership.
Fintechs are outpacing traditional banks, with three-quarters of banks struggling with digital banking infrastructure due to outdated systems. Fintech companies are rapidly gaining market share, capturing 47% of new account openings in early 2023. Legacy systems hinder banks’ ability to offer modern digital services, with 75% facing challenges in implementing new solutions. The increasing prevalence of fintechs, capturing nearly half of all new account openings, underscores the critical need for banks to modernize and update their infrastructure.
The fintech industry has not been without its challenges. However, the industry’s ability to innovate and adapt has allowed it to overcome these obstacles, continuing to drive progress and redefine financial services.
The fintech revolution isn’t about building unicorns or competing with traditional banks; it’s about reshaping finance to work better for everyone. As the fintech industry continues to grow and evolve, so does Lili, keeping small business customers at the heart of its mission. With responsible innovation, fintech can create a future where financial services are accessible, efficient, and beneficial for all, driving growth, innovation, and prosperity in our communities.
