Fintech-as-a-Service Market

Fintech-as-a-Service Market Outlook (2022-2032)

The global fintech-as-a-service market is expected to be valued at US$ 269.2 Billion in 2022. The growth of the market can be attributed to the aspects such as the swelling adoption of Artificial Intelligence (AI) technologies, mobile payment, and increasing investments in fintech infrastructure.

The overall demand for Fintech-as-a-Service is projected to grow at a CAGR of 17% between 2022 and 2032, totaling around US$ 1,300 Billion by 2032. 

Report Attributes	Details
Fintech-as-a-Service Market Value 2022	US$ 269.2 Billion
Fintech-as-a-Service Market Projected Value (2032)	US$ 1,300 Billion
Fintech-as-a-Service Market CAGR (2022-2032)	17%
Key Fintech-as-a-Service Service Providers	PayPal Holdings, Inc. Block, Inc. Mastercard Incorporated Envestnet, Inc. Upstart Holdings, Inc. Rapyd Financial Network Ltd. Solid Financial Technologies, Inc. Railsbank Technology Ltd. Synctera Inc. Braintree

Fintech-as-a-Service (FaaS) consolidates all financial management, payment, and money movement services that modern businesses need to build effective applications through a single, global, scalable API.

FaaS solutions include white-label e-wallet platforms, card issuing, payment acceptance, pay-outs and remittances, identity verification, fraud prevention, virtual accounts, and merchant services, as well as solutions for provisioning, managing, and reporting.

With Fintech as a Service, the work of building the infrastructure, integrating multiple, disparate financial systems, licensing, and compliance is handled by a third party, so businesses can quickly integrate and offer many financial services to customers that were once only available through traditional banking and financial companies.

Based on technology, Artificial Intelligence is gaining the highest traction in the development of fund transfer platforms. It provides automation and augments the safety of consumers’ funds in their bank accounts. Moreover, the regions like APAC & North America hold a major chunk of the fintech-as-a-Service market, backed by the hefty investment by prominent players in the research & development of new innovations to enhance their functionality.

Fintech-as-a-Service Demand Analysis (2017 to 2021) Vs. Market Outlook (2022 to 2032)

The global demand for fintech-as-a-service is projected to increase at a CAGR of 17% during the forecast period between 2022 and 2032, reaching a total of US$ 1,300 Billion in 2032, according to a report from Fact.MR, From 2016 to 2021, sales witnessed significant growth, registering a CAGR of 15.6%.

During the historic outlook, the FaaS market witnessed tremendous growth, backed by favorable government regulations and lenient fund transfer policies by several countries such as U.S, U.K, & China. Moreover, the increasing emphasis on cashless transactions by consumers, merchants, and institutional organizations bolstered the demand for the Fintech-as-a-Service platforms, especially after the occurrence of the pandemic.

The financial lending firms are anticipated to record a CAGR of 17.0% during the forecast period. The increasing consumer preference for using financial instruments at convenience from their home is furthering the segment growth. Additionally, tech-enabled platforms help financial institutions to provide services such as lending, borrowing, fixed deposits, and others. Besides, the increasing adoption of digital lending platforms bodes well for the growth of the market.

Which Drivers underpin Fintech-as-a-Service Industry Expansion?

Burgeoning Online Transaction Volumes to Promote FaaS Deployment across Key Industries

The global adoption of advanced technologies such as blockchain technology, open banking, cloud & big data analytics, voice bot, and digital payments is anticipated to drive the growth of the market. Banks and financial institutions are looking for ways to implement technological advancements in their offerings.

These technological advancements have made it possible to invest, borrow, transfer, and save funds virtually. Thus, technological advancements in the fintech sector are expected to drive the growth of the fintech-as-a-service platform market.

Fintech companies are continuously working on advancing traditional methods due to which they are increasingly receiving funding from venture capitalists. These investments are made to foster multiple benefits offered by the companies such as lowering service costs, increasing processing time, swift blockchain penetration, and automated banking systems. These benefits are often implemented by the fintech platform as a service is driving their demand.

Multiple government entities around the world are constantly encouraging companies that provide digital financial services to enhance their offerings. For example, in April 2022, USAID launched a new finance program ‘Digital Invest’ which is aimed at utilizing private capital for internet service providers (ISPs) and digital finance serving traditionally excluded consumer populations worldwide. As a result, the market will have significant growth opportunities during the forecast period.

Which Factors are limiting the Growth of the Fintech-as-a-Service Market?

With the increased digitization of these financial services, consumers are concerned about their security and privacy. However, an improved UI experience embedded with better data security and privacy among the users is anticipated to create opportunities for the growth of the market. Moreover, the inability to adapt to the changing technology among elderly users is also expected to hinder the growth of the market.

Region-wise Insights

Will North America Hold a Significant Position in the Global Fintech-as-a-Service Market?

Rising Contactless Payment Solutions adoption stimulating Market Expansion

In terms of market revenue. North America governs the fintech-as-a-service (FaaS) market, accounting for nearly 35% share in 2022. The region is estimated to maintain its dominance over the forecast period, states the Fact.MR report. This market growth is attributed to the growing preference for digital financial services across North America.

For instance, as per the latest analysis by MasterCard Contactless Consumer Polling, 51% of U.S. customers use some type of contactless payment option. The changing consumer preference toward digital payment methods and fintech services is driving the market’s growth. According to Visa, nearly one out of every 10 Visa card transactions in the U.S. at the point-of-sale (POS) are conducted with a tap and the majority is a contactless card.

In the region, Tap-to-pay payments are already placing themselves as the default card payment option at the point of sale, but an upward consumer emphasis on touchless experiences pushed by the global pandemic transformed the consumers, merchants, and financial institutions’ view of payment experiences. This novel emphasis on touchless experiences, combined with countless other benefits of contactless payments, has enhanced the adoption of Fintech-as-a-Service platforms in the region.

How Will Growth of the European Fintech-as-a-Service Market unfold?

Presence of Start-Up Entities to Widen Investment Opportunities

According to a recent analysis by Fact.MR, Europe is expected to capture nearly 33% share in the fintech-as-a-service market. The market is estimated to exhibit remarkable growth over the forecast period attributed to the recent development in the fintech sector and the growing emphasis on emerging fintech start-ups in countries like the UK, France, and Germany.

Owing to the presence of dominant players and their aggressive investments in the R&D activities to improve their services, the region is likely to open a doorway of immense growth opportunities in the Fintech-as-a-Service market. They are seeking discrete strategies, comprising strategic partnerships, to improve their offerings.

For instance, in July 2021, Rapyd Financial Network Ltd., a U.K.-based fintech company, announced its agreement with Arion Bank in Iceland, to acquire an Iceland-based payment solution company, Valitor. With this acquisition, Rapyd Financial Network Ltd.’s payment capabilities and issuing portfolio will be improved and the services will be accessible throughout Europe.

How is Asia Pacific bolstering the Demand for Fintech-as-a-Service?

Venture Capital Funding to open potential Investment Alternatives for Key Service Providers

As per the latest analysis, Asia Pacific is expected to expand at the highest CAGR of 17.8% throughout the forecast period. The expansion of the regional market is attributed to mounting awareness about the perks of FaaS platforms in countries such as China, India, and Japan.

Several governments and venture capitalists are heftily funding fintech firms to endorse the use of digital services and fintech-as-a-service platforms. They are adopting state-of-the-art technologies such as artificial intelligence & internet of things to develop new features for the existing platforms in the region. For instance, in 2022, funding for fintech companies in the Asia Pacific region raised USD 3.3 billion in the first quarter.

Venture capital investments in APAC-based fintech’s gushed to a record high of $15.69 billion in 2021, more than double the prior year's figure of $5.87 billion, an upsurge of nearly 75%. Thereby, soaring investments by key players in the APAC market are estimated to strengthen the growth rate for Fintech-as-a-Service over the coming years.

Category-wise Insights

By Type, Which Fintech-as-a-Service Category Will Remain Prominent?

FaaS for Payments to acquire Majority Market Share

Based on type, the segment is bifurcated into payment, fund transfer, and loans. Out of these, the payment segment captures the majority share of nearly 45% of the global revenue. The swelling incorporation of AI technology and API into mobile-based payment services for traditional banking is predicted to propel the segment's growth.

The pioneering efforts being arrayed by several tech giants to improve their respective products also bodes well for the segment growth. For instance, Google introduced the release of voice-to-text features in November 2021, allowing users to use voice commands to add their account information to the platform to initiate payments.

The fund transfer segment is projected to observe significant growth during the upcoming decade. Fund transfer is primarily allied with transferring and receiving money using technology-based payment systems. The growing fame of fund transfer apps worldwide is expected to encourage the demand thereby driving the growth of the segment. The efforts are being pursued by various fintech companies globally to develop fund transfer apps with modern user interfaces that ensure a better customer experience. These factors are fueling the segment growth.

The Start-Up Ecosystem: How key Players are Opening Frontiers for Future Growth?

• Founded in 2019, Neo Mena Technologies is a UAE-based financial technology services company, with a focus on providing digital investment services to regulated entities within the GCC. Neo offers solutions directly to banks and other financial institutions, empowering them to better penetrate their retail customer base and strengthen the proposition for HNI’s.
• Found in 2007, US-based startup Fafnir offers loan evaluation service solutions. The service provides insights for businesses to understand loan eligibility and serviceability. Further, the startup evaluates loan offers and the impact they will have on cash flow. It notifies companies of any high-cost loan offers, providing a picture of how a loan fits into different financial conditions.

Competitive Landscape: What are the Leading Players in the Fintech-as-a-Service Market Up to?

New product launches, innovation, geographical expansion, and mergers & acquisitions are some of the key strategies adopted by the players to strengthen their position in the market and gain a higher market share.

• In September 2021, PayPal Holdings, Inc. signed an agreement to acquire Paidy, a leading two-sided payments platform and provider of buy now, pay later solutions in Japan, for ¥300 billion or approximately US$2.7 billion, principally in cash. The acquisition will expand PayPal's capabilities, distribution, and relevance in the domestic payments market in Japan.
• In October 2021, Mastercard Incorporated agreed to acquire Aiia, a leading European open banking technology provider offering a direct connection to develop and launch new digital solutions that meet the needs of everyday life, work, and play.
• In August 2021, Square, Inc. and Afterpay Limited entered into a scheme Implementing Deed under which Square agreed to acquire all of the issued shares in Afterpay by way of a recommended court-approved Scheme of Arrangement.

Key Segments Covered in the Fintech-as-a-Service Industry Analysis

• By Type :

  • Fintech-as-a-Service for Payment
  • Fintech-as-a-Service for Funds Transfer
  • Fintech-as-a-Service for Loans
  • Fintech-as-a-Service for Other Types

• By Technology :

  • API-based Fintech-as-a-Service
  • Artificial Intelligence-based Fintech-as-a-Service
  • RPA-based Fintech-as-a-Service
  • Blockchain-based Fintech-as-a-Service
  • Other Technology based Fintech-as-a-Service

• By Application :

  • KYC Verification
  • Fraud Monitoring
  • Compliance & Regulatory Support
  • Other Applications

• By End Use :

  • Banks
  • Financial Lending Companies
  • Insurance
  • Other End Uses

• By Region :

  • North America
  • Latin America
  • Europe
  • Asia Pacific
  • Middle East & Africa