APAC to be Largest Fintech Market By 2030, overtaking USA

According to a report by Boston Consulting Group (BCG) and QED Investors, the Asia-Pacific (APAC) region is projected to overtake the United States and become the leading fintech market worldwide by 2030, with a compound annual growth rate (CAGR) of 27%. The report, titled “Global Fintech 2023: Reimagining the Future of Finance,” emphasizes that the majority of growth will come from emerging APAC regions, such as India, China, and Indonesia. These regions have large fintechs, sizable underbanked populations, a high number of SMEs, and a tech-savvy youth and middle class, compared to developed countries like Japan and South Korea.

India, in particular, is highlighted in the report for its significant potential to leapfrog the intermediate stages of fintech development that more developed financial markets have undergone, especially with the help of supportive regulation. The report notes that the Indian regulator is playing an active role in shaping the market by using vehicles such as UPI, Aadhar, Rupay, and Digilocker. More than 1.3 billion Indians are enrolled in Aadhar, which is the world’s largest biometric identity system. Furthermore, UPI has processed $1.25 trillion in transactions in FY21–2022 and is growing rapidly.

The report suggests that regulators worldwide need to act urgently and thoughtfully to facilitate the sector’s growth more holistically. The report notes that while regulators tend to react to the latest predicament, the recent bank crises and massive financial frauds have made them more sensitive to asset/liability management. However, they should take care not to overregulate the industry and stifle innovation while creating guardrails.

The report highlights that expanding GDP (at a CAGR of 7% per year), the rise of the educated middle class, younger demographics coming of age, and increasing fintech penetration will drive fintech revenues in India. Spread businesses, such as neobanks and lending platforms, will face challenges in developed countries but play a critical role in emerging markets. Furthermore, the report identifies lending, neobanking, and wealthtech segments as further growth areas.

The report advises fintechs to enhance their competitiveness and pursue aggressive strategies, including talent acquisition, gaining market share by entering new geographies/markets, and exploring M&A opportunities. Additionally, it is essential to take an active role in shaping and embracing forward-looking regulations that enhance customer confidence and drive higher valuations.

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