Why 2022-24 Fintech Winter May Finally Thaw In 2025
I just reread a June 2024 state of global fintech report from top consulting firm BCG and fintech VC QED Investors, and it holds up well. So before 2024 ends, let’s see which key fintech trends carry into 2025. Spoiler alert: the fintech winter may finally thaw next year, bringing growth and deals for fintech pros; and cool new Startup, Big Bank, and Big Tech innovation for consumers.
Let’s start with the image above where BCG and QED predict fintech revenue growth will increase from $300 million in 2024 to $1.5 trillion by 2030.
This is welcome news for fintech pros who’ve endured these past few years.
Comparing full years 2021 vs. 2023, fintech valuation multiples fell from 20x revenue to 4x revenue.
And fintech funding was down 71% 2021 vs. 2023.
A stark correction indeed, but two key notes here:
First, this fintech correction is warranted after a red hot funding era led to a glut of startups.
Second, it’s helpful to look at what playbooks are winning.
Of the 453 digital native startup banks (aka ‘challenger banks’) globally, just 23 are profitable.
Chime in the U.S. and Revolut in the UK and Europe are good examples, with 14.5 million* and 40 million customers, respectively.
For consumers, they earned trust with digital-first, bank-on-your-phone experiences we all demand.
For investors, demand for returns has gone well with Revolut, as the Financial Times noted yesterday:
“Revolut staff and early investors have offloaded almost $1bn of stock since August, after the fintech’s UK banking licence galvanised support from big financial institutions and secured it a $45bn valuation.”
As for Chime, they don’t have a banking charter.
In this way Chime is a true fintech: they focus on modern digital banking and cool brand for customers, and partner with The Bancorp Bank and Stride Bank on FDIC-insured accounts and other bank services.
But if a rumored 2025 Chime IPO were successful, it would open up a new wave of fintech optimism and dealmaking.
This dealmaking would include fundraising, M&A, and IPOs.
Legendary QED partner Nigel Morris confirmed this sentiment in a blog post last week:
M&A activity for fintechs is slated to heat up in 2025. We are finally emerging from an era of suppressed activity and can expect increased M&A for fintechs looking to join up for economies of scale or product & geo expansion. Plus, PE firms and LPs are seeking liquidity and encouraging exits. Taken together, we can expect a wave of deals with companies buying one another and, of course, other fintechs moving toward IPO as the market thaws.
Going back to the winning playbooks, there are 2 more worth calling out.
First, of the $1.5 trillion in fintech revenue BCG/QED predict by 2030, embedded finance accounts for 21% ($320 billion) of it.
Second, how far will Apple go into banking?
And perhaps more important, how far will banking go into tech and retail marketing?
Apple slowed fintech activity as its deal with Goldman Sachs to power AppleCard soured.
But the chart above shows just how deep Apple is into financial services even with bank partner and regulatory enforcement challenges.
And Apple will remain interested as most of us increasingly pay for stuff with our iPhones.
Meanwhile, JPMorgan Chase is now an ad network letting advertisers target customers based on spending data.
Would you take cash back from Chase if they showed you an ad in their app for a brand you’ve bought from before?
Comment below or reach out and let me know.
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Reference:
– Global Fintech Report 2024 (BCG & QED Investors)
– 2025 Fintech Predictions (QED)
– Revolut Backers Offload Almost $1b of stock (FT)
– 2025 Chime IPO Impact On Banks & Fintechs (American Banker)
– JPMorgan Chase Media Biz: What It Is | How It Works | Would You Use It?
* The June 2024 BCG/QED report shows 14.5m customers for Chime, which conflicts with Cornerstone Advisors’ April 2024 estimate of 22 million customers. To my friend Ron Shevlin who runs research at Cornerstone, if you read this, please chime in!