The Cambridge Centre for Alternative Finance (CCAF) was at Davos, Switzerland, today to present their latest findings on the Fintech revolution at the World Economic Forum. The Future of Global Fintech: Towards Resilient and Inclusive Growth was published this month and introduced today, outlining the strength and resilience of Fintech while noting the challenges.
CCAF is the leading independent research entity for the world of Fintech – including blockchain, online capital formation, banking, Regtech/Legaltech and more.
In a statement issued alongside the research, Bryan Zhang, Executive Director and co-founder of CCAF, said it is imperative that the pace of regulatory and supervisor innovation matches Fintech innovation:
“This report highlights the importance of having an appropriate and adequate regulatory environment that is conducive to 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 personalized financial products and services.”
Drew Propson, Head of Technology and Innovation in Financial Services at the World Economic Forum, said it was encouraging to see growth so strong after all of the headwinds like COVID, access to capital, and macroeconomic hurdles.
The study reports that the global Fintech industry is being driven by solid consumer demand, making inroads in financial services while providing products for underserved consumers and businesses around the world.
As AI [Artificial Intelligence] has taken the world by storm, the report shares this technology is the most relevant subject for Fintech over the next five years.
The study itself surveyed 227 Fintechs across five industry verticals: digital lending, digital capital raising, digital payments, digital banking & savings, and insurtech. These Fintechs were located around the world.
The study focused on the following areas: Fintech business demographics, market performance, market growth factors, regulatory perceptions, customer engagements, and Fintech activities with societal and economic benefits.
The study shares that growth is strong, averaging over 50% across all regions and industry verticals.
Correspondingly, 51% of surveyed firms say consumer demand is the main growth driver. The biggest challenges (56%) to growth are macroeconomic factors.
Regulation of financial services is key, and 55% find the development of digital regulatory and supervisory infrastructures are effective in supporting growth, and 64% of Fintechs say the regulatory environment is adequate.
For underserved communities, Fintech is showing great promise as technology is supporting the less affluent (40%), women (39%), and geographically challenged consumers (27%) due to the ease of access to Fintech services.
The biggest challenges (56%) to growth are macroeconomic factors, with access to capital following at 40%
AI is the hot topic of the moment for Fintechs, with 71% pointing to AI, embedded finance, the digital economy, and open banking, which were all nearly tied as the second most relevant factors (53%-54%).
The report notes that things change, as we have all seen in the Fintech sector. Today’s hot topic is tomorrows nobody. But innovation is not easy and can be messy – especially in highly regulated industries. What remains is the need for policymakers to enable innovation in financial services that partner with Fintechs – not view them as adversaries. We have seen the adversarial approach take place in some of the largest jurisdictions – like the US. CCAF states:
“As the industry continues to grow, and as technologies advance and Fintechs’ business models evolve, of course, the key drivers of growth and pressing challenges for the industry will change. Therefore, it is hoped that this report will be the first of many more empirical studies to track the trajectory of the global fintech industry, both within the Future of Global Fintech initiative and beyond. It is only possible through collective efforts that light can be shed on the development of digital financial services and understand how fintechs can impact consumers, SMEs, the wider economy and society.”
The report, available here, is a must-read for global policymakers and industry insiders interested in global Fintech trends. As AI was pinpointed as a topic of great interest, perhaps the next report by CCAF will focus on artificial intelligence usage and the evolving regulatory environments to support them.
The video of the Fintech session at the WEF is available below.