WEF and Cambridge University Unveil Future of Fintech Report
Artificial intelligence (AI) will be the factor with the biggest impact on the fintech industry over the next five years, according to a new report jointly published by the World Economic Forum (WEF) and University of Cambridge.
The study, produced by the WEF and the Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School, was unveiled during the former’s 54th annual meeting in Davos.
It reveals the global fintech industry is maintaining growth momentum driven by strong consumer demand, demonstrating resilience in a challenging fundraising environment and making meaningful inroads to extend financial services and products to underserved consumers and businesses across the globe.
A high-level panel consisting of John Rwangombwa, Governor of the National Bank of Rwanda, Drew Popson, Head of Technology and Innovation in Financial Services at the WEF, and Bryan Zhang, Executive Director of the CCAF, was on hand to discuss the findings during a press conference on Thursday (18 January) morning.
Entitled ‘The Future of Global FinTech: Towards Resilient and Inclusive Growth’, the report is an output of the Future of Global FinTech joint research initiative between the WEF and CCAF. It was supported by the UK Foreign, Commonwealth and Development Office (FCDO).
Global outlook offered by WEF and University of Cambridge
In carrying out its research, the WEF and CCAF gathered data from 227 fintechs operating across five industry verticals (digital lending, digital capital raising, digital payments, digital banking and savings, and insurtech) and six regions (Asia-Pacific, Europe, Latin America and the Caribbean, the Middle East and North Africa, the US and Canada, and Sub-Saharan Africa.
Six key areas were investigated: fintech business demographics; market performance; market growth factors; regulatory perceptions; customer engagements; and fintech activities with societal as well as economic benefits.
Key findings included:
- The global fintech industry remains strong, with customer growth rates averaging at least 50% across industry verticals and regions.
- More than half (51%) of surveyed fintechs cite consumer demand as the main growth driver, while 56% cite macroeconomic factors as the top hindrance to growth.
- Fifty-five per cent find the development of digital regulatory and supervisory infrastructures effective in supporting growth.
- Fintechs are expanding the provision of financial services and products to underserved segments, with female (39%), low-income (40%) and rural or remotely located (27%) customers constituting a substantial portion of fintech’s customer base.
- More than two-thirds (70%) cite AI as the most relevant topic for the development of the fintech industry over the next 5 years.
“It’s highly encouraging to see fintech performance remain strong after the pandemic, with average global customer growth rates above 50% from 2021-2022,” commented Popson. “However, identified headwinds such as a difficult macroeconomic climate and decreased fintech funding cannot be ignored.
“Overcoming these challenges and realising sustained social and economic benefits from the fintech industry will require continued data gathering to better understand pain points and committed support from public and private sector actors within financial services.”
Fintech drivers and barriers revealed
As highlighted, the global fintech industry is continuing to grow, boosted by significant customer demand. This is especially prevalent in regions like Latin American and the Caribbean (LAC), where almost 70% of surveyed fintechs cited it as the major supporting factor.
Other major factors supporting fintech growth are availability of a skilled workforce (39%) and a favourable regulatory environment (38%).
On the flip side, macroeconomic factors (56%) and the funding environment (40%) are revealed as the top hindering factors for overall growth.
Nevertheless, views about the impact of the funding environment are particularly differentiated by region. For example, LAC experienced the largest regional drop in funding, while surveyed fintechs in this region disproportionately find the funding environment to be a hindering factor to growth.
Conversely, in the Sub-Saharan Africa region, fintechs find their funding environment to be more conducive for growth than not, with 52% rating it as a supporting factor.
The majority of fintechs reflect favourably about their regulatory environment, with 64% rating it as adequate, while almost two in five (38%) cite regulatory environment as a major supporting factor for their operations and growth.
Fintech regulation ‘must keep pace with innovation’
AI, the digital economy, embedded finance and open banking are the factors regarded by fintechs as the most relevant for industry development in the near future.
AI topped the list, while the remaining three factors were all nearly tied as the second most relevant issues (53%-54%).
Conversely, fintechs clearly cited a lack of incentives or mechanisms to contribute to environmental and inclusion goals.
A substantial 41% of emphasise the need for sustainable finance schemes and a further 31% cite the existing schemes as being ineffective.
“As the global fintech industry continues to grow and evolve, it is imperative that the pace of regulatory and supervisory innovation match that of financial innovation,” added Zhang.
“This report highlights the importance of having an appropriate and adequate regulatory environment that is conducive for the scalable and sustainable development of fintech.”
Read the full report - The Future of Global Fintech: Towards Resilient and Inclusive Growth
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