Fintech Revenue Predicted to Surpass That of Traditional Banks by Three-Fold in 2028 – Report

In a report by global consultancy firm, McKinsey, fintech revenues are expected to surpass that of traditional banks, by three times their size in 2028.

In the report titled “Fintechs: A new paradigm of growth”, the global consultancy firm provided an in-depth analysis of the fintech industry, delving into the sector’s evolution and exploring its trajectory towards a more sustainable and profitable future.

McKinsey reports that the growth recorded in the fintech ecosystem has been fast and furious, buoyed by the robust growth of the banking sector, rapid digitization, changing customer preferences, and increasing support of investors and regulators. 

This growth according to the consulting firm will be driven by the profound digital transformation that the banking sector is currently undergoing. It further noted that digital adoption is no longer a question but a reality with around 73% of the world’s interactions with banks now taking place through digital channels.

However, despite the sector experiencing a notable slowdown that can be attributed to several factors, which include challenging macroeconomic conditions and changing investor sentiment, McKinsey predicts that several massive opportunities still exist for the fintech ecosystem.

In 2022, fintech companies accounted for 5% (or US$150 billion to US$205 billion) of the global banking sector’s net revenue, according to the firm’s estimates. By 2028, McKinsey predicts that this share could increase to more than US$400 billion, representing a 15% annual growth rate of fintech revenue between 2022 and 2028, or three times the overall banking industry’s growth rate of roughly 6%.

The global consulting firm expects emerging markets to fuel much of this revenue growth. In Africa, Asia-Pacific (excluding China), Latin America, and the Middle East, fintech revenues represented 15% of fintech’s global revenue last year. On the other hand, North America, which accounted for 48% of worldwide fintech revenues in 2022, is expected to decrease its share to 41% by 2028.

It is also interesting to note that globally, retail consumers are recording the same level of satisfaction and trust in fintech companies as they have with incumbent banks, the report says. In fact, 41% of retail consumers surveyed by McKinsey in 2021 said that they planned to increase their fintech product exposure.

Notably, McKinsey notes that amid a more challenging funding environment, fintech companies must adapt to the new market reality by emphasizing revenue generation and profitability.