Emerging economies are leading the way as financial technology (fintech) gains momentum, with global revenues set to surge sixfold from $245-billion to $1.5-trillion by 2030, a new report released by Boston Consulting Group (BCG) and QED Investors shows.

Africa will be the fastest-growing region, while emerging Asia-Pacific (APAC), including China, India and Indonesia, will outpace the US and become the world’s top fintech market by 2030.

Africa’s fintech market, led by South Africa, Nigeria, Egypt and Kenya, is projected to grow thirteenfold to $65-billion in 2030, at a projected compound annual growth rate (CAGR) of 32%, the ‘Global Fintech 2023: Reimagining the Future of Finance’ report indicated.

“Unencumbered by legacy infrastructure, Africa can leapfrog its way to a new financial ecosystem and address the challenges of a population that is predominantly unbanked or underbanked,” said BCG Johannesburg partner Caio Anteghini.

APAC, historically an underpenetrated market with nearly $4-trillion in financial services revenue pools, has a projected CAGR of 27%, with the largest fintechs, voluminous underbanked populations, a high number of small and medium-sized enterprises (SME’s) and a rising technology-savvy youthful population and middle class.

“Globally and in Africa, the fintech journey is still in its early stages and will continue to revolutionise the financial services industry as we know it,” said Anteghini, noting that more than half the world’s population remains unbanked or underbanked, with the majority in emerging economies.

In the Middle East and Africa, 52%, or nearly 500-million, of adults are unbanked, while 43% are underbanked.

“We expect to see continued growth not only in developed markets in the US and Europe, but also in developing fintech markets in Latin America, Asia and Africa, where the inertia and friction is even greater,” added QED Investors managing partner and report co-author Nigel Morris.

Despite fintechs losing more than half their market value on average in 2022, the report noted that it was a short-term correction in an otherwise long-term positive trajectory, as the industry’s fundamental growth drivers have not changed.

“QED remains more bullish than ever about the future of fintech and its promise to improve the lives of billions of people across the world,” Morris highlighted.

The report further indicated that regulators need to be proactive and “lead from the front”, while incumbents should partner with fintechs to accelerate their own digital journeys.

“Regulation of fintechs has traditionally been relatively light, nonproactive, fragmented, and, in some cases, even lagging behind. While recent bank crises have made them more sensitive to asset/liability management, in addition to creating guardrails, regulators must ensure they are not overregulating the industry and thereby stifling innovation,” it said.

However, regulators should consider levelling the playing field by enabling faster pathways for banking and payment institution licences, facilitating an open banking ecosystem and supporting digital public infrastructure.

“The rise of new technologies has created a need for next-generation infrastructure that can facilitate complex transactions in a more digital world and systems that facilitate the delivery of essential services and benefits to the general public, such as digital identity and verification, can promote economic expansion, especially in emerging markets,” said Anteghini.

The combination of digital identity, an application programming interface-enabled payments network allowing for real-time settlements and access to innovators to build use cases is increasingly becoming a solution to fast-track digital services and showing particular value in markets where cash is still dominant, such as South Africa.

Meanwhile, the payments segment, which led the first part of the fintech journey, will remain the largest fintech market in 2030, growing fivefold to $520-billion; however, business-to-business-to-any-user (B2B2X) and B2b serving small businesses will lead the next era.

The B2B2X market is expected to grow at a 25% CAGR to reach $440-billion in yearly revenues by 2030, supported by growth in embedded finance and financial infrastructure, while the B2b fintech market is expected to grow at a 32% CAGR to reach $285-billion in yearly revenue by providing solutions to credit-starved and poorly served small businesses.