The future of fintech: six trends to watch in 2025
Next year looks rosy for the fintech sector, with an uptick in the adoption of embedded finance in the B2B space, further steps forward in AI and more opportunities to collaborate with banks.
Michael Galvin, co-founder of technology provider Toqio, shares his top predictions for 2025
The fintech sector will see a reversal of fortunes in 2025
After several challenging years of slow growth, the fintech sector looks set to benefit from an upsurge in 2025. A combination of favourable macroeconomic conditions, increasing digitalisation and renewed investor confidence is expected to fuel a resurgence in the market.
Companies that have honed their propositions, demonstrated clear value and achieved product market fit will fare best, with the opportunities being greatest for forward-thinking companies that are aligned to the current regulatory environment.
As we enter 2025, businesses face a rapidly changing regulatory landscape. New compliance challenges are emerging, with stricter requirements for AML, KYC and adherence to sanctions. At the same time, expanded data privacy laws in the EU and US demand greater vigilance from compliance teams. Success in this landscape will require agility, focus and a commitment to staying ahead of these complexities.
As the sector matures, there will be a wave of consolidation
The rising tide of fintech opportunity is not a free pass and not every fintech will stay afloat. Instead, 2025 will likely be a year of significant divergence.
The market will reward clarity, execution and results, while penalising complacency. The next 12 months will separate the visionaries from the survivors. For fintech, 2025 is not just about riding the wave, it’s about proving you’re built to last.
Fintechs that have merely survived the lean years without meaningful innovation will struggle to justify their existence and may find themselves marginalised.
As the sector matures, we expect significant consolidation, with leaders emerging stronger than ever, carving out commanding positions in their respective categories and snapping up any laggards in their space.
Companies will increasingly integrate embedded finance solutions into their ecosystems, driven partly by the improved interest rate environment
Thus far, embedded finance has not been as widely adopted in the B2B space as it has in the B2C space. We think 2025 is the year this will change.
Interest rates are now firmly on a downward trajectory in both Europe and the US. Hence, we expect corporations to feel more confident integrating embedded finance solutions, particularly embedded lending, into their platforms.
Companies in a wide variety of industries will realise that embedded finance is more than an efficiency tool, and that it can provide incredible revenue opportunities that allow them to deepen customer relationships, and in turn increase retention and share of wallet. With the rise of advanced platforms and new players, businesses will be able to connect with multiple providers, enabling them to select the best payment, lending and cash management solutions to meet their specific customer needs.
Banks and fintechs will work together rather than in competition
Over the past few years, we’ve seen a lot of discussion about the rivalry between banks and fintechs. However, we take a different view to many others in the market and see the two groups more as collaborators than competitors.
This is because we see them as having different strengths: banks hold the most clout in terms of their balance sheets, but fintechs offer innovation and agility that traditional financial institutions struggle with.
We see 2025 as potentially being the year where we see real disintermediation in banking, with banks, fintechs and corporates all working closely together to create new revenue streams, open up more opportunities for merchants and consumers, and create new profit pools.
AI will drive the evolution of technology and enable banks and fintechs to create monetisation opportunities across the board.
A combination of AI and embedded finance could be very powerful as it should enable banks to create monetisation opportunities across the board. The combination of the two could be particularly useful in terms of helping businesses increase their personalisation efforts, such as giving them the ability to offer digital gift cards for payouts and rewards.
Then there are the obvious AI use cases such as streamlining outdated manual processes and driving the growth of technology. We think the full potential of AI is yet to be realised and expect 2025 to bring some significant developments in this area.
Crypto-powered embedded finance options will redefine cross-border payments.
Cross-border payments have increased rapidly in recent years, with significant further growth expected. FXC Intelligence predicts the total cross-border payment market will reach USD 290 trillion by 2030, a 53% increase on the USD 190 trillion of 2023. However, the rising protectionism and stronger dollar we are currently seeing may provide headwinds to fiat transactions.
With cryptocurrencies gaining traction, especially as they receive backing from larger institutions, embedded finance solutions will likely incorporate crypto options for real-time and low-cost cross-border payments. This trend will allow companies to offer integrated crypto wallets, stablecoin transactions and blockchain-powered payments directly within their platforms. The result will be faster and cheaper cross-border transactions that appeal to global customers as they will reduce their dependence on traditional banking channels.