Generative AI will be a global fintech ‘gamechanger’, says report

As fintech companies continue to face an investment slump, a report from BCG and QED Investors suggests that generative AI could offer short- and long-term benefits for the sector.

The fintech sector has faced a “funding winter” but is set to get a boost thanks to the potential of generative AI, according to a new global report.

The report – created jointly by Boston Consulting Group (BCG) and QED Investors – estimates that the global fintech sector will grow in value to $1.5 trillion by 2030, a huge leap from its current value of around $300 billion. dollars.

The report notes that the global fintech sector has been struggling as investment has declined rapidly in recent years. The report says the global sector had $144 billion in equity funding in 2021, but it fell to $42 billion last year

Macroeconomic issues have had a strong impact on financing for the sector. A March report showed that funding for Irish fintech companies it plummeted 94% in 2023while global investments hit their lowest levels in six years.

Despite these findings, the latest report shows that fintech companies’ revenues are still increasing, at a rate of 14% annually over the past two years, and that the decline in investment is part of a “short-term correction” to the challenges which are starting to fade away.

The potential of artificial intelligence

The report states that, as in many industries, generative artificial intelligence (GenAI) is rapidly proving its value for the fintech and financial services sectors, being deployed in areas such as customer service, coding, testing and documentation .

The report states that applications of generative AI for the fintech sector will increase in the future.

“We believe GenAI has strong potential for productivity use cases such as customer support, fraud risk management, onboarding and developer co-pilots,” said Fran Ryan, Stripe GM of Services financial. “It will also provide value by better automating payment method recommendations for different countries and average transaction value use cases.”

The report suggests that fintechs will experience a short-term impact from generative AI, as many of these companies’ cost structures are “heavily tilted” toward areas where generative AI is producing huge gains, such as coding, customer service and digital marketing.

“We see a future for technology, particularly in personal financial management, where large language models can better evaluate and personalize recommendations for things like savings advice and suggest ways for customers to achieve their financial goals,” he said the report. “Along with its productivity and innovation benefits, GenAI can help financial institutions achieve end-to-end transformation into more effective, strategic and competitive organizations.”

A changing landscape

The report also makes some predictions about how the fintech sector will change in the coming years. Integrated finance – the integration of banking and other financial services into other apps and services – is expected to be a $320 billion industry by 2030. This industry is also expected to be driven by SMEs.

The report predicts that connected commerce, through which shoppers can move between in-store, online and app channels to purchase items, could become a “triple play” for banks, creating a new revenue stream, increasing customer loyalty. customers and enabling banks to offer a marketing channel to their SME and corporate customers.

“As key payments revenue streams, such as exchange and late fees, continue to come under pressure and deposits risk becoming a commodity in a higher yield environment, connected commerce suggests a future model for the banks,” the report reads.

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