With the shift to digital-first payments and transaction models, businesses have an increasing need for fintech services. Several fintech firms offer their technology and services as a fintech-as-a-service (FaaS) platform for traditional financial institutions, startups, and other non-financial companies to use. Today, amidst the high demand and skyrocketing demand for user-friendly digital services, the FaaS market is charting out a massive growth story.
According to SNS Insider’s research, a welcoming combination of technological advancements, attractive consumer behaviors, supportive regulatory changes, and industry partnerships are fuelling the growth of FaaS solutions. The market has already touched $272.5 billion in 2022 and is set to grow much further.
Fintech-as-a-service refers to a cloud-based model through which fintech firms offer their technologies as a service or platform for businesses to use. It allows businesses to integrate fintech solutions without having to build these technologies from scratch. From digital payments, and risk management to lending and compliance, the FaaS suite enables organizations to easily deploy a wide range of fintech solutions.
Given its high functionality, the FaaS market is witnessing unprecedented growth, redefining the financial landscape as we know it.
Talking about the growth of consumer demand across fintech, Arunabh Madhur, regional VP of EMEA, SHAREit Group commented: “The growth will evidently expand into 2023 and beyond, and for companies who wish to benefit from such growth, it is vital that they adapt to the digital payment changes to ensure future success”.
Driven by consumer demand for convenience and rising technologies, the FaaS market is experiencing exponential growth. The industry is projected to reach $983.5 billion by 2030, growing at a staggering CAGR of 17.4 per cent.
Luis Carbonnier, co-founder and co-CEO, Hokodo said: “Banks have slowly been losing their monopoly over financial services as tech firms. Off the back of this, we’ll see banks partnering up with more agile fintech firms to offer the services that they’re not capable of offering alone”. The collaboration between banks and fintech firms is key to pushing FaaS growth.
From growth in fintech adoption to the need for smarter banking solutions, there are a number of factors driving FaaS growth. As consumers demand advanced financial solutions, traditional institutions will turn to FaaS providers to digitalize their offerings.
FaaS solutions also bring high cost-efficiency and scalability to businesses, which in turn, propels their demand. Integrating expertise and advanced technologies with the help of FaaS, traditional institutions save on costs and expenditures to remain competitive in the market.
Finally, regulatory and compliance requirements are also advancing the demand and adoption of FaaS platforms across businesses. Businesses often turn to FaaS platforms to navigate their complex regulatory requirements and manage compliance risk.
Amidst the well-rounded exponential developments across the FaaS industry, there are several key trends that stand out to shape the future of the industry. First, the fund transfer segment will clock in the fastest growth in the coming years. Another dominant segment in the market will be that of AI models. AI is gaining traction in the industry due to its ability to automate and personalise processes.
When you look at the geographical distribution, you’ll find North America to take the crown in the FaaS industry. With a robust financial ecosystem, access to investments, and a tech-savvy population, the region has been highly supportive of the growth of fintech.
The FaaS industry has held strong, despite the impending global recession and gloomy economic outlook. On the contrary, the downturn has reignited the demand for cost-effective solutions, accelerating the business demand for FaaS platforms.
Over the forecast period, experts predict APAC to show the greatest CAGR in the market. Countries in the region are witnessing increasing FaaS adoption and investor funding, which is set to drive the industry growth. As the fintech industry evolves, FaaS systems are going to play a major role in its journey.