Asia-Pacific (APAC) is likely to outpace the United States and become the world’s top fintech market by 2030, with a projected compound annual growth rate (CAGR) of 27%, according to a report by Boston Consulting Group (BCG) and QED Investors.
The report titled, Global Fintech 2023: Reimagining the Future of Finance, said that the majority of growth is expected to come from emerging APACs regions, including China, India, and Indonesia, compared to developed ones like Japan and South Korea, as they have the largest fintechs, voluminous underbanked populations, a high number of SMEs, and a rising tech-savvy youth and middle class.
Spotlighting India’s fintech sector, the report said the country has the opportunity to leapfrog the intermediate stages of fintech development more-developed financial markets have undergone, especially if it can benefit from supportive regulation.
“The Indian regulator is taking an active role in shaping the market through vehicles such as UPI, Aadhar, Rupay, and Digilocker,” the report added.
More than 1.3 billion Indians are enrolled in Aadhar—the largest biometric identity system in the world—while UPI processed $1.25 trillion in transactions in FY21–2022, continuing to grow fast.
It suggested that the sector’s growth will require regulators across the globe to act with urgency and thoughtfulness more holistically.
“Currently, regulators are often just “reacting” to the latest predicament. The recent series of bank crises (e.g., SVB and Crédit Suisse), along with massive financial frauds (e.g., Wirecard and FTX), have made regulators more sensitive to asset/liability management. However, while creating guardrails, they must also take care not to overregulate the industry and stifle innovation,” it said.
Expanding GDP (a CAGR of 7% per year), the rise of the educated middle class, younger demographics coming of age, and increasing fintech penetration will spur fintech revenues in India, the report added.
“Spread businesses like neobanks and lending platforms will face challenges in the developed world while playing a critical role in emerging markets,” it said, adding that further growth areas are lending, neobanking, and wealthtech segments.