Embedded finance to be $320-billion revenue market by 2030: BCG

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The embedded finance market projected to reach over $320 billion in revenue by 2030, said a report by QED Investors and Boston Consulting Group (BCG).

The report highlighted the growth in real-time payments in India. The number of monthly real-time payments has grown by five times in the last three years, from 2.6 billion to 13.3 billion. The availability of an alias directory and QR codes on top of RTP infrastructure was critical to propelling innovation

The report noted that the DPI stack has government-defined protocols throughout three layers, which in turn enable private innovation: foundational national digital ID, platform for interoperable instant and cheap payments, and consent-based exchange of federalised data.

Enterprise segment

The enterprise segment of embedded finance is expected to grow to a $50 billion revenue market, with horizontal software increasingly integrating payments, lending, and trade to address persistent issues in accounts payable and receivable.

Financial services are being embedded into B2B platforms and supplier networks, incorporating value-added services like cash flow forecasting and spending management tools.

Despite advancements, global fintech valuations have plummeted from 20 times revenue to four times on average, with funding down 70%, and nearly 50% in the past year, according to the Boston Consulting Group. The decline has been more pronounced in late-stage investments, which have dropped by up to 89%, compared to a decline in the range of 54% to 73% in early-stage funding rounds.

Also read: Kogta Financial raises $148 million in Series-E investment from Ontario Teachers’ Pension Plan

“With an annual global profit pool of $3.2 trillion on a base of $14 trillion in total revenue, the financial services industry is both massive and ripe for innovation,” said Nigel Morris, Managing Partner at QED Investors.

“Fintechs are growing faster than incumbents, and while the $320 billion in fintech revenue represents less than 3% today, the exponential advances in generative AI and continued growth in embedded finance indicate that we are still in the early stages of fintech’s journey. The separation of winners and losers is becoming apparent,” he said.