QED-BCG report: Fintech profits surge, but share remains small

A new report from QED Investors and Boston Consulting Group shows that fintech companies are enjoying a surge in profitability, yet they still account for only a small fraction of the broader financial services market. The study found that global fintech revenues grew 21 percent over the past year, with nearly 70 percent of publicly listed fintechs now operating profitably. This marks a sharp turnaround from just two years ago, when many firms were cutting costs to survive a funding slowdown.

The report attributes much of the revenue growth to rising adoption of digital financial products across both developed and emerging markets. Payments, lending, and wealth management platforms saw particularly strong momentum as more consumers shifted to online channels. The rebound in cryptocurrency-related services also contributed to top-line gains, though that segment remains more volatile than traditional fintech offerings.

Despite these advances, fintech still holds a relatively small share of the financial sector. The study estimates that fintech accounts for just 3 percent of total revenues in banking and insurance. While this is up from less than 2 percent five years ago, it highlights the scale of opportunity—and the challenge of breaking into markets dominated by established institutions.

Profitability has improved largely due to disciplined expense management, better monetization strategies, and a renewed focus on high-margin products. Several major players have shifted away from rapid customer acquisition at any cost, instead prioritizing sustainable growth through cross-selling and premium services. In addition, partnerships with banks have become an important revenue stream, allowing fintechs to access broader customer bases without building costly infrastructure from scratch.

The report also notes that regulatory clarity has played a role in the recovery. In some jurisdictions, new licensing frameworks for digital lenders, payments firms, and investment platforms have reduced uncertainty and encouraged capital inflows. However, challenges remain in markets where rules are inconsistent or evolving rapidly, which can complicate scaling efforts.

Looking ahead, QED and BCG expect the next phase of growth to be driven by expansion into underbanked regions, increased integration of artificial intelligence in customer service and risk management, and the rise of embedded finance models. These models allow financial services to be offered directly within non-financial apps, creating new distribution channels.

Investors appear to be taking notice. Funding rounds for late-stage fintech companies have begun to pick up after a slow 2023 and 2024, and valuations have stabilized in many segments. Still, analysts caution that competition will intensify as both traditional financial institutions and large technology companies expand their digital offerings.

The overall message from the report is that fintech has entered a more mature phase. The era of unchecked growth and easy capital is over, but companies that have adapted to the new environment are now seeing the benefits. Whether they can grow their share beyond single digits will depend on their ability to win customers from entrenched incumbents while maintaining profitability.