Dec 23, 2024

Fintech Trends for 2025: AI Innovation, Shifting Business Models, and Evolving Leadership Skills – by Axel Demazy, CEO of Spendesk Guest Post by  Axel Demazy , CEO of Spendesk Making accurate forecasts for the year ahead is a tricky task for any business, but there is plenty of evidence to suggest that 2025 can be a bright one for the fintech sector. While there were challenges in 2024, with investment in the industry continuing to fall, there are many positive developments that fintech companies can use to their advantage in the months ahead. The  ongoing push  to accelerate digitalisation of European businesses is creating genuine opportunities for innovative financial institutions – and the rise of AI should raise the pace even more. Focusing on the creation of lean, future-proofed business models and investing in the right technologies will be key for fintechs that want to make a success of 2025. Here’s a look at the major trends that will shape the coming year for the sector. Innovation to the fore, driven by AI The increasing investment in AI by fintech organisations will continue in 2025, with projections indicating a compound annual growth rate (CAGR) of 19.72% for this market until 2032 – by which point investments will have reached a staggering $61.6 billion globally. In key markets such as the UK, the adoption rate for AI solutions among SMBs has grown more than 32 times in the two years from 2022 to 2024. AI is a loose term, covering many different technologies, but it can be applied to a variety of use cases across finance such as fraud detection, customer services, reducing risk and enabling better decision-making. This means there is great potential for innovation driven by fintech companies, as disruptive organisations seek to create tools that will help financial institutions meet the needs of their customers as well as regulatory demands. The application of AI to fraud detection is a particularly interesting area, with cybercrime on the rise and banks needing to ensure the security of transactions and customer data. Fintechs that are helping businesses adapt to changing regulation also have a big opportunity over the next year. For example, in France where the government is introducing laws to mandate e-invoicing between companies, fintechs (such as Spendesk) are becoming partner dematerialization platforms (PDPs) – and can establish themselves as key partners for businesses. Shifting business models As the fintech market becomes more crowded we will see increasing amounts of consolidation. Organisations that have built their business models around high interest rates will be forced to pivot as these rates come down. This means they may merge or partner with other fintech providers to broaden their services for clients. But another possibility for such fintechs lies in collaborating with large, established financial institutions. Big banks that have long innovation cycles due to internal bureaucracy and legacy infrastructure can quickly provide market-leading services to their customers by partnering with – or even acquiring – fintech companies. For example, Lloyds has recently partnered with PayPoint Group to expand its service offering for SMBs, while UniCredit this year acquired Banking-as-a-Service (BaaS) provider Vodeno to bolster its embedded finance offering. Speaking of embedded finance, this will be one of the key growth areas in fintech in 2025; consumers increasingly expect to be able to access financial services through the ecommerce platforms and other apps they use every day. With the rise of BaaS, more companies are able to offer customers financial services such as payments, loans, investments, and insurance. Platforms that offer white-label access to these services will be hot property over the coming year. Evolving your leadership skills The coming year will be a challenge for fast-growing fintech companies. There is a steep learning curve from building prototype products and rallying investors, to managing and scaling a profitable business day-to-day. It’s therefore vital that leaders evolve their skills and perspectives as fintech companies grow. It’s important to retain the agility that fosters innovation; but reaching the next level requires a focus on sustaining a business model fit for the longer term, and structures will need to be streamlined to keep the organisation fit for the challenges that lie ahead. Factors such as regulation and compliance must form a part of growth strategies, and the businesses that will be most successful are the ones that recognise the need for excellence in KYC, AML and data privacy processes, as their customers and partners will demand this. The best approach to compliance is to turn it into a selling point for your organisation; fintechs that treat regulation as an afterthought or see it as a blocker are setting themselves up for failure. Opportunities abound for fintech in 2025 – but so do risks While fintech investment seems likely to maintain a downward trajectory in 2025, there are some areas such as the UK that are  bucking the trend . But more consolidation is highly likely in the coming year, and only the strongest business models will survive. Fintechs that recognise the value of closely conforming to regulations – and that can communicate this value clearly to customers and partners – have the best chance of getting themselves noticed, as will those that learn how to blend innovation with long-term thinking. And while artificial intelligence is likely to play a big part in enabling this innovation, it’s up to humans to display the strong leadership required to weather any storms ahead. Source: VCWire