AI, Automation, and Open Banking Drive Growth in Fintech-as-a-Service

The financial services sector is undergoing rapid digital transformation, fueled by advancements in artificial intelligence, automation, and the expansion of open banking, as highlighted in The Fintech Times. According to a recent report by The Business Research Company, the fintech-as-a-service (FaaS) market has experienced remarkable growth, increasing from $327.51 billion in 2023 to $386.39 billion in 2024 at a compound annual growth rate (CAGR) of 18%. The market is projected to reach $745.53 billion by 2028, growing at a CAGR of 17.9%.

The acceleration of FaaS adoption is attributed to several key factors:

1. Technological Innovations:
   • Integration of AI and machine learning to enhance services such as financial advice and personalized customer experiences.
   • Use of blockchain and cryptocurrency for secure, transparent transactions.
2. Expansion of Open Banking:
   • Collaboration between banks and third-party providers via APIs fosters innovation and convenience.
3. Globalization of Services:
   • The shift towards cross-border financial solutions drives demand for FaaS.
4. Focus on Security and Compliance:
   • Adoption of regulatory technology (regtech) to ensure data privacy and regulatory compliance.

Additionally, trends like embedded finance, growth in API ecosystems, sustainable finance initiatives, and evolving payment solutions are reshaping the financial landscape.

A rise in mobile and internet penetration has driven increased adoption of digital and mobile banking services. FaaS supports this trend by enabling businesses to provide sophisticated online banking solutions. For example, a report by Finder.com revealed that 93% of Brits used online banking in 2022, with 10% planning to open digital-only accounts in 2023. By 2028, nearly 22.6 million Brits (43%) are expected to hold digital-only bank accounts, further driving the FaaS market’s growth.

Companies in the FaaS sector are investing heavily in innovative technologies to gain a competitive edge. In April 2023, Valley National Bank launched a fintech innovation platform powered by NayaOne. This platform integrates with multiple financial services, offering synthetic data tools that allow secure testing of novel fintech solutions. Such innovations exemplify the transformative potential of FaaS in delivering customized, user-friendly financial services.

The growth of the FaaS market offers significant advantages for businesses and investors:

• Market Insights: Detailed statistics and trends to inform strategic decisions.
• Informed Decision-Making: Data-driven approaches reduce risks and enhance planning.
• Competitive Advantage: Analysis of competitors and market share helps businesses stay ahead.
• Tailored Solutions: Customized reports cater to specific needs and objectives.
• Global Expansion: A comprehensive perspective on regional and international markets.

Prominent players driving the FaaS market include:

• Stripe Inc.
• Visa Inc.
• Mastercard Incorporated
• Fiserv Inc.
• Global Payments Inc.
• Coinbase Global Inc.
• Plaid Inc.
• Revolut Ltd.

These companies leverage cutting-edge technology to deliver scalable and efficient financial services globally.

As AI, automation, and open banking reshape the financial services industry, the fintech-as-a-service market is poised for continued growth. With technological advancements and increasing consumer demand for digital banking solutions, FaaS is set to become a cornerstone of modern finance.