The Rise of Fintech as a Service (FaaS) Market: A $806.9 billion Industry Dominated by Tech Giants – PayPal (US) and Mastercard (US)| MarketsandMarkets™

Chicago, Aug. 19, 2024 (GLOBE NEWSWIRE) — The Fintech as a Service (FaaS) Market size is estimated to grow from USD 358.8 billion in 2024 to USD 806.9 billion by 2029 at a Compound Annual Growth Rate (CAGR) of 17.6% during the forecast period, according to a new report by MarketsandMarkets™.  FaaS is intended to offer payment, lending, analytics, and compliance services to various sectors. By leveraging pre-made specialized solutions in the financial domain, FaaS allows enterprises to avoid the significant financial and human resource expenditures that are usually associated with internal development from scratch.

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Fintech as a Service (FaaS) Market Dynamics:

Drivers:

• Operational flexibility and scalability with advent of cloud computing technology
• Innovation of AI and blockchain
• Growth in demand for streamlined compliance and regulatory solutions

Restraints:

• Complexity involved in integration with legacy systems
• Issues related to data security and privacy
• Risks associated with geopolitical and macroeconomic factors

Opportunities:

• Increase in shift toward digital banking and payments
• Leveraging technology to improve operational efficiency
• Expansion of cross-border payments and remittances

List of Key Companies in Fintech as a Service (FaaS) Market:

• PayPal (US)
• Mastercard (US)
• Fiserv (US)
• Block (US)
• Rapyd (UK)
• Envestnet (US)
• Upstart (US)
• Solid Financial (US)
• FIS (US)
• Synctera (US)

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In the financial landscape, every organization is adopting the fast-growing enhancement of digital payments and lending and other operations where security monitoring of FaaS becomes critical. Secure APIs enable the secure transfer of data between their systems and fintech companies and compliance with regulations

Trend: Transforming Fintech-as-a-service through Blockchain

Blockchain in Fintech as a Service (FaaS) provides secure, transparent, and tamper-proof transactions. The payments, remittances, and asset management because the cryptographic algorithms used by blockchain ensure the security and immutability of transactions. Through this, all the parties can verify transaction history without intermediaries.

Blockchain’s success in cross-border transactions is because of reducing fees and increasing speed, both by cutting out middlemen while transmitting money directly from sender to recipient using only 2 nodes. This eliminates any additional hops along the way that could slow down or draw funds before it reaches the destination. Blockchain is transforming the financial industry through security (because of trust), transparency (of shared information), efficiency (in workflow), and cost savings (through these operational improvements). It helps businesses to stay relevant and competitive among other players in the fintech space.

Trend: Secure data sharing through the use of APIs in banking operations.

In financial services, APIs secure data sharing by enabling integration among banks, fintech, and third-party providers, which is crucial for banking platforms. Through APIs customers can share financial data by accessing innovative solutions with trusted parties. In banking, APIs allow institutes to update and extend functionalities without affecting the overall system with a modular approach, which enables APIs to open new revenue streams, improve customer engagement, integrate services into a single platform, and reduce costs. This helps financial institutions reach new markets while adhering to rules and regulations and providing better management.

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Trend: Big data analytics prevailing in the fintech industry

The fintech industry is seeing a rise in big data analytics applications, as a reason financial institutions are investing in platforms and technologies that collect, process and analyze large and complex data. The tools being used in big data analytics offer financial services to organizations, customers, and third-party developers, including risk assessment, fraud detection, and customer behavior. By analyzing large amounts of customer data, financial institutions can better understand customer needs and preferences, helping them to develop more personalized products and services by developing a deeper understanding of consumer needs and preferences.

By type, Banking accounts for the highest CAGR during the forecast period.

In Fintech as a Service Market, banking is picking up fast-moving growth, showing a promising future during the forecast period. The reasons are the increasing penetration of digital banking, which is backed by the rising smartphone adoption and shifting customer preferences towards the digital world platforms. Since the partnerships of traditional banks with the fintech companies have changed the banking sphere, by bringing into existence the neobanks and challenger banks have disrupted traditional banking with superior user experiences and innovative products, which has fueled the expansion of the customer base. Other factors include digital wallets, mobile banking, government provisions for providing banking to the underserved, and a broad range of other banking services offered by fintech companies.

By technology, Blockchain accounts for a larger market share.

Blockchain holds a promising dominating future in Fintech as a Service Market, as its potential to redefine financial services are undeniable. It helps business models as decentralized finance by removing third parties and centralizing the institutions from financial transactions using technology. Blockchain technology is cryptocurrencies and software that allow people to do financial transactions with each other. Blockchain’s security features work on reducing fraud and errors using data privacy and immutable records, building transparency and people’s trust; it also helps by automating processes through smart contacts for intermediaries and lowering operational expenses, which in return becomes more cost-efficient. Blockchain is suitable mainly for large-scale applications and other businesses due to its technological advancements, scalable performance, regulatory clarity, and cross-border transactions promoting financial inclusion.

Opportunity: Transformative personalized on-demand affordable coverage.

InsureTech companies develop innovative products and distribution channels such as micro-insurance for specific risks, usage-based insurance that premiums on real-time driving behavior, and on-demand insurance for coverage needs. Digital Distribution includes mobile apps, online platforms social media, and embedded insurance policies into platforms like e-commerce sites and ride-sharing apps. With data analytics and AI, risk assessment and pricing enable predictive models with real-time data analysis, dynamic pricing, and automated underwriting. Regtech solutions further automate the compliance process by ensuring data privacy and regulatory monitoring, simplifying the process of reporting and audits. These provide tools for scenario analysis, real-time monitoring, and risk assessment.

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