Fintech as a Service (FaaS) Market worth $676.9 billion by 2028, growing at a CAGR of 16.9%: Report by MarketsandMarkets™

Chicago, Aug. 11, 2023 (GLOBE NEWSWIRE) -- The Fintech as a Service (FaaS) Market is expected to experience substantial growth, with projections indicating a rise from USD 310.5 billion in 2023 to USD 676.9 billion by 2028, exhibiting a compound annual growth rate of 16.9%, during the forecast period, according to a new report by MarketsandMarkets™.  The growth of the FaaS market is driven by factors such as the emergence of cloud computing technology which will facilitate operational flexibility and scalability for businesses and increasing market demand for efficient compliance and regulatory solutions.

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237 - Tables
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Scope of the Report

These include the convergence of artificial intelligence and blockchain technology into FaaS, which has created a heightened demand for robust FaaS solutions. Additionally, organizations are becoming more aware of the importance of compliance and regulatory management and are investing in FaaS systems to meet regulatory requirements. These solutions reduce the risk of regulatory violations and enable banks and other financial institutions to operate more efficiently and cost-effectively.

The promising growth potential of the FaaS market can be attributed to various factors, including the introduction of API and Cloud-powered FaaS services, the blockchain aspect, and the increasing adoption of FaaS among SMEs.

Trend: AI/ML

AI and ML have transformed the Fintech industry by enabling financial institutions to automate processes, improve customer experience, and reduce costs. AI and ML are used in various applications in Fintech, such as financial advisory, fraud detection, customer support, and risk management. AI-powered chatbots can provide all-round customer support, while ML algorithms can analyze large amounts of data to detect fraudulent activities. These technologies can quickly identify suspicious activities and prevent fraudulent transactions by analyzing customer behavior and transaction data. These technologies can help businesses make informed decisions, reduce the likelihood of fraud, and enhance the customer experience. Therefore, AI/ML technologies will play a vital role in adopting FaaS solutions.

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Trend: Cloud Computing

Cloud computing has become a prominent technology in the fintech industry. Cloud computing involves using remote servers hosted on the Internet to store, manage, and process data. Cloud computing in FaaS refers to using cloud-based infrastructure and services to provide financial services such as payments, lending, and asset management to third-party developers, businesses, and consumers. Scaling up or down based on demand without significant capital investment in hardware and software using cloud solutions can enable financial institutions to respond quickly to changing market conditions and customer needs. With cloud-based services, financial institutions can quickly test and deploy new products and services without significant IT infrastructure changes. Cloud-based infrastructure and services can provide advanced security features and compliance controls, which can help financial institutions meet regulatory requirements and protect sensitive customer information. Thus, Cloud Computing empowers businesses to focus on innovation, agility, and customer-centricity while leveraging the benefits of cloud-based FaaS platforms.

By type, the Banking segment accounts for the highest CAGR

The banking segment in the FaaS market is responsible for providing core banking services to other businesses and organizations. Traditional banking institutions increasingly embrace digital transformation to enhance customer experiences, streamline operations, and stay competitive. FaaS providers offering banking-related services, such as core banking systems, digital banking platforms, or open banking APIs, cater to this growing demand for innovative banking solutions. Open banking initiatives, which promote the secure sharing of banking data through APIs, have gained momentum worldwide. Fintech solutions in the banking sector focus on customer-centric services, such as personalized banking experiences, real-time transaction updates, budgeting tools, and financial management applications. FaaS providers in the Banking segment offer robust security measures and compliance frameworks to address the stringent regulatory requirements of the financial industry. Thus, the Banking segment in FaaS accounts for a higher CAGR during the forecasted period.

By technology, the AI segment accounts for the highest CAGR

In the dynamic FaaS solution market, vendors continually enhance their offerings by providing robust technologies capable of deriving valuable insights from vast amounts of financial data. These AI-based analytics solutions help businesses make data-driven decisions, improve risk assessment, detect fraud, and optimize operational processes. AI enables FaaS providers to deliver personalized customer experiences through chatbots, virtual assistants, and recommendation engines. RPA combines AI and automation to automate repetitive and rule-based tasks in financial processes, such as data entry, reconciliation, and compliance checks. By leveraging AI algorithms, FaaS providers can optimize operational efficiency, reduce costs, and minimize errors. As businesses increasingly recognize the potential of the latest technologies in optimizing processes, delivering personalized experiences, and managing risks, adopting technology-powered FaaS solutions is expected to continue growing in the coming years. Thus, the technology segment accounts for a higher CAGR.

Opportunity: Leveraging technology to increase and improve operational efficiency

Technology has recently revolutionized the banking sector, transforming how banks operate and interact with customers. One of the most significant changes has been the rise of digital banking, which has become increasingly popular among consumers. Banks can gain insights into customer behavior and preferences by leveraging data analytics and artificial intelligence (AI) and tailor their services accordingly. By analyzing data from various sources, such as social media and transaction records, banks can better understand their customers and tailor their services to meet their needs. This can lead to increased customer loyalty and satisfaction and improved operational efficiency. Businesses in the FaaS market are leveraging technology to increase and improve their operational efficiency. By partnering with FaaS providers, banks can access a wide range of innovative technologies to streamline their operations and reduce costs. This creates an opportunity for organizations, including SMEs, to adopt FaaS solutions and enhance their security posture effectively. Therefore, it helps businesses stay ahead of the curve and remain competitive in a rapidly evolving market.

Top Companies in Fintech as a Service (FaaS) Market:

PayPal (US), Mastercard (US), Fiserv (US), Block (US), Rapyd (UK), Envestnet (US), Upstart (US), Solid Financial Technologies (US), FIS (US), Synctera (US), Stripe (US), Adyen (Netherlands), Dwolla (US), Finastra (UK), Revolut (UK), Fispan (Canada), NIUM (SG), Airwallex (AUS), SoFi (US), Marqeta (US), Finix (US), Synapse (US), are the key players and other players in the FaaS market.

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Top Trends in Global Fintech as a Service (FaaS) Market:

• Application Programming Interfaces (APIs) were used by fintech as a service providers to provide easy interaction with third-party applications. Initiatives for "open banking" were picking up steam, enabling users to safely exchange their financial information with other financial service providers, improving personalization and user experiences.
• FaaS suppliers concentrated on supplying scalable and adaptable solutions to satisfy the various needs of enterprises. This development made it possible for businesses to select and alter fintech services in accordance with their needs without making a substantial initial infrastructure expenditure.
• FaaS vendors were providing compliance and regulatory help due to the complexity of financial rules. By ensuring that firms employing their services could continue to adhere to pertinent financial laws and norms, these providers helped to lighten the burden of regulatory adherence.
• Due to their adaptability, affordability, and simplicity of use, cloud-based FaaS solutions were becoming more and more popular. Cloud computing has made it possible for businesses to swiftly launch finance services without the need for expensive IT infrastructure.
• With the popularity of blockchain-based financial services increasing, the DeFi movement was expanding inside the FaaS sector. Users looking for decentralised and permissionless financial solutions were drawn to DeFi platforms because they provided services like lending, borrowing, and yield farming without the use of conventional intermediaries.
• FaaS providers prioritised strong security measures and fraud prevention methods as more financial transactions migrated online. Biometrics, biometric authentication, and AI-driven fraud detection were all becoming standard components of FaaS products.
• Targeting emerging markets with limited access to traditional financial institutions, fintech as a service providers. These markets could advance into the digital financial ecosystem by providing FaaS solutions, encouraging financial inclusion.

Key Industry Development:

• The exponential growth of embedded finance has been one of the most notable developments in the FaaS business. Strategic alliances were being created between non-financial companies and providers of fintech as a service to enable those companies to integrate financial services into their platforms and products. With the help of this trend, businesses could offer smooth financial services that were tailored to the needs of the individual client, which enhanced client retention and opened up new revenue streams.
• Application Programming Interfaces (APIs) were a major factor in the expansion of the FaaS business. The adoption of standardised APIs by fintech as a service providers has increased, making it simpler for enterprises and financial institutions to interact with and use fintech services. Globally, measures to promote secure and regulated data sharing between financial institutions and independent FaaS providers, known as "open banking," were also picking up steam.
• An important development in the FaaS sector was the rise of decentralised finance (DeFi) platforms. Blockchain-based DeFi protocols provided a range of financial services, including lending, borrowing, and yield farming, without the use of conventional middlemen. DeFi posed a threat to the established financial system by offering alternatives that were decentralised and permissionless, drawing an expanding user and investment base.
• Due to its scalability, flexibility, and affordability, cloud technology continued to fuel the FaaS market's expansion. Businesses may now access financial services without having to invest heavily in on-premise equipment thanks to the growing number of cloud-based solutions that fintech as a service companies are offering.
• FaaS providers were investing in strong cybersecurity measures and fraud prevention technology in response to the rising usage of digital financial services. To protect client data and transactions, advanced authentication techniques, biometrics, and AI-driven fraud detection systems were integrated into FaaS products.
• In order to meet the financial requirements of underprivileged populations, fintech as a service providers targeted emerging markets. Offering FaaS solutions could give these markets access to affordable and inclusive financial services, advancing the cause of financial inclusion.
• Advanced data analytics and business intelligence technologies were being incorporated by FaaS providers into their systems. Through the use of these analytics tools, organisations were able to uncover important financial data insights that helped them make wise decisions, spot patterns, and streamline their processes.

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