- Fintechs are growing far faster than banks (~21% vs ~6% YoY), increasingly profitable, but still only ~3% of global banking and insurance revenue.
- They also lead AI execution, driving ~70% of initiatives despite being ~40% of tracked entities, while banks are slowed by regulation, legacy tech, and culture.
- To close the innovation gap, banks are accelerating fintech partnerships and M&A (e.g., FIS-Amount, Fifth Third deals) to add digital and embedded capabilities.
- More permissive regulation on charters and consolidation is lowering barriers for fintechs and intensifying competitive pressure on incumbents.
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The financial services sector is at a strategic inflection point: fintechs are no longer marginal disruptors but established, profitable competitors outpacing incumbents across innovation, revenue growth, and AI deployment. A recent analysis shows fintechs growing significantly faster (~21% vs ~6%) than traditional banks globally, improving profitability (69% of public fintechs now EBITDA-positive), yet capturing only ~3% of sector revenues.
On technology deployment—especially AI—fintechs account for around 70% of measurable initiatives despite representing ~40% of entities, due to their agility, leaner operations, and fewer legacy constraints. Banks’ efforts often stall in pilot phases or focus on incremental enhancements rather than transformative use cases.
To bridge this gap, many banks are shifting strategy toward acquiring or partnering with fintechs. Recent deals illustrate this momentum: FIS’s acquisition of Amount (a $1 billion-valued fintech) to enhance its digital banking tools and Fifth Third’s multiple fintech investments and partnerships—such as acquiring Rize, teaming with Brex, and acquiring Comerica in a major bank-bank deal—all reflect attempts to build innovation engines rather than just incremental enhancements.
Regulatory winds are shifting. Authorities are showing increased openness to fintechs seeking bank charters or deposit insurance and easing restrictions on mergers and acquisitions among institutions of different sizes. This, coupled with aggressive fintech expansion (e.g., into deposits, payments, credit), raises the competitive stakes for banks.
Strategic implications: Banks that continue defending existing models without embedding fintech innovation risk losing share in payments, deposits, and credit. M&A must be disciplined—early, small, and well integrated—and complemented by systematic scouting and cultural transformation. Questions remain around valuation risks, integration drag, regulatory compliance, and how banks will protect trust as speed of innovation accelerates.
Supporting Notes
- Fintech revenues grew ~21% YoY, compared to ~6% for incumbents; ~69% of public fintechs are now profitable.
- Fintechs represent ~40% of financial entities tracked in McKinsey’s AI initiative dataset but lead ~70% of AI projects.
- FIS acquired fintech Amount (valued at $1B), integrating digital account-opening tools across its offering.
- Fifth Third has acquired embedded finance fintechs (e.g., Rize), partnered with Brex to tap ~$5.6B in commercial card volume, and is acquiring Comerica Bank for $10.9B.
- Regulators are becoming more permissive of fintechs obtaining charters, and M&A approvals across bank size tiers are easing.
- Large fintechs such as Klarna, Robinhood, Credit Karma, Nubank, Chime cited as public, profitable, and growing faster than many incumbents. [Primary article]