Short update from the Team @ McKinsey & Co. on the interconnection between AI and FinTech.
report
Key details:
Four trends that will shape the future of fintech:
1. The first and most consequential force is artificial intelligence. It is the accelerant behind most trends in this report. AI is supercharging structural trends that have been eroding incumbent advantages for years-but the pace has changed. Fintechs are deploying AI to build products in weeks that once took years, to serve customer segments that were previously not economically viable, and to compress cost structures so that legacy operating models cannot compete on price.
2. Second is the rise of digital assets such as stablecoins and tokenized deposits. With instant, near-free settlement, the promise of stablecoins for cross-border payments and remittances is clear. However, of the $35 trillion reported annual stablecoin transaction volume, only about 1 percent, or $390 billion, represents true end user payments, such as paying suppliers or sending remittances.
3. Third, fintechs are increasingly viewing banking licenses not as constraints but as strategic tools to unlock cheaper funding, enable expansion opportunities, enhance trust with customers, and reinforce their moats. In 2025, 21 fintechs applied for banking charters in the United States, more than in the previous four years combined. This could further reinforce the market bifurcation between the largest-scaled fintechs with licenses and the rest, and potentially reduce a key moat for incumbent financial institutions.
4. Finally, a new form of fintech is gathering momentum and attracting a disproportionate share of investment. These are "horizontal" fintechs-software firms that help digitize incumbents from the inside out. They are ecosystem enablers that improve the efficiency of parts of the financial-services value chain. Today, these horizontal fintechs represent about 13 percent of industry revenues and have grown 25 percent faster than those directly competing with financial-services players over the past four years. They pose little direct competition to incumbents, and, in fact, help them modernize and survive, particularly those without the scale, cash, or appetite to build similar solutions themselves. In some pockets-for example, UK insurtech-they have received 90 percent of all investment over the past five years.
Recipes for success:
- Economics. The industry has moved from a phase in which growth alone was rewarded, through a period where profitability became paramount, into a new equilibrium that demands both. Winning firms demonstrate strong growth while achieving profitability or demonstrating a near-term graduation path to credible unit economics.
- Product and distribution. In a world in which AI is reshaping the cost and speed of product development, the age-old debate between product and distribution now looks to be over. Trusted distribution is the critical ingredient that will differentiate winners from losers; fintechs that have earned that trust through years of reliable service, transparent pricing, and regulatory credibility will find it compounds over time. That is not to say user interfaces and products won't be important; rather, they will be less differentiating. A feature is no longer a fintech.
- Regulatory posture and production-grade capabilities. Fintechs are increasingly shifting the perception of regulation from a barrier to a source of differentiation. Mature compliance capabilities are a touchstone of distinctive modern fintechs.
#AI #Fintech #innovationcommunity
- Todor
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Todor Kostov
Director
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