Fintech
Fintech is financial services delivered through technology by firms that compete with, supply or sit inside the incumbent banks, insurers and asset managers — payments, lending, banking, wealth, insurance, infrastructure and compliance software — and the sector those firms make up, whose acquisitions run to tens of billions a year. Most fintechs are licensed, or operate on a partner's licence, and are regulated as the financial institutions they are; the technology is the delivery, the product is money.
- Also known as
- Financial technology, FinTech, Fintech company, Fintech sector
- Used at
- the segments — payments (acquiring, gateways, wallets, cross-border), lending (consumer, SME, BNPL), banking (neobanks, BaaS), wealth (robo-advisers, brokers, platforms), insurance (insurtech), capital markets and infrastructure (data, core banking, orchestration), compliance (regtech, identity), and crypto-assets; and the business models — interchange and processing fees, net interest margin, subscriptions, SaaS, take rates and outcome-based pricing
- Binding
- the same regulation as the incumbents — payment and e-money licences (PSD2 and its successor in the EU, the UK's Payment Services Regulations), banking licences, lending and consumer-credit rules, investment licences, insurance authorisation, AML at every layer, data protection, and the EU AI Act for models that decide about customers; unlicensed fintechs operate through a licensed partner and inherit its obligations
- Typical economics
- investment peaked in 2021 (over $200 billion globally by most counts), fell by more than half in 2023, and stabilised around profitable growth; valuations moved from revenue multiples of 20–40× to 5–10× for growth and to earnings-based multiples for the mature; the largest companies (Stripe, Revolut, Nubank, Adyen, Klarna, Wise) reached tens of billions of dollars; thousands of smaller ones were acquired, merged or closed
- Typical M&A
- strategic acquisitions by incumbents (banks buying wealth and payments technology), consolidation among fintechs (payments roll-ups, neobank mergers), private-equity buyouts of profitable infrastructure and software, and the AI-driven transactions of 2024–2025 in fraud, identity and automation
- Parties
- the fintechs, the incumbents they compete with and sell to, the regulators, the venture and private-equity investors, the sponsor banks and card schemes whose rails they run on, and the customers
How fintech works in practice
A fintech chooses a slice of finance — cross-border payments for SMEs — and rebuilds it: a licence (or a partner's), integrations with the rails (banks, schemes, local clearing), a product designed from the customer's screen backward, and pricing transparent where the incumbents' was opaque. Growth comes from a better experience and a lower price; margin comes from the same fees the incumbents earned, taken more efficiently; defensibility comes from the licence, the integrations, the data and the brand, none of which the technology alone provides. The firm is regulated from its first customer, and the compliance, risk and capital functions scale with the book — the part of the model that the 2010s underestimated and the 2020s corrected.
The sector's shape by the mid-2020s: a few large winners in each segment; many mid-sized firms profitable enough to be bought and not large enough to be independent; infrastructure and software companies selling to both fintechs and incumbents; and the incumbents themselves, who bought or built what they needed and remain the majority of the market. Embedded finance moved the product into non-financial software; banking as a service supplied the licences; AI became the layer every fintech now claims and a few actually run at scale — in fraud, underwriting, service and compliance. The M&A market prices all of this: a fintech is valued on its revenue quality, its regulatory standing, its unit economics and its data, and the diligence reads the licence file before the pitch deck.
For a founder, fintech is a regulated business with a technology advantage that erodes, in which the durable assets are the ones that took years to build; for a buyer, it is a sector where the licence and the book are the price and the technology is the reason to pay it.
Example
A cross-border payments fintech reaches €38 million of revenue, 22% EBITDA margin and 40% growth in 2025, with an EMI licence, integrations into 30 local clearing systems and 9,000 SME customers. Three types of buyer appear: a bank wanting the product and the customers (offers 6× revenue, conditional on regulatory approval of the change of control); a payments consolidator wanting the integrations and the volume (5× with a earn-out); a private-equity firm backing the management to buy more (5.5×, with a rollover). The process, run over six months, closes with the bank at €228 million; the approval takes five months; and the founders, who had built the licensing and clearing integrations over seven years, sell what the technology alone was never worth.
Common mistakes
- Treating the fintech as a technology company and discovering at the first regulatory review that it is a financial institution. - Scaling customers faster than compliance, capital and risk. - Valuing a fintech on revenue growth without reading its licence, its book and its regulator correspondence. - Assuming the technology is the moat; the licence, the integrations and the data are. - Partnerships with a sponsor bank taken as permanent; they are contracts that end.