“Fintech is only 3% finished. We only have 3% market share, and the market narrative has shifted.”
– Simon (referencing how much more room fintech has to grow)
“If you feel like you’ve fallen asleep on fintech, wake up in 2025 because it’s going to be exciting.”
– Simon (highlighting the near-future shake-up)
Fintech in 2025 is only just getting started—hyperscalers are emerging, banks are in a surprisingly strong position (for now), AI and stablecoins are unleashing new product possibilities, and the ‘great rebundling’ of financial services is on the horizon.
Today’s incumbents (banks, large networks like Visa/Mastercard) continue to thrive thanks to strong macroeconomics and scale. However, fintech “hyperscalers” (companies like Stripe, Nubank, Revolut, Robinhood, and Klarna) are poised for rapid expansion, potentially capturing a massive share of the world’s $30 trillion financial services market. AI, stablecoins, and open finance regulations are all catalysts that make it easier for challengers to finally move beyond table scraps and threaten core revenue streams (like credit cards, payments, global corporate banking).
The Rise of Fintech Hyperscalers
- Fintech “hyperscalers” (Nubank, Revolut, Klarna, Stripe, Robinhood, etc.) have the potential to exceed the scale of major incumbents within the next decade.
- Massive Customer Bases: Nubank has 100+ million customers; Revolut is at 35+ million.
- High Growth Rates: Stripe’s 35% TBV CAGR illustrates how quickly digital disruptors can reach enterprise scale.
- Geographic Expansion: International markets open new doors, e.g., Revolut’s push into Mexico, Robinhood’s expansion into Europe.
- Hyperscalers use AI to cut costs dramatically (e.g., Klarna reducing hundreds of support agents). That fosters even faster scaling.
The “Great Rebundling”
“The last 10 years unbundled the simpler products… now we are seeing the great rebundling of finance.”
– Simon (on fintech evolution)
- After a decade of unbundling (niche products like debit-only neobanks and single-product apps), fintech players are now “rebundling” to deliver entire financial suites (credit cards, savings, brokerage, etc.).
- Robinhood: Transition from stock trading to retirement accounts, high-yield savings, credit cards (X1), etc.
- Neobanks: Revolut, Nubank, SoFi, and others are layering multiple services on top of simple bank accounts.
- The ability to embed or integrate multiple services (cards, real-time pay, stablecoins) simplifies cross-selling
AI in Financial Services
“Financial services is a $30 trillion market. Most of that goes to labor, like $27 trillion. AI means more of that can be done by software.”
– Rex (underscoring the magnitude of AI’s potential impact)
- AI is changing the labor vs. software dynamic, unlocking more of the $30 trillion market.
- Labor Cost: Financial services historically pay $27 trillion in labor on a $30 trillion revenue base. If AI automates large portions of compliance, underwriting, or support, digital newcomers can scale with fewer staff.
- Klarna: They claim 700 support jobs are now replaced by AI chatbots.
- Private Credit & Capital Markets: Research/analysis can be AI-driven, lowering the barrier to entry in once “untouchable” segments for challengers.
- AI both increases deepfake potential (making KYC harder) and enables faster detection.
Embedded Finance & Regulation
- Embedded finance (integrating financial products within non-financial websites/apps) remains a large net-new growth opportunity, but 2023-24 brought more regulatory scrutiny.
- VC Funding Correlation: As new fintech programs and embedded finance initiatives soared, so did enforcement actions; when funding dipped, program launches slowed.
- Synapse Blow-up: Real-world example of consumer harm highlighting the need for compliance maturity.
- Banks as Partners: Smaller bank platforms like Pathward, Bankcorp, and Column can achieve higher ROA (2%+) by powering embedded solutions.
- As Apple, Google, and even Amazon embed more financial features, more scrutiny falls on the sponsors behind the scenes.
Payments: The Fistfight for Global Volume
- Payment processing is a winner-take-most environment, with growth rates mattering more than absolute volume. Stripe, Adyen, and PayPal are expanding quickly, while JP Morgan Payment Services remains the 900-pound gorilla.
- Stripe: Gains an edge from “indexing” to growth startups, e.g., 82% of Andreessen Horowitz’s AI portfolio use Stripe.
- Adyen: No longer just e-commerce—moving into in-store POS, competing with Toast and Shift4.
- Shopify: A historically Stripe-exclusive partner is now diversifying to PayPal and Adyen.