The fintech sector is a rapidly evolving environment, with market activity and tech advancements constantly changing its landscape. It is also marked by significant competition among incumbents and startups, as they jostle to innovate, scale, and compete effectively. 

The last few years have been quiet ones for the sector, with shifting macroeconomic conditions and investor expectations leading to constrained funding and suppressed industry activity. However, 2025 has brought with it some momentum for fintech, with a wave of build, buy, partner activity signalling its rebound.

‍

Where We Stand: Q1 2025 Snapshot

The first quarter of the year witnessed several notable strategic mergers and acquisitions (M&A), partnerships, investments, and a renewed focus on profitability and operational efficiency. This has been buoyed by fintechs and financial institutions chasing acquisitions to scale, enhance tech capabilities, and better comply with regulatory requirements. Many firms have also demonstrated a more measured approach through partial acquisitions and strategic stakes in new markets to manage risk.

The global financial services market continued its strong growth in Q1 2025 and is projected to reach a value of around USD 36 trillion within the year, driven by digital innovation, changes in demand, and increasing investment. This trend is expected to continue, pushing its value to around USD 47 trillion by 2029.

According to the Financial Services Market Report 2025, the major trends during the period included the integration of smarter safety systems, implementing AI, product launches, adoption of cloud tech, and wealthtech innovations.

‍

Segment Spotlight: Lending, Insurance, and More

The financial services market features several segments. Key among them are 

• Lending and payments: Underpins consumer and business finance, covering everything from credit cards and digital wallets to business loans and real-time payments (e.g., JPMorgan Chase, PayPal, Visa)
• Insurance: This includes services that provide financial protection against various risks, losses, and damage (e.g., Allianz, AXA, HDFC Life)
• Reinsurance and brokerage: Helps primary insurers manage large or catastrophic risks, while brokers connect clients with suitable insurance products (e.g., Munich Re, Marsh McLennan)
• Investments: Includes the management and growth of wealth for individuals and institutions (e.g., BlackRock, UBS, Morgan Stanley)
• Foreign exchange services: Facilitates international trade and remittances (e.g., Western Union, Wise, Revolut)

The lending and payments segment was a major growth engine during the quarter, driven by rising demand for loans, mortgages, and the rapid adoption of digital payments. The insurance segment witnessed a strong quarter as well. Increased insurer competition triggered a third consecutive quarter of global rate decline according to Marsh’s Global Insurance Market Index. This decline, which was seen across almost all product lines, will yield reduced pricing and better coverage options. Meanwhile, investment management also saw improved activity within the quarter.

‍

Innovation Trends: AI, Blockchain, and Regtech

It’s impossible to discuss fintech today without acknowledging the transformative effect AI and machine learning (ML) have had on product innovation and client expectations. They have impacted fintech investment and build, buy, partner activity tremendously, with some reports predicting that global investments in AI for banking and financial services alone will rise to USD 31 billion this year. 

AI’s biggest impacts have been in powering fraud detection, credit risk assessment, personalized customer experience, and process automation. According to The Business Research Company, the fraud prevention market size is expected to grow from USD 13 billion in 2024 to over USD 15 billion this year.

AI-related product launches also gained momentum through the quarter, particularly in the payments space. AppZen and Routable launched AI agents to streamline invoice processing and accounts payable functions, while S&P launched an AI-powered data extraction tool. In the insurance sector, Gain Life launched a real-time voice call translation software for insurance claims, while Sure launched an AI insurance compliance verification platform for property management.

Blockchain and decentralized finance (DeFi) have gained momentum in the last few years as well, and this has been evident in the amount of related activity. Tokenization has attracted increasing investment over the last few years, with a highlight being Ondo Finance’s launch of Ondo Chain, a new blockchain network focused on tokenized real-world assets (RWAs).

Meanwhile, Regtech has also proven to be a high priority, as regulatory complexity is increasing globally. The automation offered by AI-powered compliance tools is now turning the segment into an investment hotbed.

‍

Funding Trends: Cautious but Selective Optimism

A focus on AI, blockchain, embedded finance, digital banking, and automation has defined recent investment trends. The fintech investment market has been cautious but, in certain segments, optimistic, with capital flowing into industries like AI, payments, regtech, DeFi, embedded finance, and cybersecurity.

According to SPEEDA Edge’s fintech quarterly report, industry funding declined by 50% QoQ to USD 7.5 billion in Q1 2025. This is largely due to a drop in mega deals and a fall in banking and infrastructure sector funding. Geopolitical uncertainty also forced investors to adopt a more cautious approach to fintech investing. However, this was still a 63% YoY increase, signalling some big-picture optimism.

The banking and infrastructure segment pulled in the most funding with USD 3.2 billion, while blockchain investment reached almost USD 3 billion. Bitcoin-based DeFi protocol startup Avalon Finance raised the most funds during the quarter, with a total of USD 2 billion in the form of a credit facility from several unnamed Asian conglomerates. Fintech infrastructure providers Imprint and Rapyd raised USD 500 million each, also marking significant Q1 raises.

‍

Strategic Partnerships on the Rise

With the rate of innovation in the sector as well as the increasing complexity of client expectations, big fintech players and startups alike have explored partnerships to fast-track market expansion, product development, and portfolio expansion. Financial institutions have looked to collaborate with fintech startups to digitize operations, enhance customer experiences, and expand offerings, while fintechs access broader customer bases, regulatory expertise, and brand credibility in return.

SPEEDA Edge tracked 88 partnerships related to fintech in Q1 2025, with the banking and infrastructure segment leading the way (29) and blockchain close behind (19). Fintech infrastructure firms forged partnerships to improve digital banking capabilities and expand cross-border transactions. Significant among these were Q2’s partnership with Ninth Wave and Mastercard’s partnerships with FreedomPay and ICBA Payments.

The quarter also saw significant partnerships in the buy now, pay later (BNPL) industry, with Klarna expanding its global partnership with Stripe. It also partnered with OnePay to exclusively offer BNPL services to Walmart customers, while Affirm offset this loss by partnering with FIS to integrate BNPL capabilities for the latter’s debit card-issuing network.

The blockchain and DeFi segments also saw notable alliances, including the Plume-BounceBit partnership to expand RWA offerings and the Ripple-Chainlink partnership to give developers access to the latter’s price feeds for Ripple’s stablecoin. Mastercard was active in this segment as well, partnering with Ondo Finance to make tokenized institutional financial assets available on its multi-token network.

The payments sector saw Mesh Payments and ALTOUR partner to deliver integrated solutions for streamlining corporate travel and expense processes. There was significant activity in biometric payments, too, with PopID partnering with Verifone to launch biometric payment solutions that enable authentication through facial or palm recognition. Meanwhile, Checkbook partnered with PayPal and Venmo to let businesses send funds directly to customers’ PayPal and Venmo wallets.

Infrastructure-related collaborations in insurtech included Bdeo’s partnership with S&G Response to enhance claims processes and reduce operational costs. Personal lines insurance partnerships focused on expanding digital access and underwriting precision, with Ethos Life and Protective Life Corporation partnering to expand its term life insurance offerings.

‍

M&A Momentum

The fintech world saw several notable M&A deals this quarter, with the banking and infrastructure and wealthtech segments leading the way. Most of the activity focused on expansion and enhancing AI-powered offerings.

Marqueta acquired TransactPay for USD 47 million to strengthen its program management capabilities in the UK and Europe, while Rapyd bought up PayU’s payment operations in Latin America and Africa for USD 610 million. Amazon also announced plans to acquire Axio for more than USD 150 million to expand into India.

Significant deals in the DeFi market included Jupiter acquiring majority stakes in Moonshot and SonarWatch, and One Click Labs acquiring KeyFi to integrate the latter’s back-end infrastructure into its front-end.

In the payments segment, American Express acquired software company Center to create a platform to help businesses automate tasks and ensure compliance. Meanwhile, in the insurance sector, Moody’s acquired AI-powered property risk intelligence company CAPE Analytics, while Munich Re’s ERGO Group AG acquired NEXT Insurance for USD 2.6 billion to enter the US market.

‍

Q1 Takeaways: Momentum Is Back

The first quarter of 2025 continued fintech’s growth trajectory, with digital transformation and AI integration being at the heart of build, buy, partner strategies. Leading banks, insurers, asset managers, and fintechs drove innovation and consolidation during the quarter, with all major segments seeing a healthy amount of activity.

Now, the sector is poised for more change, as it readies itself for further evolution in technology, regulations, and customer requirements.

‍

Want to Go Deeper?

SPEEDA Edge is a market intelligence platform that helps organizations make quick, confident decisions about emerging tech industries and their players. Be sure to visit our resources page for the latest developments and trends within the fintech space. You can also request a demo and experience first-hand how our platform can help you.