Financial Services Offered via Technology Set to Exceed USD 995.9 Billion by 2032: The Evolution of Integrated Banking

The financial technology (Fintech) industry is on an upward trajectory, with the Generative AI in Fintech market projected to generate an impressive USD 16.4 billion in revenue by 2032. This growth underscores the role of advanced technology in the Function-as-a-Service (FaaS) landscape. The FaaS market itself is forecast to reach USD 76.2 billion by 2033, further highlighting the growth potential of AI in Fintech.

One of the key benefits of FaaS is the ability to streamline in-app lending. Data-driven credit models and real-time risk scoring can make lending faster and more precise. However, as these advancements are implemented, robust guardrails will be necessary to manage them effectively. Regulators are expected to push for stronger guardrails in the FaaS ecosystem to ensure responsibility, transparency, and resilience, particularly as embedded finance becomes materially important.

Deeper verticalization of FaaS offerings is expected, with industry-specific solutions becoming more prevalent in sectors like travel finance, healthcare payments, and the creator economy. Sponsor bank and banking license partnerships allow fintechs and platforms to offer regulated services while outsourcing compliance and custody.

FaaS democratizes finance, giving small merchants, gig workers, and underserved segments access to tailored credit and payments tools. Consumers and businesses expect frictionless payments, instant lending, and one-click checkout inside the products they use. However, rapid growth in FaaS doesn't guarantee frictionless progress. Key risks include potential security and regulatory issues.

Outsourced FaaS stacks can concentrate operational and cyber risks, making major API outages or security events potentially impactful for many dependent businesses. Consumer protections and transparency are expected to become more stringent as brands behave more like banks, with regulators and consumers demanding clarity on fees, data use, and dispute resolution.

The shift from monolithic finance to microservices through FaaS is expected to impact nearly every industry that sells to people or businesses online. FaaS isn't a single product - it's a toolkit with components like card issuance, payments orchestration, embedded lending, Banking-as-a-Service (BaaS) modules, Know Your Customer (KYC)/Anti-Money Laundering (AML) and compliance toolkits, and wealth, insurance, and savings primitives.

Leading Fintech-as-a-Service providers in Germany include CRX Markets from Munich, offering a multi-channel platform that connects buyers, suppliers, banks, and investors with financing solutions like factoring and reverse factoring. Raisin, another prominent provider, supports better, more efficient financial systems with banking-as-a-service solutions, focusing on capital optimization, liquidity management, and integration with ERP systems for automation.

Cross-border regulatory complexity continues to be a challenge, with increased scrutiny on sponsor bank models in the FaaS ecosystem. The Banking-as-a-Service (BaaS) market is projected to surpass USD 73.7 billion by 2034, indicating the expanding future of embedded finance. As we move forward, it's clear that FaaS will continue to reshape the financial landscape, offering unprecedented opportunities and challenges alike.

Financial Services Offered via Technology Set to Exceed USD 995.9 Billion by 2032: The Evolution of Integrated Banking