When ING Group decided to rebuild its retail banking platform in 2018, it did not hire IBM or Accenture. It partnered with Thought Machine, a London-based fintech company that was four years old and had fewer than 200 employees. That decision, repeated by dozens of banks across every major market since, tells a clear story about where banking transformation is actually happening. It is not happening inside banks. It is being built by fintech companies and sold back to banks as infrastructure. The global banking-as-a-service market that supports this model reached $18.6 billion in 2024, according to Global Market Insights, growing at 15.1% annually toward $73.7 billion by 2034.
The Structural Reason Fintech Leads
Banks are constrained by what they already have. A large bank runs thousands of applications, hundreds of databases, and millions of lines of legacy code. Any change to the core system requires months of testing against every connected application. A single unintended interaction can freeze transactions, misreport regulatory data, or lock customers out of their accounts.
Fintech companies have none of this baggage. They start with empty codebases and modern tools. They recruit from the same talent pool as Google, Amazon, and Meta, offering equity-based compensation and startup culture that large banks cannot replicate. And they focus entirely on a single problem, whether that is core banking, payments, identity verification, or fraud detection, while banks must maintain competence across every function simultaneously.
The Boston Consulting Group projects fintech revenues will reach $1.5 trillion by 2030, with embedded finance and digital lending accounting for the largest share of projected growth.
According to CB Insights’ 2024 fintech report, global fintech funding declined 40 percent between 2022 and 2024, pushing the sector toward consolidation and a sharper focus on profitability over growth at all costs.
The result is a speed differential that compounds over time. A fintech company ships new features weekly. A bank ships quarterly, if it is fast. Over five years, that difference produces technology platforms that are generations apart in capability.
Where Fintech Is Transforming Banking
The transformation is not uniform. Fintech companies have reshaped some banking functions completely while others remain largely unchanged.
Payments is the most transformed function. Traditional correspondent banking for cross-border payments involved chains of intermediary banks, each adding fees and delays. Fintech companies built direct connections to local payment networks, compressing settlement from three to five days to seconds. The global cross-border payments market reached $371.59 billion in 2025, according to Fortune Business Insights, and fintech-built rails handle a growing portion of that volume at a fraction of the cost.
Customer onboarding is another area of deep transformation. Opening a bank account once required a branch visit, paper documents, and manual identity checks. Fintech companies like Onfido and Sumsub built API-based identity verification that confirms a customer’s identity in under 60 seconds using document scanning, biometric matching, and database checks. Banks integrate these services through APIs, reducing onboarding from days to minutes.
Lending decisioning has moved from committee-based review to algorithmic assessment for consumer and small business products. Fintech companies that analyse transaction data, cash flow patterns, and alternative data sources can produce credit decisions faster and, in many cases, more accurately than traditional underwriting models. This is particularly true for thin-file borrowers (those with limited credit history) where traditional bureau scores provide little useful signal.
Core banking itself is now a fintech product. Thought Machine, Mambu, 10x Banking, and Temenos SaaS have built cloud-native platforms that banks purchase as a service. These platforms replace the COBOL mainframes that have run banking for 50 years. The shift to cloud deployment, which accounts for 67% of the BaaS market per Global Market Insights, is the most fundamental transformation in banking since the introduction of electronic processing in the 1960s.
The Data That Confirms the Shift
API adoption provides a measurable proxy for how deeply fintech has penetrated banking operations. Banks globally process over 2 billion API calls daily, handling $676 billion in transaction value, according to Coinlaw. Each API call represents a function that a bank has outsourced to or integrated with a fintech provider: a payment processed, an identity verified, a credit score pulled, a transaction screened for fraud.
The neobanking segment, where fintech-built infrastructure is the entire bank rather than a component of one, reached $210.16 billion in 2025, per Fortune Business Insights, growing at 49.30% annually. That growth rate, nearly ten times faster than traditional banking revenue growth, reflects the market’s judgment about where the future of banking is being built.
Bank technology spending tells the same story from the other direction. JPMorgan Chase spent $17.1 billion on technology in 2024. Bank of America, Citigroup, and Wells Fargo each spent between $10 billion and $14 billion. A significant portion of that spending went to fintech partners and vendors rather than internal development teams. Banks are becoming assemblers of fintech-built components rather than builders of proprietary technology.
Why Banks Accept This Dependency
The obvious question is: if banks are the ones with licences, deposits, and regulatory standing, why are they ceding technology leadership to fintech companies? The answer is pragmatic. Building modern banking technology internally has been tried and has mostly failed.
Royal Bank of Scotland spent £1.2 billion on a core banking migration programme that was eventually abandoned. TSB’s IT migration in 2018 locked 1.9 million customers out of their accounts. These failures demonstrated that replacing legacy banking systems requires specialised engineering talent, modern architectural patterns, and organisational structures that most banks do not have and cannot easily acquire.
Buying from fintech companies is faster, cheaper per unit of capability, and transfers technology risk to a specialist. The trade-off is dependency: if the fintech partner fails (as Synapse did in 2024), the bank faces operational disruption. Regulators are addressing this through frameworks like the EU’s DORA, which requires banks to demonstrate resilience across their entire technology supply chain.
What This Means Going Forward
The banking industry is settling into a structure where banks provide the regulatory infrastructure and customer trust, while fintech companies provide the technology. This is not a temporary arrangement. It reflects a permanent specialisation: banking requires deep regulatory expertise, and building modern technology requires deep engineering expertise. Few institutions can maintain both at the highest level.
The banks that will perform best in this environment are those that become effective at evaluating, integrating, and managing fintech partners, treating technology vendor management as a core competence rather than a procurement function. The fintech companies that will survive are those that can scale their platforms to support the transaction volumes, security requirements, and regulatory demands that banks impose.
Fintech is leading banking transformation because the technology talent, the architectural innovation, and the product development speed all sit outside the banking system. That will not change. The banks that recognise it early and build effective partnerships will transform faster than those still trying to do it alone.
