Chime, a fintech-powered bank that holds no banking charter of its own, reported 22 million active accounts at the end of 2024, up from 7 million in 2020. It did this while spending less than $1 on customer acquisition for every $10 a traditional bank spends. That cost asymmetry explains why fintech-powered banks, institutions that use technology partners for core banking infrastructure rather than building it themselves, are growing faster than any other segment of financial services. The global banking-as-a-service market, which supplies the infrastructure these banks run on, reached $18.6 billion in 2024 and is projected to grow to $73.7 billion by 2034, according to Global Market Insights.
What Makes a Fintech-Powered Bank Different
The term covers two distinct models. The first is a neobank: a company that obtains a banking licence (or partners with a chartered bank) and builds its entire operation on cloud-native technology. Monzo, N26, and Nubank fall into this category. They have no legacy systems, no branch networks, and no mainframe infrastructure to maintain.
The second model is a traditional bank that has replaced its core technology with fintech-built platforms. Standard Chartered launched Mox Bank in Hong Kong on Thought Machine’s core banking platform. Goldman Sachs built Marcus on a modern technology stack rather than retrofitting its existing infrastructure. These institutions keep their banking charters and regulatory relationships but outsource the technology layer to specialist providers.
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.
Both models share a common advantage: they operate at a fraction of the cost of a traditional bank branch network. A conventional bank spends between 60% and 70% of its revenue on operating costs, with physical branches, legacy IT maintenance, and manual processes consuming the largest shares. Fintech-powered banks typically run at cost-to-income ratios between 30% and 45%. The difference flows directly to either lower prices for customers or higher margins for shareholders.
The Numbers Behind the Expansion
The neobanking segment of fintech-powered banking is growing at an extraordinary rate. The global neobanking market reached $210.16 billion in 2025, according to Fortune Business Insights, and is forecast to reach $7.66 trillion by 2034, a 49.30% compound annual growth rate.
Several factors drive that growth rate. Customer acquisition is cheaper and faster when there are no branches to staff. Product development cycles are shorter on cloud-native platforms. And the addressable market is enormous: billions of people in emerging economies who have smartphones but no traditional bank account.
Europe holds the largest regional share at 37.20% of the global neobanking market, per Fortune Business Insights. That share reflects the regulatory head start provided by PSD2 and the UK’s Open Banking framework, which required traditional banks to open their customer data (with consent) to licensed third parties. Neobanks in Europe used that access to build products that aggregated accounts across institutions, offered real-time spending insights, and automated savings, all features that traditional banks were slow to deliver.
In the United States, banking-as-a-service has been the primary growth channel. Fintech companies partner with chartered banks (often small community banks) that provide the licence and regulatory infrastructure. The fintech handles the customer interface, marketing, and product design. This model reached $5.9 billion in the US market alone in 2024, according to Global Market Insights, and platform-based BaaS accounts for 69% of the global BaaS market.
Why Traditional Banks Cannot Easily Replicate the Model
The obvious question is: why don’t traditional banks simply adopt the same technology and compete? Some are trying. JPMorgan Chase, Bank of America, and HSBC have all invested billions in technology modernisation over the past five years. But the migration is far harder than a greenfield build.
Legacy core banking systems are deeply intertwined with every function a bank performs: deposits, lending, payments, compliance reporting, and regulatory filings. Replacing the core is comparable to rebuilding an aircraft engine while the plane is in flight. The bank cannot stop processing transactions, cannot miss a regulatory filing, and cannot lose customer data during the transition.
The migration typically takes three to five years and costs hundreds of millions of dollars for a mid-size bank. For the largest global banks, the estimates run into the billions. During that transition period, the bank is simultaneously maintaining two systems, one legacy and one modern, which increases rather than decreases operating costs in the short term.
Fintech-powered banks face none of these constraints. They start with modern infrastructure and never accumulate the technical debt that makes migration necessary. Every year that a traditional bank delays its technology transition, the cost gap widens.
Where Fintech-Powered Banks Are Winning Customers
The customer segments moving fastest to fintech-powered banks are predictable. Young adults (18 to 35) who have no existing loyalty to a traditional bank are the largest cohort. Small businesses frustrated with the slow loan approval processes and high fees at conventional banks are the second. And cross-border workers who need low-cost international transfers are the third.
The cross-border payments market illustrates the opportunity. It reached $371.59 billion in 2025, according to Fortune Business Insights, and is projected to grow to $727.74 billion by 2034 at a 7.90% compound annual rate. Traditional banks charge fees of 3% to 5% for international wire transfers. Fintech-powered alternatives like Wise and Revolut charge 0.3% to 1%. For a small business sending $50,000 abroad each month, the difference is $1,350 to $2,350 per month in savings.
API adoption is accelerating this competitive pressure. Banks globally now process over 2 billion API calls daily, with $676 billion in daily transaction value flowing through API-based systems, according to Coinlaw. That infrastructure makes it possible for fintech-powered banks to plug into payment networks, credit bureaus, and identity verification services without building any of it themselves.
Risks That Could Slow the Expansion
Regulatory risk is the most significant threat to fintech-powered banking. The collapse of Synapse, a US-based BaaS middleware provider, in 2024 left thousands of customers temporarily unable to access their funds. Regulators responded by increasing scrutiny of bank-fintech partnerships, particularly the question of who is responsible for customer funds when a technology intermediary fails.
The EU’s Digital Operational Resilience Act (DORA), effective January 2025, requires all financial institutions to demonstrate that their technology supply chains can withstand disruptions. For fintech-powered banks that rely on third-party cloud providers and API partners, meeting these requirements adds compliance costs that partially erode their cost advantage.
Credit risk is another concern. Several neobanks that expanded rapidly into consumer lending saw default rates climb during the interest rate increases of 2023 and 2024. The discipline of underwriting, managing credit risk conservatively over full economic cycles, is a skill that traditional banks have developed over decades. Some fintech-powered banks are still learning it.
The pace of fintech-powered banking expansion will moderate as the market matures and regulation tightens. But the structural cost advantage is real, measurable, and compounding. Institutions that can deliver financial services at 35% cost-to-income ratios will continue taking share from those operating at 65%.
