Outlook on the Three Major Themes of the Fintech Industry in 2025: Regulation, Trading, and Cryptocurrency

The clouds hanging over the fintech industry in 2024 seem to be dissipating, as interest rate cuts, the recovery of fintech stocks, and the promise of a relaxed regulatory environment under a second Trump administration paint a brighter picture for startups.

According to Zhitong Finance APP, after a period following the COVID-19 pandemic, a large number of startups in the fintech industry, particularly in payments, lending, consumer banking, and other areas, received an unexpected windfall, but they faced a challenging adjustment period. With venture capital funds drying up, some fintech companies have cut expenses through layoffs and more focused product strategies. The valuations of other well-funded companies now seem to have been inflated during the frenzied fundraising period.

These factors combined have led to stagnant trading activity, slowed growth, and sparked laments about a "fintech winter." However, as we approach 2025, industry insiders are optimistically believing that the trend will reverse, with momentum around new technologies such as stablecoins gaining strength, and financing, acquisitions, and public listings beginning to accelerate.

Here are three fintech themes to watch in 2025:

Regulatory Easing

The bankruptcy of Synapse Financial Technologies Inc., a banking-as-a-service startup, left thousands of fintech customers unable to access funds held in accounts that were claimed to be protected by the Federal Deposit Insurance Corporation (FDIC) in some cases. This bankruptcy has put the partnership between banks and fintech startups in a regulatory quagmire and accelerated enforcement actions against so-called sponsor banks that partner with fintech companies to enable them to offer financial products. In response, the current administration has taken a series of enforcement actions, proposed rule changes, and public guidance.

In fact, even before the Synapse disaster, FDIC Chairman Martin Gruenberg had stirred anger among policy groups such as the U.S. Fintech Council, which argued that the FDIC had adopted a "regulatory overreach" approach that stifled innovation in the banking sector. Similarly, the Consumer Financial Protection Bureau (CFPB) has long been accused of overregulation. Its recent actions include claims of regulating digital wallets sold by large tech companies and investigating fintech companies such as PayPal (PYPL.US), Affirm Holdings (AFRM.US), Klarna Group Plc, and Block (SQ.US)'s Afterpay.

However, all of this is expected to change under the new administration. Reports indicate that Trump's advisors are attempting to narrow or eliminate banking regulatory agencies, including the FDIC and CFPB. Elon Musk, co-head of the Department of Government Efficiency (DOGE), called for the "abolition of the CFPB" in a post on the X platform. Trump supports DOGE and has the power to fire CFPB Director Rohit Chopra. Other financial regulatory agencies expected to be replaced include FDIC's Gruenberg and Acting Comptroller of the Currency (OCC) Michael Hsu Amias Gerety, partner at QED Investors and former Deputy Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury, stated: "This will have an immediate impact on the tone, and the experiments people are willing to undertake, as well as what they prioritize, will change relatively quickly. Meanwhile, most financial institutions will try to establish a reasonable path so that when regulatory attitudes shift, they won't have to make significant adjustments to their business."

Trading Boom Unleashed

The rebound of publicly listed fintech companies after a significant drop from the peak in 2021 has sparked optimism about upcoming listing opportunities. The Ark Fintech Innovation ETF (ARKF.US) has risen about 34% in 2024. Buy now, pay later company Klarna and fintech newcomer Chime Financial Inc. have applied for initial public offerings (IPOs), setting a precedent for other fintech companies to follow. Two closely watched IPO competitors are Stripe Inc. and Plaid Inc.

Matt Streisfeld, general partner at fintech investment firm Oak HC/FT, stated: "You can see the fog in the market is lifting. As you enter late 2025 and early 2026, you will see the IPO gates opening."

While the sentiment in the public markets is more hopeful, only a few private fintech companies are large enough to confidently navigate this transition period. Meanwhile, fintech venture financing has slowed to pre-pandemic levels.

For startups that do not wish to go public and want to avoid pitfalls in the private market, being acquired by larger companies may be the most attractive route. Last year, personal finance platform MoneyLion Inc. was acquired by Gen Digital Inc. (GEN.US) for $1 billion. By 2025, investors expect to see similar deals completed.

Neil Kapur, partner at fintech investment firm TTV Capital, remarked: "From a revenue and profitability perspective, the scale required for going public is no longer $100 million, but rather a multiple of that figure, and many companies have not yet reached that point. Therefore, we expect to see more strategically cash-rich companies going public and being more aggressive in acquisitions."

Meanwhile, for those companies looking to raise more venture capital, there are signs that the clouds may continue to dissipate. Last month, fintech startup Parafin, operated by former employees of Robinhood (HOOD.US), raised $100 million in a late-stage funding round, which may signal a new wave of investment in this sector amid venture capital exhaustion. This funding values Parafin at $750 million, as the company provides loan products to sellers through marketplaces such as Amazon (AMZN.US), Walmart (WMT.US) Walmart Marketplace, DoorDash (DASH.US), and TikTok Shop Expense management and savings tools.

Cryptocurrency payments become mainstream

A month after Donald Trump won the presidential election, Bitcoin first broke the $100,000 level, likely driven by the incoming president's supportive attitude towards cryptocurrencies. Trump's positive stance on cryptocurrencies is also reflected in his personal involvement through promoting his project World Liberty Financial.

The incoming government's support for the cryptocurrency agenda may drive efforts to utilize technologies like stablecoins, especially for those trying to expand internationally. For example, Stripe CEO Patrick Collison wrote in a post announcing a deal that Stripe's motivation for acquiring the stablecoin issuance startup Bridge for $1.1 billion was to build a global payment infrastructure.

QED's Gerety stated, "Today, the most interesting aspect of stablecoins is cross-border payments, especially between countries that are viewed as medium to high risk by U.S. and European financial institutions."

Similarly, PayPal announced that it would allow payment partners to settle cross-border transactions using its own stablecoin PYUSD on its international remittance service Xoom. PayPal also allows consumers to buy, hold, and sell cryptocurrencies through its wallet. The issue of cross-border payments has also attracted startups. YellowCard is a stablecoin startup that traded over $3 billion worth of cryptocurrencies in 2024, aimed at finding a way to bypass expensive international wire transfers.

While early movers like Stripe and PayPal are taking action to capitalize on the momentum of cryptocurrencies, other companies in the payment space are waiting for regulatory clearance before making their own investments. Under the new government's leadership, this hesitation may begin to fade.

Airwallex co-founder and CEO Jack Zhang stated, "From our current perspective, the regulatory landscape is still too unclear for us to actively invest in stablecoin infrastructure. While stablecoin payments are not currently a priority for our customers, we are exploring some areas to adapt to market needs. Stablecoins have the potential to disrupt many cross-border use cases—such as globally distributed payrolls—and we hope to see this emerge when the regulatory framework aligns with customer demand."