Fintech: Deregulated, digitized, developing

Hot topics

Here is an update of the hot topics presented in our 2025 outlook. Another article specifically covers our blockchain-related strategy, also part of our broad fintech universe.

A new deregulatory era in the United States

It is a good time to be a fintech, less to be a consumer.

President Trump’s early 2025 executive order instructed financial agencies to "support responsible innovation" and unwind the post-2010 regulatory web. This has yielded quick results: the Office of the Comptroller of the Currency (OCC) shelved its climate-risk guidance, the Consumer Financial Protection Bureau (CFPB) began retracting key consumer-protection rules, and Congress is moving to slash the Bureau’s budget by two-thirds.

Several flagship reforms were stalled or reversed:

• The CFPB is planning to revoke the rule that would have considered buy now, pay later (BNPL) companies like credit card firms. While states like New York and California are stepping in with licensing regimes and rate caps, the move at the federal level lowers compliance risk for Affirm Holdings Inc and its peers, preserving existing business models.
• The SEC’s auction-based market-structure proposals, which would have disrupted payment-for-order-flow (PFOF), were scrapped. This is a lifeline for firms like Robinhood, whose commission-free trading model would have been directly impacted.
• The Credit Card Competition Act, which aimed to route credit transactions over cheaper networks, failed again in the Senate. Credit card networks and major issuing banks keep their fee economics.

Still, this deregulatory wave is asymmetrical. While capital and pricing rules are loosening, operational scrutiny is intensifying, especially for Banking-as-a-Service (BaaS) platforms. Sponsor banks are facing heightened exams around AML, KYC, and revenue-sharing arrangements. The result: more regulatory relief for incumbents, but growing compliance pressure for partners.

A new credit cycle

The Fed hasn’t cut rates - yet. The market now anticipates only 1-2 rate cuts for this year, while it was expecting up to 6 cuts when we wrote our positive stance on alternative lenders.

We expect additional liquidity to enter the financial system despite sticky inflation and tariff risks. And even if the Fed does not aggressively cut the benchmark rates, this extra liquidity in the system should eventually boost banking reserves. Reverse repo run-off, Treasury account drawdowns, and a potential QT taper could increase banking reserves by over $300bn in H2. That’s fuel for banks to expand credit issuance, tighten spreads (already near historic lows), and delay potential stress.

Consumer credit keeps expanding, while the marketplace for ABS issuance surged 51% YoY in Q1. Fintech companies heavily use such a marketplace to refinance their originated loans. The resumption of student loan collections is likely to accelerate this trend, as prime borrowers explore private refinancing options. This presents a clear opportunity for platforms like SoFi, which already saw their best student-loan origination quarter since 2021.

Monetization of GenAI

GenAI is no longer a freemium demo. Companies like Thomson Reuters Corp are now reporting KPIs tied to AI monetization, while Intuit Inc is positioning itself as a “one-stop shop” for AI agents serving both consumers and SMBs. Revenue disclosures increasingly reference “tokens,” “seats,” and “API calls”. This is a sign that GenAI features are moving from pilot to product.

Meanwhile, agentic AI has emerged as the next platform frontier in payments. Visa, Mastercard, and PayPal all launched toolkits for agent-initiated payments, allowing AI agents to execute transactions autonomously. This shift positions payment incumbents as key infrastructure providers in an AI-native world, ahead of potential challenges from Big Tech companies or Open AI.

There’s an irony at play: while regulators fail to cap interchange fees, networks are already engineering the next fee layer via agentic-token services. Combined with the development of the stablecoin payment rails, this new agentic layer could force the entire payments stack into perpetual innovation and perpetual monetization.

Catalysts

• Market volatility. Brokers and neobanks have benefited from the recent surge in market volatility, with retail trading activity nearing record highs. Amid economic, political, and geopolitical uncertainty, platforms like Robinhood and SoFi SoFi stand to gain from sustained engagement and asset inflows.

• Basel III endgame delay. The U.S. political tide continues to favor delaying or softening Basel III capital rules. A congressional review is expected this summer, and the final text may reflect significant concessions. This would give U.S. banks and neobanks a regulatory cost edge over international peers, supporting credit expansion and fintech-bank partnerships.

• AI-driven fraud. A sharp rise in deepfake and synthetic-ID attacks pushes financial institutions toward multi-factor biometrics, passkeys, and behavioral risk models. With fraud now a board-level concern, regtech and cybersecurity vendors that bundle identity tools (e.g., passkeys + device intelligence + liveness detection) are positioned to outgrow the sector.

Risks

• IPO wave. A series of successful IPOs like Chime and Circle Internet Group is restoring confidence in fintech. But history cautions: the 2021 IPO boom marked the cycle top for many digital finance names (although the current macro environment differs).

• Stablecoins. As a cheap and instant payment method, stablecoins could disrupt the payment industry, especially now that new regulations were passed in the United States. Will companies specialized in cross-border payments and remittances be able to adapt to these changes?

• Patchwork state regulation. With the federal government retreating from consumer protection, “blue” states are stepping in. This could fragment national fintech offerings, increasing compliance complexity and product inconsistency.