Fintech and Small Business Predictions for 2025

With 2025 approaching, the landscape for SMBs is undergoing transformative changes driven by advances in technology, shifts in consumer expectations, and evolving regulatory frameworks. 

It is a priority for a company to keep a pulse on the industry trends that impact those it serves. How will AI agents transform financial services? What does a shift in tipping structure mean for the small businesses it serves? Between conversations with partners, customers, investors, and the Fintech community, we constantly synthesize what we learn, using fresh insights to adapt quickly and strategically. 

The below trends highlight how Fintech and embedded finance are reshaping financial accessibility and empowering small businesses globally. 

Predictions for SMBs

Platform solutions will see increased demand as SMBs will move to integrated tools and applications.

With the launch of autonomous AI agents on the horizon, AI agents will soon become a part of our daily lives. Savvy small businesses will quickly discover new applications for AI agents, seeing a boost in efficiency as they engage agents for everything from customer service to data analytics. 

However, for SMBs, this means that having a single unified view of their data will become more critical than ever. Today, SMBs use 7-8 different software applications to run their businesses, resulting in data being siloed across multiple systems (for example, an email marketing platform, accounting software, and CRM tool). For AI agents to make sense of a business’s data and act on that information, SMBs will increasingly look to vertical apps or software platforms that can serve multiple needs and house relevant performance data within a single solution. With a single pane of glass view of the business, AI agents will be able to make smart recommendations and help them complete critical tasks. 

In response to new tax on tip policies, SMBs will adjust their pricing structures.

Already, there’s a growing expectation for consumers to leave tips for everyday services, including salons, cafes, bars, and restaurants. If a policy eliminating taxes on tips were to get approved, employees might be able to take home more pay without business owners having to raise employee wages. As a result, this would most likely change the way that SMBs price their services. For example, we may begin seeing mandatory tips for services or, in an even more drastic situation, lower-priced services and higher mandatory tips. 

However, if customers think there’s less tax burden on small business employees, this may also backfire and cause customers to tip less. Small businesses need to be ready to adapt to these changes and inform their workers what this actually means to them from a tax perspective. 

Predictions for Fintech 

Favorable market conditions will result in increased M&A and IPO activity.

The past two years saw a sizable dip in IPO and M&A activity due to regulatory pressures and broader macro concerns. With the regulatory cloud clearing and the economy proving more resilient than expected, we expect M&A activity and IPO markets to pick up.

In addition, in the past couple of years, there has been a lot of private capital raised for debt investment, albeit at a higher hurdle rate than that which was raised in 2020 or 2021. With the amount of dry powder available, we expect debt capital markets activity to remain robust in 2025. With spreads across various instruments continuing to tighten, we expect issuers to use favorable market conditions to access markets and even pull forward their funding plans.

Banks will continue to lag behind Fintech in innovation but will leverage acquisitions and partnerships to stay competitive. 

It’s unlikely that banks will catch up to Fintech in the near future from an innovation perspective. Banks have been around much longer, using a lot of legacy services and infrastructure. They’re also much more regulated overall, so they will not be able to disrupt the market the way that Fintech has. However, we’ve seen banks and Fintech partnering much more closely, which is accelerating access and innovation. 

As Fintechs start nibbling at the lending pie typically owned by banks, we won’t be surprised if banks use their financial muscle to make strategic Fintech acquisitions or minority stakes. This allows them to tap into the modern tech stack and new demographics while directly competing with other Fintech firms, rather than losing to them in aggregate. This could be a positive direction for small businesses, a historically underserved population, to get more access to capital and financial services. 

2025 will bring increased, albeit cautious, investment in Fintech. 

Converging with our expectations of improving M&A activity and IPO markets, we expect to see a boost in investments in Fintech. As Fintech VCs are able to exit their legacy positions via either strategy (i.e., not just reliant on illiquid secondary markets) and improve DPI ratios, it creates a tailwind for the Fintech sector.

Overall, there will be more investment in Fintech where there is the right product and innovation. It’s already starting to pick up—but investors are approaching cautiously since they’ve been burned in the past. The financial services industry is still ripe for disruption, and plenty of opportunities for funding in the Fintech space to excel.