Fintech Predictions for 2025: What’s Next?

2025 is a defining moment for fintech. Indeed, the sector is innovating wildly, driven by embedded finance, alternative lending models, and AI; it's also being reshaped by new regulations and shifts in funding. The last year has been a real test of the resilience of financial services as investments start to tighten, economic uncertainty increases, and regulatory frameworks continue changing. Those that move fastest will shape the next stage of growth in fintech.

Fintech investment is getting a reset in the UK. While the total deal activity saw a drop of 61% in 2024, the average deal value reached an all-time high at $21.8 million, indicating that fewer but more qualitative investments are being made. This would indeed be a sign that investors are moving toward profitability instead of rapid expansion-a trend that will redefine how fintech companies raise money. Meanwhile, the Bank of England's Prudential Regulation Authority is relaxing key rules, including removing a cap on bankers' bonuses and dialing back some reporting requirements. That is part of a broader effort to boost economic competitiveness by giving financial firms incentive to take smart risks.

But economic change is not constrained to the UK. Global financial markets are also being stretched to their limits by an escalation of trade tensions and increasing geopolitical uncertainty. The US has raised tariffs on imports from Canada, Mexico, and China, raising concerns about a long trade war and causing volatility in markets. Meanwhile, global risk perception is at an all-time high, with the Doomsday Clock at 89 seconds to midnight amid growing apprehensions about economic uncertainty, geopolitical tension, and AI-driven risks. These forces are global in nature and will shape the path that investors, regulators, and financial firms take toward innovation in 2025.

Having operated in both banking and fintech, I've seen firsthand how this movement in regulation, risk appetite, and investment trend is directly affecting the bottom line. Today, the digital-first company and fintech lender have to operate against a landscape where funding strategies are changing, compliance pressures are mounting, and AI changes the game in financial decision-making. In this article, I explore five key trends that will define fintech in 2025, and what they mean for businesses who want to get ahead.

1. AI-Powered Credit and Risk Assessment

AI is really changing the game in credit risk assessment, shifting away from static backward-looking credit models to real-time financial insights that paint a far more accurate picture of borrower risk. Traditional lending methods rely on historic data from financial statements, credit scores, and collateral, and often shut out high-growth startups and SMEs with non-traditional revenue streams.

A new generation of open finance frameworks is helping drive fintech lenders' usage of alternative data sources for dynamic assessments of financial health. According to HSBC's Access to Finance report, 2024, the increased access to SME credit data due to the SBEE Act will eventually provide an opportunity for challenger banks and alternative finance providers to further extend their lending scope. AI-driven models accelerate this trend since it equips lenders to assess businesses based on real-time transaction patterns and cash flow, rather than outdated credit scores.

Beyond increasing access to capital, AI is also enhancing fairness in lending decisions. According to HSBC's report, one of the main obstacles to SME lending has been the fact that credit data has traditionally been controlled by a few major providers, making it hard for new entrants to accurately assess borrower risk. By expanding credit data availability, AI-driven credit risk models can provide greater financial inclusion, ensuring viable businesses are not unfairly excluded from funding opportunities.

Shifting from Backward-Looking to Real-Time Credit Models

While traditional credit models only gauge risk by using past financial statements and credit history-a narrow view of the business's financial health-AI-driven models look at real-time revenue patterns, customer transactions, and industry trends. This helps lenders make much quicker and more precise funding decisions. This means:

• Businesses without long credit histories can be assessed based on live financial activity rather than past records.

• Lenders can adjust risk models dynamically, responding to economic shifts, industry trends, and business performance in real time.

• Funding decisions can be made in hours instead of weeks, significantly reducing approval times for SMEs.

Deloitte's research underlines how AI-powered credit models predict default risks more precisely, enabling lenders to approve credit for viable businesses that would otherwise have been rejected by traditional models. 

Decreasing Bias, Increasing Access to Capital

The fairness of credit decision-making is the most widely pressed criticism of conventional lending, mostly resulting in overly restricted access to capital. Artificial intelligence allows alleviating such biases by:

• Evaluating businesses based on financial behaviour rather than demographic or credit score-based assumptions.

• Using machine learning to identify patterns that indicate financial stability, even in businesses without extensive credit histories.

• Automating decision-making to remove human subjectivity, improving fairness in lending.

Faster Funding and More Flexible Lending Terms

Beyond better risk assessment, AI is changing how credit is structured and delivered. By analysing business performance in real time, lenders can offer:

• Flexible repayment models that adjust based on cash flow.

• Dynamic credit limits that scale as business revenue grows.

• Personalised loan terms tailored to specific business needs.

With the ability of AI to constantly monitor financial health, this allows lenders to refine risk assessment over time, making sure funding remains with the performance of the business. This is a big departure from the traditional model of lending, which locks borrowers into rigid structures of repayment based on outdated projections.

2. Expansion of Embedded Finance

In 2025, one of the defining features of fintech has been embedded finance: taking financial products and embedding them directly into platforms with which businesses and consumers are already engaged. In so doing, this is removing friction from financial services and making access to lending, payments, and banking frictionless in ways never before possible.

Financial Services Where Businesses Need Them

Traditional financial services usually require businesses to apply for loans, open an account, or integrate third-party payment systems manually. Embedded finance eliminates these steps by offering financial tools within existing platforms, including:

• E-commerce platforms offering instant financing options at checkout.

• Accounting software integrating business loans based on real-time cash flow analysis.

• Marketplaces embedding insurance and lending products tailored to business needs.

How Fintechs Are Driving Embedded Finance Growth

Meanwhile, the fast growth of Banking-as-a-Service and API-driven platforms accelerated this growth in the adoption of embedded finance. Instead of taking traditional banks as the sole provider of financial services, fintech companies partner with software platforms for:

• Instant credit lines for SMEs within inventory management systems.

• Revenue-based financing directly integrated into sales platforms.

• Automated expense management tools with built-in business lending options.

Businesses no longer need to navigate separate applications for financial services, reducing administrative work and improving cash flow access.

A Competitive Advantage for SMEs

For SMEs, embedded finance offers more than just convenience—it provides a strategic advantage. Businesses that leverage embedded financial services can:

• Access funding faster, without traditional application processes.

• Reduce payment delays by integrating real-time payment solutions.

• Improve financial planning with AI-driven insights embedded in accounting platforms.

This will give a whole new shape to the face of Fintech while traditional banks and independent lenders alike will be pitched against platforms which directly embed their financial services. Companies that embedded finance will make up for more liquidity and better financial flexibility.

3. Flexible Funding Models and BNPL Expansion

The use of fintech lenders is becoming more flexible in terms of avoiding fixed-term loans and rigid structures of repayment by offering funding solutions that work around the financial cycle of a business. While BNPL has already reshaped consumer finance, in 2025, similar models are gaining traction in B2B lending, revenue-based financing, and on-demand credit solutions.

BNPL Moves Beyond Retail

BNPL has typically been associated with consumer purchases: the ability for buyers to divide a payment into manageable instalments. However, BNPL fintechs now move into business areas and expand on offering delay payments to small- and medium-sized enterprises, which include inventories, software, and operation expenses. This is especially true for companies that face seasonal working capital oscillations or large upfronts:

• B2B BNPL services enable companies to spread supplier payments over time.

• Subscription-based BNPL models allow businesses to access software or services with deferred payments.

• Flexible repayment schedules help SMEs manage costs while maintaining working capital.

Deloitte’s report on the future of payments highlights BNPL’s expansion into business lending, with fintechs partnering with wholesalers, SaaS providers, and supply chain platforms to offer payment flexibility.

Revenue-Based Financing as an Alternative to Traditional Loans

Revenue-based financing instead permits repayment of a share of revenues against fixed loan repayments, thus aligning funding with actual income instead of pre-determined instalments. This model works to the benefit of:

• E-commerce companies with irregular monthly sales.

• Subscription-based companies with recurring revenue streams.

• High-growth startups reinvest in expansion rather than paying back debt at a fixed rate.

The fintech lenders apply dynamic risk assessments with AI-driven revenue analytics to make the repayment schedule flexible. This approach replaces the one-size-fits-all lending model that often strained SMEs when sales are low.

On-Demand Credit Lines and Dynamic Lending

Apart from BNPL and revenue-based financing, on-demand credit lines are one of the most in-demand options for companies in need of access to short-term capital. This form of credit solution allows a company to:

• Draw funds as needed, rather than borrowing a lump sum upfront.

• Scale credit limits in line with revenue growth to avoid overborrowing.

• Dynamically adjust repayment terms in line with the business cycle.

It works particularly well for businesses that have very inconsistent income streams, or those investing heavily in marketing, inventory, or scaling operations.

4. Sustainability and ESG-Driven Financing

Sustainability is no longer a nice-to-have in financial services. In 2025, ESG considerations are playing an increasingly important role in how fintechs, investors, and lenders conduct their operations. Regulators, consumers, and businesses alike want financial products that align with their sustainability objectives, meaning the fintech sector has to embed ESG into its lending and investment decisions.

Lenders Are Prioritising ESG-Linked Financing

ESG-driven financing is gathering steam, with lenders increasingly considering sustainability metrics in credit decisions. Therefore, companies with the best ESG practices get to enjoy preferential loan terms, sustainability-linked credit lines, and green financing.

Some of the key happenings taking place include:

• Green loans: This provides better interest rates if the companies achieve goals on carbon reduction.

• ESG-linked credit lines: This is a type of funding where funding terms change due to changes in sustainability performance.

• Increased investor interest in fintech firms emphasizing responsible lending and impact finance.

According to Deloitte's Financial Services Outlook, financial institutions are incorporating ESG factors into their risk models, so that access to funds is higher in businesses with good sustainability initiatives.

Regulatory Pressure on ESG Compliance

Governments and financial regulators are putting on pressure for increased transparency of ESG reporting, which requires businesses and lenders to show their environmental and social impact. This changes the way in which fintechs build their products, with a view to ensuring that financing models fall within regulatory frameworks.

• The EU's Corporate Sustainability Reporting Directive (CSRD) will force financial institutions to disclose ESG risks.

• The UK's Financial Conduct Authority is introducing new sustainability disclosure requirements.

• Lenders and investors are increasingly pricing ESG scores into credit decisions, thereby affecting access to capital.

Fintech Pioneers Driving the Change in Sustainable Finance

Different from traditional financial institutions, the ability of fintech companies to bake ESG into new, digital-first lending models includes the following: 

• Carbon tracking tools that help businesses measure and report on their sustainability progress.

• Impact-based lending, where funds are allocated based on either social or environmental contributions.

• AI-powered ESG risk assessments that dynamically evaluate a borrower's sustainability profile.

Only fintech lenders with incorporated sustainability-driven models will emerge successful in both attracting investors and businesses that pursue ethical financing alternatives.

5. Increased Regulation and Compliance in Fintech Lending

Regulators have started to take a closer look at fintech lending, putting stricter compliance rules on AI-driven credit assessments, open banking, and consumer protection. With alternative finance continuing to rise, going forward, businesses must be prepared for added scrutiny and regulatory change-forced innovation in the way it operates.

Stricter Oversight on AI-Driven Lending

AI is increasingly central to credit risk assessment, but regulators are concerned about bias, transparency, and fairness in automated decision-making. In response, financial authorities are pushing for:

• Explainable AI, or XAI, in order to make lending decisions more transparent and auditable.

• Fair lending rules that bar AI models from disproportionately disadvantaging certain borrower groups.

• Data privacy regulations that limit the ways in which financial institutions can collect and store information on borrowers.

Evolving Open Banking Regulations

Open banking is still expanding, but new regulations are starting to define how financial data is shared between fintechs and incumbent banks. These new regulations aim to do the following: give more protection to consumer data, with more stringent security requirements for open banking APIs; make financial records more transparent, ensuring lenders use customer data responsibly; standardize data-sharing protocols, enabling fintechs to integrate with banking systems more securely.

Compliance Becomes a Competitive Advantage

Proactive adaptation to these new regulations, however, can be the key strategic competitive advantage for fintech lenders. Companies that address compliance, transparency, and ethics in their lending will:

• Gain confidence among investors and borrowers seeking safety and responsibility in financial products.

• Be free from regulatory fines and constraints on product expansion.

• Come to the front in the industry as leaders in ethical and sustainable finance.

Fintech in 2025

In the ever-changing face of fintech, AI, embedded finance, and flexible funding models are rewriting the rulebook on how businesses access capital. As lenders continue moving away from rigid credit models, technology is making quicker, fairer, more tailored financial solutions for SMEs possible. Simultaneously, ESG-linked financing and regulatory oversight force the industry into lending practices that are more transparent, responsible, and sustainable.

Key Takeaways:

• AI-powered credit assessments are ensuring greater access to funding by using current financial data rather than out-of-date credit scores. The embedded finance model is removing friction in financial services, enabling businesses to access funding within the platforms they use. BNPL and revenue-based financing provide flexible lending that adapts to the cycles of a business's cash flow.

• ESG-driven finance is the new face of investment decisions, with lenders and regulators calling for increasing numbers of sustainability-linked credit solutions. Compliance is a relative benefit in that fintech companies embracing transparency and fairness will gain the confidence of the market.

• Financial services are getting into a modern phase where changes in technology and regulation, in conjunction with newly evolved customer needs, are defining how businesses engage with lenders in the future. Those that better understand these currents-and adapt fastest-will become the ones determining the standards with which the industry operates in future fintech development.

As we look to 2025 and beyond, the lenders that will thrive are those that think beyond transactions to build funding solutions that truly serve modern businesses. Which trend do you think is going to make the biggest impact on fintech in 2025? Join the conversation.