Ongoing FinTech innovation continues to redefine global financial services.

Rapid technological advancements and disruptive business models — including artificial intelligence, blockchain technologies, and embedded financial systems — are enabling unprecedented operational efficiencies and growth opportunities for both traditional banking industries and new industry players.

While innovation in these areas, among many others, is being undertaken by incumbents and insurgents alike, it’s established financial institutions that have the opportunity to build highly impactful FinTech solutions that can transform their own organizations and potentially the FinServ space at large.

The current FinTech innovation landscape (and opportunity areas for FinServ companies)

To identify the gaps and opportunities in the financial technology space that could be potential avenues for innovation, though, FinServ organizations must first assess the state of the modern FinTech landscape. Many industry incumbents and insurgents are focusing their FinTech innovation attention on opportunities tied to:

‍AI-powered financial automation

It's little wonder why many banking executives want AI infused in day-to-day business operations. Half of financial services leaders told Deloitte they want generative AI adoption company-wide to improve efficiency and reduce costs.

By fully embracing GenAI, Deloitte noted FinServs can better "assess the current state of banking systems, prepare data for core conversions, and automate integration of microservice-based applications."

Thankfully, for financial services companies, there is no shortage of AI tools to automate critical activities, like:

‍

• Handling regulatory reporting. With regulatory requirements already impacting the FinServ space under the new administration (and more changes likely on the way), banks, lenders, and other industry players are turning to AI to maintain compliance with measures.

• Managing and predicting risk. Fraud and cybersecurity threat detection, ATM maintenance, and market swings are just a few areas in which AI-powered, real-time predictive analytics empowers today's FinServs to anticipate and proactively deal with potential risks.

• Personalizing recommendations. Robo advisors, in particular, are leveraging AI to improve the customer experience — specifically, by offering data-driven product recommendations based on individual investors' portfolio preferences and perceived risk tolerance.

‍

With the potentially sizable time and cost savings that GenAI innovations can provide, it's easy to see why two-thirds of FinServ companies are becoming "mass adopters" of the tech to improve everything from client acquisition to revenue generation, per EY research.

Decentralized finance (DeFi) and blockchain architecture

Blockchain technology is revolutionizing the financial services industry.

DeFi and blockchain are impacting many areas of the value chain, including cross-border financial transactions, executing smart contracts, B2B and B2C payment processing, open banking with third-party providers, increasing transparency for regulatory reporting, and more.

With established incumbents like JPMorgan, Mastercard, Visa, and Morgan Stanley adopting DeFi, it's clear the technology "isn't just an upgrade," as finance expert Roomy Khan wrote for Forbes.

"It's a complete reimagining of how money moves."

Embedded banking ecosystems

Embedded finance and Banking-as-a-Service (BaaS) have taken off recently. For many FIs, it's adapt or die.

"Banks and FIs are adopting embedded finance and BaaS to introduce seamless financial services into everyday consumer and business experiences, countering competitive threats, and catalyzing growth," a 2024 PYMNTS Intelligence report found. "This is the future of banking."

The types partnerships being formed by financial services firms and non-FIs has been fascinating to watch:

‍

• Toast partnered with WebBank to offer a cash-advance product for restaurant clients.
• Apple partnered with Goldman Sachs to launch the no-fee, cash-back Apple Card.
• Airbnb partnered with American Express to allow cardholders to book using rewards points.

‍

The (long) list goes on.

The point is there are endless use cases where it's mutually beneficial to work with retailers, grocery stores, streaming platforms, and other consumer brands to open up new revenue streams and gain exposure to entirely new audiences they otherwise wouldn't have been able to without these partnerships.

The trick for financial services firms is identifying the partner(s) that can provide the most advantages for their businesses. This, of course, depends on the target goals for financial institutions.

For example, some want to:

‍

• Expand small and mid-sized business banking offerings and increase deposits
• Grow their consumer lending portfolio and better attract homeowner customers
• Attract younger demographics to counteract an aging customer/clientele base
• Tap into tech-savvy customer bases and introduce more appealing offerings

‍

FinServs just need to think strategically about which prospective partner(s) make the most sense, what exciting partner technologies they could tap into, and what net-new tech they could co-create to achieve their respective goals.

Tech-enabled revenue innovation

The three innovation opportunity areas above all have one thing in common: The AI technologies mentioned can help FinServ firms create new revenue streams beyond their traditional net-interest income model.

The three innovation opportunity areas above all have one thing in common: They can create new revenue streams beyond their traditional net-interest income model. For instance, they can:

‍

• Add new AI-driven advisory services to monetize robo-advisors or AI-powered financial planning tools via subscription models or performance-based fees (e.g., offering tiered digital wealth management services).

• Create tokenized financial products or custody services for digital assets, stablecoins, and staking/liquidity positions (in a compliant wrapper, like a ‘regulated’ yield account product that competes with high-yield DeFi platforms).

• Monetize consented customer or synthetic data to create anonymized market-intelligence products for asset managers, merchants, or insurers (e.g., sell insights to institutional investors or offer premium benchmarking tools to small businesses).

‍

“In 2025, AI use in financial services won’t be a differentiator,” Commodore Capital CFO Anand Pandya wrote for PaymentsJournal. “It will be a requirement for survival in a landscape that it has already irreversibly altered.”

Finding ways to leverage AI to stay ahead of the curve in an increasingly competitive space is vital, and building new fintech companies to address these monetization avenues is an ideal starting point for this industry.

Addressing FinTech innovation gaps and opportunities through external venture building

Despite all this innovation happening across financial services, there is always going to be room for new entrants (startups) that solve new problems and address longstanding challenges that no one has yet to solve for in a meaningful way.

This is why established FinServs are primed to fill these needs and gaps through venture building.

Working with a venture builder to create entirely new companies that address Jobs to Be Done (i.e., functional, social, and emotional problems they want to solve for themselves, their customers, or their partners) can help these organizations:

‍

• Explore novel business ideas through rapid testing. Incumbent financial institutions can innovate faster and experiment with new tech and business models without the constraints of their existing organizational structure. This agility enables quicker adaptation to emerging trends in AI, blockchain, and embedded finance.

• Reduce their organizations' regulatory burden. New ventures operating outside the core business may face fewer regulatory constraints (and even outright deregulation). This allows for more flexibility in product development and go-to-market strategies, especially in areas like DeFi and cryptocurrency.

• Access insights tied to potential customers. External startups can serve as a testbed for new customer engagement models and provide valuable intel into evolving consumer preferences and behaviors, which can then be applied to augment core business offerings and/or help them create new financial products.

‍

"Persistently high inflation, geopolitical pressures, regulatory challenges, and slow global economic growth are combining to challenge businesses across financial services," KPMG's 2025 Global Tech Report found.

And one of the best ways for FinServs to combat these issues and future-proof their organizations is to build new, advantaged startups that tackle issues tied to these problem areas head on.