FinTech Companies: How Do They Make Money?

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FinTech Companies: How Do They Make Money?

FinTech Companies: How Do They Make Money?

In business, digital transformation is the integration of computer-based technologies into a company’s products, processes, and strategies to drive fundamental change. It has significantly shielded labor and productivity from the global COVID-19 pandemic while accelerating technology adoption, especially in lagging countries.

Digital technologies offer a multitude of benefits to companies. These solutions primarily improve the efficiency of the way they operate and deliver value to their customers, resulting in increased consumer spending and widespread company buy-in. More importantly, they make businesses become more agile, enabling them to keep up with the latest trends and stay ahead of the game in the ever-evolving market. 

With several advantages alongside changing consumer preferences and added relinquishment of digital technologies, it’s no surprise why financial technology (FinTech) continues to boom nowadays. Its global market size is estimated to reach $305.7 billion in 2023 and is projected to grow to $1.5 trillion by 2030. Here’s how FinTech companies will likely reach this sixfold growth with the following revenue streams:

P2P Lending

Most FinTech platforms have commercial lending space, where they connect different borrowers to lenders or investors. This service is called offering peer-to-peer (P2P) lending. They earn from it by charging fees on the financing repayment process.

P2P lending differs from simple loans like payday or personal loans often offered by online lending companies. Through this digital lending solution, people borrow funds directly from lenders or investors without the intervention of traditional financial institutions, hence the name “peer-to-peer.” 

Lenders or investors of P2P loans can be any individuals or groups, like a company. Compared to traditional lenders in debt markets, they tend to get higher yields. Operating without the traditional industry standard and institutional supervision means no intermediary costs typically associated with traditional banking and investment models. 

P2P loans usually come with lower interest rates, origination fees, and credit score requirements, making them a very attractive borrowing option to borrowers. FinTech companies will also benefit from this. The higher the number of P2P loan borrowers, the more commission they’ll get. 

P2P loans usually come with credit score requirements, lower origination fees, and interest rates, making them a very attractive lending solution to borrowers with poor or no credit. This is again advantageous for FinTech companies since the more P2P loan borrowers there are, the more commission they’ll get. 

Interchange Fees

Another significant source of revenue for many FinTech firms comes from “interchange fees.” These are transaction charges that a merchant’s bank pays to the bank issuing the card whenever their customers use debit/credit cards for purchases.

Interchange fees are essential to cover various expenses such as handling, addressing fraud, and managing bad debt, along with the risks taken by the card-issuing bank in approving the payment. That’s why they’re typically distributed among the card processor, issuing bank, and network.

FinTech companies earn from interchange fees when they label a card white. This process involves purchasing products from another company and rebranding them as their own. When they white label a card, the issuing bank shares a portion of its interchange fee with them. While these fees may appear small (often just a few cents), they accumulate rapidly.

For instance, VISA garners an average of 7.5 cents per transaction. When multiplied by billions of transactions, FinTech companies may potentially accrue multiple billions of dollars in revenue solely from interchange fees.

Subscription and Flat Fees

Several FinTech companies also charge customers a fee for accessing their products and services. This payment is called a “subscription fee.” Unlike other apps working with other third parties, subscribers can pay subscription fees to FinTech companies directly, ensuring transparent and safe payment transactions. 

Another approach FinTech companies employ is “flat fees.” They’re also known as the “transactional approach,” where FinTechs earn revenue for each fund transfer. This model is often combined with subscriptions, enhancing the overall profits of FinTech companies.


A growing number of FinTech firms provide “robo-advisors,” functioning as investment managers within their platforms. They’re automated and algorithm-driven tools used for financial and investment planning. With these technologies, users can easily trade in the stock market with remarkably low associated fees.

FinTech companies generate revenue through robo-advisors in a similar manner to traditional investment managers. They levy a percentage fee based on the total assets, albeit at a lower rate. While human investment managers typically charge 1%, FinTech companies can offer these services for approximately 0.25%.

The rationale behind the cost-effectiveness of FinTech companies lies in the utilization of algorithms by robo-advisors. This enables them to automatically distribute, oversee, and optimize portfolios and assets, resulting in a more efficient process, reduced operational costs, and increased profits.

Final Thoughts

FinTech companies have various distinct strategies for revenue generation. Despite potential hurdles in the industry, such as competition, cybersecurity, trust-building with consumers, and regulatory compliance, they’re poised for continued success due to their digital nature, which fosters ongoing innovation and widespread adoption.



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