How the fintech ecosystem is transforming financial services

An examination of our connected finance world and where it will go from here

March 18, 2024

Tom Sullivan Pic
Tom Sullivan

Tom is a fintech industry writer who creates whitepapers and articles for Plaid. His work has been featured in publications like Forbes, Fortune, and Inc. He's passionate about the freedom that the union between financial services and technology can create.

In the last decade, there has been an explosion of digital platforms that allow people to pay, invest, budget, save, lend, and more—forming an ‘ecosystem’ of fintech companies to choose from. And most people are all in, with the average US consumer using 3 to 4 different fintech apps.  

Understanding what the fintech ecosystem is and how it's impacting the financial services industry is crucial to building apps and systems that consumers will use. 

What is the fintech ecosystem?

The fintech ecosystem refers to the network of banks, fintech companies, apps, and consumers that make up the financial system. 

Historically, banks were the primary providers of financial products and services—it’s where you went to cash a check, apply for a loan, or invest.

Banks still play a crucial role, holding the depository accounts found at the center of a complex and growing web of connected fintech apps and services.

Today, the connected ecosystem includes fintech companies that pair with banks to offer easy ways to track spending, apply for mortgages, and invest in stocks, bonds, and even cryptocurrency. 

As the ecosystem has expanded, innovation in digital experiences and strong consumer preferences have changed the way both fintechs and banks build products and services. For example: Chime, a leading fintech bank,  stopped charging non-sufficient funds fees and offered free overdraft protection.   

Others followed suit, with Chase cutting out non-sufficient funds fees and drastically reducing overdraft fees in 2021. Citi, Wells Fargo, and some smaller banks also amended their fees.

The increase in competition helps drive innovation, improves the customer experience, and increases consumer access to a wide range of financial services.   

Key players in the fintech ecosystem

The modern fintech ecosystem is made up of multiple players, though most fall into four major buckets. Understanding each makes it easier to see what services they offer and where there is overlap.


As users of fintech and financial services, consumers are in the driver's seat of the connected financial ecosystem. Their choices determine who wins and loses in the fintech industry. Fintech startups and financial institutions should carefully monitor consumer preferences so they can fill market gaps.

Consumers’ willingness to share their financial data with third-party apps is also critical for success. It’s up to fintechs and financial institutions to prove their trustworthiness through transparent policies and high standards for privacy and security.  

Financial institutions that can connect to fintech apps have a growing competitive advantage. 75% of consumers agree that the ability to connect their bank accounts with digital finance apps and services is important to them.

Fintech apps and companies 

In the connected financial ecosystem, fintech companies (also known as third-party providers) are defined as: “Non-bank providers that offer products or services which directly leverage customer data or other services consumed from account holding institutions. This may be based around APIs, bilateral connections, or through an intermediary.”

In other words, fintechs leverage bank account data—mainly through APIs, but also through other means—to make financial products and services more digital and accessible, and improve user experience. That could be anything from cryptocurrency trading to tools that help people pay off student loans to personal financial management apps. The possibilities are endless, and fintech companies are quick to fill the gap when a new consumer demand reveals itself.

Financial institutions

Financial institutions—and the core banking accounts they provide to consumers—have long been central to the fintech ecosystem. These banking platforms hold core account data such as balances and transactions, and are the primary accounts for payments and deposits. They provide the data fintechs can build off of or augment. 

Most fintech apps are built by connecting with existing banks rather than displacing them—creating new ways of budgeting, investing, lending, paying, or any other conceivable financial service.

Data networks

Data networks are the lesser-known players in the financial ecosystem, but potentially the most important. They are the ‘glue’ that holds all these connections together. 

There are thousands of fintech apps and services and tens of thousands of financial institutions, making it virtually impossible for developers to build 1:1 API connections between them all. Instead, fintech apps turn to data networks that have already built these connections. By connecting to a data network with pre-existing APIs with financial institutions, fintech apps instantly gain secure access to the latter’s accounts with the user’s permission.

Likewise, financial institutions can also rely on data networks to provide their customers access to fintech apps. By integrating with a reputable data network that fintech apps trust, they open up their customers’ bank accounts to any app connected to that data network—again, on the condition of user permission. Plaid is one such open API data network, providing connections between 8,500+ fintech apps and 12,000+ financial institutions. 

Data networks can also share information about fraud between fintech companies and financial organizations, reducing the risk of fraud.  

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3 trends to watch in the fintech ecosystem 

As the connected fintech ecosystem continues to grow, new trends and consumer behaviors will demand changes. These three trends are worth watching. 

1. Expanding the fintech ecosystem into open finance

The concept of open banking—the practice of opening up financial account data to third-party fintech apps—is at the forefront of the connected financial ecosystem. By allowing fintech companies to connect to financial accounts through APIs and data networks securely, banks have opened up a whole new world of financial services to consumers. But that was just the beginning.

Now comes the evolution from open banking to open finance, which goes beyond linking up bank accounts and fintech apps only. Open finance takes a further step, opening up a broad spectrum of enhancement through fintech. These include investments, loans, pensions, insurance, and mortgages. 

Expanding to other types of accounts means the fintech ecosystem could reach many more facets of our everyday lives. Already, 76% of consumers say the ability to connect their bank to apps and services is a top priority when choosing a bank. Imagine if this were also true when selecting a mortgage, insurance plan, or investment portfolio.

2. Making the financial system even more connected

Given that open finance can broaden financial access beyond the bank account, the future could see more seamless connectivity between the apps and accounts that make up the fintech ecosystem.

Consider how it works currently, with separate apps for investing, budgeting, peer-to-peer payments, banking, and more. While embedded finance reduced the constant switching, many parts of our financial lives are still siloed in different apps. Digitizing these functions alone is extremely helpful, but connecting them could go the extra mile towards a holistic ‘digital transformation’ of our financial lives.

With even more connection, extra money left over in the budget could automatically go to where it’s most impactful—things like paying off student loan debt, investing in a 401K, or saving for college tuition. If the ecosystem’s fintech apps are more integrated, they could work together to have an even greater impact on people’s lives. 

3. The fintech ecosystem and artificial intelligence 

As the AI industry continues to mature, it may help consumers lower their bills, provide financial advice, and solve customer service issues. 

Consumers aren't just ready for AI in fintech—they're expecting it. Sixty percent of Americans think AI will transform the fintech industry in the next five years. Some of those revolutions are already happening, with the rise of robo-investing and apps that automatically log expenses.

The future of the fintech ecosystem includes regulation 

Acceptance of the connected ecosystem of finance has already begun, with formal US government regulations on the way. A July 2021 executive order formally encouraged “The CFPB to issue rules allowing customers to download their banking data and take it with them.” 

In October 2023, the CFPB proposed Section 1033, which would require many financial institutions to make data related to transactions and accounts more available to third parties, create standards for how that data is accessed, and promote open and inclusive industry standards.

These announcements show the connected financial ecosystem is a force to be reckoned with—and regulated. More importantly, they confirm that the government is taking consumer safety seriously while encouraging a competitive business environment. 

With the mass adoption of fintech and more official rules on the way, financial services are destined to become even more interconnected. Entry into the fintech ecosystem is a prerequisite for doing business, which means more opportunities for consumers to find a path to financial health and freedom.

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