What fintech trends to look out for in 2023?

2022 proved to be a tumultuous period for the fintech industry, as global pressures such as the war in Ukraine, exiting the pandemic, and ongoing supply-chain issues have led to a tightening of fiscal policies. Runaway inflation has caused many central banks to raise their interest rates, which has meant that the fintech industry, once flush with investment money, has now entered a period of belt tightening.

However, as the old saying goes; no pressure, no diamonds. 2023 will be a year for innovative fintechs to prove their worth by meeting the needs of their customers in more effective ways. Taking these challenges and opportunities into account, we have compiled a list of five predictions for the fintech industry in the coming year. 

Fintechs adapt to the new market

A combination of macroeconomic effects and rising interest rates has seen a dramatic fall in the amount of investment money available to the market. As investments dry up, investors will now be focusing on safer bets. 

Fintech companies will need to demonstrate the ability of their business model to solve the most pressing issues of their customers, whether they are B2C or B2B. Whilst prior to 2022 the emphasis had been on big money investment and rapid growth, investors are now more interested in profitability and companies that can demonstrate predictable revenue streams.

Additionally, as funding becomes harder to secure, we predict that there will be a rise in the number of mergers and acquisitions.

Read on: How banks & fintechs can help consumers cope with inflation

Increased bank-fintech partnerships

Whereas fintechs were once considered a major competitive threat to the traditional banking industry, there is a growing trend of bank-fintech partnerships taking place. Banks see numerous opportunities in cooperating with their more nimble fintech partners, chief amongst these are:

  • Increasing loan volume and loan productivity
  • New product development
  • Increasing deposit account opening productivity

However, a report by Cornerstone Advisors has found that many of these partnerships have thus not not been meeting their stated objectives. The challenges to these partnerships are known, and they can be solved with the right approach. 2023 will not only be the year of new partnerships, but also the year of improving the efficiency of existing ones. 

Green banking gains momentum 

The movement towards green banking has been picking up substantially, as consumers seek to make more environmentally friendly choices and banks aim to hit their ESG targets. In 2023, we predict that there will be further developments in the green banking sector, with banks moving beyond ‘traditional’ green banking products (think carbon footprint calculators) towards products that are more effective at helping consumers adopt sustainable ways of living.

We are also seeing incoming policy to further support this shift, such as the introduction of Scope 4 as a means of standardisation currently being discussed in Brussels.

Embedded finance grows

If there is one area in which we will see some major developments in 2023, it is embedded finance. Consumers today are less interested in traditional stand-alone financial services and are in favour of embedded experiences. In particular, there is likely to be an increase in consumer lending solutions following the widespread success of Buy Now, Pay Later. 

The best results will come from companies which take the time to fully understand their customer flow, and examine which solutions fit naturally into this. Those which can leverage the rich data available to them will be able to offer relevant financial services such as payment optimisation, efficient collections and lower risk lending at the point of need.

User experience remains key

Intuitive interfaces and seamless user experience are no longer ‘nice-to-have’, in 2023 and beyond these features will be key in determining the winners and losers in the fintech space. With Gen Z proving to be a generation of switchers, the need for targeted products and exemplary customer service will only increase over the coming years.

Part of the success of the fintech industry so far has been its ease of accessibility to financial products, with improved transparency and simplified processes proving particularly popular. Going forward, we expect to see further developments in areas such as accessibility (e.g. voice assistance), data visualisation, simplification of complex functionalities

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