REVOLUTIONIZING FINANCE: 8 TRANSFORMATIVE FINTECH TRENDS TO WATCH IN 2023

The financial industry is on the cusp of a transformative era, opening doors to numerous exciting possibilities and positive changes.

Do you know?

Fintech remains the most actively invested sector globally, having raised an impressive $21.5 billion worldwide during the year 2022.

It's worth noting that nearly 90% of people in the USA are now utilizing fintech services. The global quarantines and lockdowns have prompted a shift towards customer-focused digital financial processes. This push has inspired fintech companies to adapt to the changing times by actively embracing the latest technologies, ensuring the provision of exceptional services, and maintaining high levels of customer satisfaction.

How does the future look?

The future looks incredibly promising for the fintech market, with an estimated worth of $698.48 billion by 2030 compared to $110.57 billion in 2020. Both startups and established organizations are keeping pace with this rapid transformation, updating their operations and acquiring the necessary technical skills and tools to thrive.

In this dynamic landscape, it is crucial to scale in order to succeed. However, it is equally important to ensure that the scalable solutions adopted remain relevant. This is why considering the adoption of new fintech industry trends in 2023 can provide a significant advantage over competitors. In this blog, we have covered the top fintech trends of 2023 that will be game-changing. Without further delay, let's dive into these exciting trends that are shaping the future of fintech!

1. OPEN BANKING

By 2024, Statista predicts that 63.8 million people will embrace open banking, which is nearly five times the number in 2020.

Open banking revolves around secure financial data exchange, allowing individuals to share their information with nontraditional financial institutions. Through accessible APIs, third-party providers can access clients' financial data, enabling fintech companies to offer budgeting, expense tracking, financial planning, lending, and other services. This emerging technology holds great promise, with 麦肯锡 estimating that only 10% of its potential has been realized thus far. Open banking and secure API-based information sharing will simplify transactions, drive transparency, and likely result in lower loan rates and more favorable application outcomes for consumers, as lenders leverage richer data sets in their credit models.

With open banking, individuals can easily link analytics tools to their financial data, enabling them to analyze their spending patterns and receive regular reports on their balance, expenses, and savings. Additionally, open APIs allow banks to provide insurance companies, retailers, and other businesses with access to clients' financial information, facilitating faster loan approvals, streamlined online payments, and more convenient services overall.

2. NEO BANKING

The pandemic has underscored the remarkable potential of remote capabilities, and the financial industry has wholeheartedly embraced this notion. FinTech has played a significant role in the rise of neo-banks, which function as virtual banks without physical branches.

Neo-banks provide all the essential features of a traditional bank but without the constraints of brick-and-mortar locations. Many innovative FinTech companies have shifted their focus towards the neo-banking concept, creating a win-win situation for both businesses and customers by reducing costs and enhancing accessibility.

These neobanks are specialized FinTech firms that aim to lower the cost of banking services, often prioritizing specific service categories to deliver high-quality experiences. According to Statista, the number of individuals with at least one neobank account is projected to peak at 39.1 million in 2025, a significant increase from 20 million in 2021. As remote work became crucial for many businesses, the ability to have instant transfers, quick registration, and access to fully online banking with IBAN and ACH accounts has become a valuable advantage.

In the neobanking market, Chime stands out as a preferred choice, with 48% of respondents indicating a preference for it, as per the Statista report. With over 13 million users, Chime is one of the largest neobanks in the US. Their mobile banking app enables users to access cash from direct deposits up to two days earlier than traditional banks.

Chime offers essential banking services, alternative options for debit and credit cards, and a user-friendly interface. Users can build their credit and save money for the future while enjoying necessary banking features through Chime without incurring fees.

3. RegTech (Regulatory Technology)

In the realm of financial institutions, strict adherence to laws, regulations, and standard practices is paramount. Businesses must meticulously maintain accounting records, tax reports, income statements, and customer reports, submitting the necessary paperwork to regulatory bodies within specified timelines. Ensuring the accuracy of data and the legality of operations can be aided by regulatory technology or RegTech.

RegTech is a specialized technology designed to monitor and ensure regulatory compliance. It identifies non-compliant issues and streamlines them within the system. Utilizing specialized software, RegTech automates repetitive processes, maintains data security, and alerts both users and bank personnel to potential fraud.

Non-compliance with regulations can result in substantial financial penalties. For instance, Bank of America Corporation was previously required to pay $42 million to New York State for failing to adequately explain how clients' share orders were handled.

RegTech simplifies communication between organizations and regulatory authorities, ensuring uninterrupted data transmission, monitoring compliance (such as adhering to PCI compliance rules), and tracking financial crimes. By leveraging RegTech solutions, businesses can navigate regulatory landscapes more efficiently and mitigate risks associated with non-compliance.

4. SMART CONTRACTORS

Smart contracts have emerged as a remarkable FinTech innovation with broad applications across the financial sector. These contracts effectively manage and govern the execution of agreements between buyers and sellers in virtual environments. By utilizing cryptographic keys for virtual signatures, smart contracts eliminate the need for traditional paper-based agreements or legal intermediaries.

The global market for smart contracts is witnessing significant growth, driven by the top trends in FinTech. In the realm of finance, smart contracts offer the potential to automate agreements without the involvement of third parties such as banks or loan officers. This means that buyers and sellers can securely engage in legally binding transactions without the need for intermediaries.

The future holds the possibility of standardizing smart contracts through DeFi (Decentralized Finance) FinTech applications. Imagine the scenario where you need a mortgage. Instead of going to a bank and waiting for loan approval, you could obtain a loan based on a smart contract, receiving the funds within minutes or even seconds. This demonstrates the transformative power of smart contracts in revolutionizing financial processes and enhancing efficiency.

5. VOICE PAYMENTS

According to Statista, the number of voice assistants on the planet is projected to surpass the human population by 8.4 billion by 2025. Fintech companies are capitalizing on this trend by integrating voice assistants into financial management, aiming to enhance the adoption of digital assistants among users.

Within the voice payment market, voice biometrics ensures secure protection of user data. Through voice commands, individuals can make purchases, check their balances, and perform various other tasks simultaneously.

Capgemini Digital Transformation Institute reveals that 44% of people express interest in banking via voice assistants. Capital One Corporation has emerged as a leader in voice payments, having already introduced the use of Amazon Alexa to facilitate credit card bill payments for its clients.

Additionally, other FinTech businesses are leveraging voice assistants to provide personalized guidance to customers on complex issues, replacing traditional chatbots, managers, and contact center agents.

By embracing voice assistants, the fintech industry aims to revolutionize the way users interact with financial services, offering convenience, enhanced security, and a more personalized customer experience.

6. GAMIFICATION

Fintech gamification refers to the use of technology in commercial companies to enhance the customer experience. By incorporating gamification elements, businesses have achieved increased revenue, brand loyalty, customer engagement, and various other positive outcomes. As customers have become more accustomed to interacting with technology, they have also become more discerning about how companies employ it.

The gamification market has experienced significant growth in recent years. According to Statista, spending on gamification surged from $4.91 billion in 2016 to $11.94 billion in 2022.

Within the FinTech sector, many companies are integrating gamification into their overall business strategies to remain competitive and captivating. This has led to the widespread adoption of gamification as a means to promote products, engage customers, and foster a sense of ownership.

One notable example is the British fintech company, Revolut, which witnessed a remarkable 45% growth in its customer base between 2019 and 2020, attracting 15 million users across 37 countries. Through a gamification strategy, digital banking app users are incentivized to make in-person purchases using their Revolut debit cards. The Revolut Perks program rewards customers every tenth time they use their card, offering various benefits.

For instance, when consumers use their Revolut card for transactions, they receive cashback rewards, earning a percentage of the purchase price back. Additionally, discount incentives provide predetermined discounts for travel or online purchases. This gamified approach not only drives customer engagement but also fosters a sense of value and rewards for their loyalty.

By leveraging gamification in fintech, businesses can create a more interactive and rewarding experience for customers, ultimately strengthening their brand and driving customer satisfaction.

7. BNPL (Buy Now Pay Later)

The Buy Now Pay Later (BNPL) option is poised to witness a substantial increase, with transactions worth $576 billion projected globally by 2026, compared to $120 billion in 2021.

If your business involves any form of payment, whether B2C or B2B, it is crucial to pay attention to the BNPL boom.

BNPL has emerged as a prominent trend in the fintech industry, offering short-term financing that enables customers to defer payment for goods or services. Often, these arrangements come without interest, making them a popular form of funding. Customers using point-of-sale installment loans make an initial payment towards an item and then settle the remaining balance at a later date.

To illustrate, companies like Amazon and Affirm are collaborating to implement BNPL by breaking down payments for purchases over $50 into smaller monthly installments.

One notable BNPL provider is the multinational financial company, PayPal, which offers customers the option to divide a maximum payment of $1,509 into four equal installments payable every two weeks. The initial payment is made at the time of purchase, and PayPal does not charge late fees or report to credit bureaus.

Implementing BNPL can offer businesses and customers greater flexibility and convenience in managing payments. As this trend continues to gain momentum, integrating BNPL options can be a strategic move to attract customers and enhance their purchasing experience.

8. DECENTRALIZED FINANCE (DeFi)

Decentralized finance, also known as DeFi, is a rapidly growing fintech trend in 2023, closely associated with the cryptocurrency market and alternative financial instruments.

Within the DeFi market, a range of decentralized financial products is emerging that operate without the need for a central authority. These products include loans, exchanges, payment applications, and more. DeFi relies on self-executing smart contracts for all transactions and is built on open-source technology, providing users with increased transparency and trust.

One of the significant advantages of DeFi is its ability to facilitate seamless interaction between multiple blockchains, which has elevated the cryptocurrency industry to new heights and made it accessible to a broader audience. With numerous DeFi initiatives entering the market, there is significant competition for traditional, centralized financial solutions. This trend towards decentralization in finance is reshaping the industry and opening up new possibilities for users around the world.

WRAPPING UP

With our extensive experience in developing FinTech solutions, we have successfully tackled various challenges ranging from automating payments to creating personalized fintech solutions. We excel in establishing integrations and crafting innovative solutions based on the latest B2B fintech trends.

If you have a unique idea in mind, we encourage you to reach out to us at StrategistHub without any further ado. Let's collaborate and explore how we can transform your ideas into actionable solutions, aligned with the trends shaping the fintech landscape in 2023.

Together, we can bring your vision to life.