What Awaits the European #Tech Scene in 2023?

Know What’s at Stake: Nostradamus Painting an Optimistic(!) Word Picture for 2023?

The end of the year is exciting due to the many possibilities and opportunities it bears.

A year of turmoil and change is about to end; nevertheless, we can’t seem to breathe a sigh of relief due to the unpredictability around 2023. If we consider Nostradamus’ predictions for 2023, including some marine population extinction, the collapse of the (British) monarchy, the debut of the antichrist, and a “seven-month-long great war,” it is tough to find reasons to look forward to the new year.

Whether Nostradamus likes it or not, 2023 is around the corner, and business owners, entrepreneurs, and managers should leave the doomsday scenarios aside and prepare for the coming year. So, what can we foresee already, looking at the most recent developments?

The Foreseeable: 3 Things Entrepreneurs Can Expect From 2023

If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. Therefore, judging from this year's activities, we can expect more compliance requirements, consolidation, and a value-driven attitude toward products and services. So let's take a closer look:

1.??????????New and Tighter Regulatory Regimes:?

The first unboxing of 2023 consists of stricter tech regulations that have been work-in-progress for a while now. If you haven't been living under a rock, you probably have heard that the collapse of #FTX and other exchanges will likely trigger strict regulatory responses in most jurisdictions. The regulators are additionally alarmed about the potential risks of #BNPL and gamified neobroker practices. While these regulations are unlikely to ban the products mentioned earlier, they are likely to make the playroom and the margins tighter, making it harder for new players to enter the scene and resulting in corporate dominance.

Further regulatory updates are expected for #BigTechs. The EU and the UK were among the first to start a "cold war" with the Silicon Valley giants via investigations and privacy fines.?

The Digital Markets Act is likely to take this war one step forward, forcing BigTech's hands in terms of data and marketing practices and already entered into force on November 01, 2022. In addition, Digital Services Act, another attempt at creating a digital level playing field, entered into force on November 16, 2022.?

Lastly, the EC's approval of the Data Governance Act on May 16, 2022, will likely create compliance-related ripples for the next months.?

People are increasingly losing their trust in governments and public institutions. Will they allow private sector autocrats to replace the public institutions with their monitoring and arbitrary practices? Will the increased regulations force BigTech companies to switch to focused strategies instead of widespread ones? We might be able to answer these questions starting next year.

It is crucial to mention that not all is lost regarding regulations. For example, the newly proposed framework for a European digital identity (#eID) is likely to increase access to financial services and enhance Europe-wide harmonized open banking and #FinTech services via electronic identification. Consumers have remained opposed to this idea for a long time, but this could change. Nevertheless, a harmonized, cross-border solution can help financial service providers unlock their full potential, decrease unnecessary compliance costs and spread secure digital services.

Both potential providers and users can?learn more?and provide feedback via the?online eID feedback platform.?

A Nordic EU initiative is already?testing an EU digital wallet pilot in parallel, with a payment focus, due March 2023.

2. ?The Search for New Revenue Streams, Business Consolidation, and Planning:?

The first and second waves of FinTechs and tech companies are already looking for new ways to generate revenues, primarily due to investor pressure and limited funding options. One of the biggest challenges of these start-ups and scale-ups is reaching profitability and/or remaining profitable by using additional revenue streams. With heated competition and many copycats, these companies are entering the embedded finance and holistic banking areas to diversify and differentiate offers and use partnerships to create new revenue streams.

The first and second waves of companies that cannot demonstrate revenue or potential next year could be forced to consolidate or pivot.?

Tech start-ups' impulsive experimentation days are over, at least until we leave the economic turmoil behind. With less attractive valuations and visible challenges to financing access, all strategy and budget decisions should be meticulously planned. The focus will remain the secret sauce for start-up success, and uncalculated risks will not favor the bold.?

Regardless of their size, the businesses unwilling to adapt to the status quo are likely to be consolidated.

Consolidation, on the other hand, creates possibilities for corporate innovation and European market entry opportunities as the companies with decent tech stacks, teams, or infrastructures that have drained their cash runway are likely to be acquired by more prominent or foreign players.

3. The Shift Towards Less Hype, More Value-Driven Products:?

The last quarter’s activities reveal that consumers are losing interest in high stake products and services.?

We have learned essential value lessons through web3 products in 2022.??Although the expert users were satisfied with digital assets, mainstream users were frustrated with the lack of market predictability, which is eventually reflected in the?Crypto Fear and Greed Index.??Since summer, the barometer navigates in "fear."

The early days of this year marked the NFT and metaverse craze.??Numerous business models evolved from this trend, including "metaverse consultancy" and "metaverse property management."??Yet, monetization remained an issue for many platforms of businesses due to the lack of tangible value.??One funny anecdote was the EU hosting a metaverse party in December with a €387,000 price tag that attracted merely six people.?

Does this mean that metaverse and popular digital asset platforms are dead???Not quite; however, "the demand" still needs to arrive.??Ultimately, the platforms that cannot explain their added value will lose their charm.

Seconding Herman Nerula's speech during the Sifted Summit in November, "The most important aspect in the metaverse is the user experience that involves an exchange of value.??It should be better than the experience provided via VR."

As consumers show signs of economic conservatism and are more engaged in safer products, the products that create actual value are likely to be more in demand.??Empathizing crisis-times user needs could determine the added value for tech companies.??Repurposing and circular economy-related products are becoming more and more popular.??As for FinTech, the products and services that might help the users save money, have access to discounts and exclusive offers, and give access to financing options could deliver significance.

3 Tech Trends That Are Likely to Shape 2023

ESG, Sustainability, and Green Products:?

2022 was the first year making the energy and climate crises' impacts visible to the masses. Seeing some European landmarks unlit during Christmas sent a solid message to many (although some local governments continued as if they didn't get the memo). This message will likely echo through 2023, forcing consumers to make greener choices and thus increasing sustainable product competition.

The increased consumer consciousness, as well as the upcoming regulations, are likely to convert once corporate branding slogan, #ESG, and #sustainability, into a focus topic for not only big corporates but also SMEs, start-ups, and even shop owners. Many new initiatives allow smaller organizations to offset their carbon footprint, comply with relevant regulations, calculate their impact, and have more sustainable operations.

Super Apps:?

?Tech companies mastering one or several areas are already looking into conquering more and becoming the European super app. However, unlike Asia or LaTam, Europe's super app throne is yet to be filled.

Although European consumers are culturally not eager to share massive data sets with one single company, the market gap creates an appetite among corporations and successful tech companies.?

European regulation doesn't necessarily enable a super app infrastructure; however, it doesn't necessarily make it unavailable. Advanced open banking practices can make the process easier. Ultimately, the choice of the starting region will be the key.?

Also, for European customers imagining a super app that starts as a delivery provider and spreads to more sensitive services might be controversial. To lock in the trust factor, the potential super app provider should start with financial or insurance services that could build trust.

The usual suspects of super app providers are unicorns and IPO companies. Nevertheless, if a European super app is possible, it will likely come from a stealth provider working on the product as we speak.

Once Again, Artificial Intelligence:?

#AI is neither artificial nor intelligent. It has been on the tech scene's radar for a while now. However, one chatbot practice pulled mainstream users' attention to the evolving technology. You are right; we are talking about #ChatGPT, the AI-powered chatbot that crossed 1M users in less than a week and continues to grow.

ChatGPT needs to have a clear revenue and governance model outlined. Regardless, the public attention and the word-of-mouth success will likely inspire more techies and VCs to shift back to AI R&D.?

AI is nowhere near replacing humans but could successfully automate repetitive tasks and be trained to fill simple talent gaps, thereby decreasing costs.

Another source indicating the AI trend is the EU #ArtificialIntelligence rulebook, accepted on December 06, 2022. The Artificial Intelligence Act isn't innovative per se and intends to act more from the market protection instinct. However, regulations have always been the catalyst for innovation in the EU. Now that a clear set of rules is out there, entrepreneurs and researchers will be more confident investing in this area.?

The Artificial Intelligence Act prohibits social scoring, AI-based systems "that exploit the vulnerabilities of a specific group of persons and persons who are vulnerable due to their social or economic situation."

Suggestions: How to Get Ahead of the Curve in 2023?

In a year of instability, consumers will need trust and reassurance more than ever. Tech companies that leave destructive growth plans at the doorstep and instead empathize with their customers, supporting them during their tough times and offering (not only UX but also) value will be able to get ahead of the curve.?

After a year of layoffs, scandals, and crises, consumers need service providers they can rely on more than ever.?

What is your company doing to refresh the trust and strengthen customer loyalty?

Take One Step Back Now: A Year in Review

The lack of visibility makes 2023 more exciting and creates a range of possibilities.

Before kicking off the ambitious 2023 plans and unlocking different opportunities, entrepreneurs and companies should invest in a retrospective study that goes beyond the hard KPIs, evaluating their and their partners' performance, achievements, mistakes, and learnings.?

This year we learned a lot, and we would like to offer a free retrospective study as a thank you to all entrepreneurs and professionals helping us grow!

If you use the holiday season for strategy preparation, this might be just the thing for you. You can download the retrospective analysis here.?

Have a great year, everyone!

#fintechinnovation #banking #retrospective #financialservices #digitalidentity #RegTech #entrepreneurship #superapps #superapp