What to prepare for 2023 and upcoming years as a Fintech company? Synodus will cover some notable trends of the fintech industry during the first quarter of 2023 and the rest of the year in this article. Keep in mind that a trend doesn’t equal new technology, but an increase in the market demand and adoption rate that is worth considering. With all these latest Fintech trends, you can prepare better for your product and turn it into a tremendous business opportunity.
A Sneak Peek into The Fintech Market
Over the last few years, adopting Fintech solutions, including online payment, digital banking, and many others, has skyrocketed among consumers and businesses to more than 64% globally. In leading regions such as China, the US, and India, the number of adoptions can go between 80% to 90%, accounting for a vast majority of the population.
Why do people love fintech so much? It’s convenient and fast. Consumers no longer want to deal with lengthy financial paperwork and customer service interaction.
This trend pushed the birth of many fintech startups, with around 26,000 active companies worldwide. But many said fintech has passed its prime, mainly due to the decrease of investment between 2021 and 2022. Investors are more skeptical about new business ideas. There’s no longer a piece for anybody, but only for good ones.
In 2023, the fintech market will go through many turbulences. Especially with the FTX collapse, multiple banks got shut down, mass layoffs, and a recession. From what we’ve seen in Q1 of 2023, investors are still skeptical and slower on funding. Even though there is a slight increase, it’s mainly thanks to Stripe’s bag of $6.5B.
As a fintech startup, what should you do in this crazy time:
- Find a good product market fit.
- Validate your business ideas instead of rushing into the funding round.
- Focus on building your product: development, UX/UI, and testing. You may want to slow down on Marketing spending.
As a financial business, it’s a good time to go for a customer-centric digital transformation strategy to maintain their engagement and retention.
Top Fintech Trends That Will Define The Industry in 2023
1. Growing interest in Embedded Finance
Embedded finance is financial services being integrated into non-financial websites and apps. It allows consumers to access credit and make transactions immediately instead of going to the bank or using online banking. Moreover, the embedded payments help shorten the checkout time by auto-filling all the necessary information, making shopping efficient yet secure.
This fintech trend is mostly driven by the customer’s desire for convenience. The search volume of embedded finance has accelerated by more than 600% from 2019 to early 2023. So far, embedded finance has reached $54.3 billion and is expected to grow to more than $248 billion by 2032.
Bond, a fintech company, reports that one-third of consumers using embedded financial services of a brand are likely to spend more money. Also, they tend to stick with their familiar brand over other competitors.
2. NeoBank to attract Gen Z users
Unlike traditional banks, neo-banks do not have a physical location touchpoint and operate entirely on a digital platform. Yet, it still includes all the features of common banks. Neo banks have fewer service categories and focus more on the quality of those services with lower fees.
The interest in neo-banks has risen significantly during the roam of Covid-19 pandemic. In 2021, there were 80 million people with at least one neo-bank account in North America and Europe alone.
Generation Z is considered the growing and full-of-potential finance customer group for this global fintech trend:
- Most Gen Z have their first purchases sooner than previous generations.
- They are more drawn to seamless digital experience or bot-powered customer service.
- They want to save time and hate paperwork. With neo-bank, they can easily create an account and link it with other digital wallets, bank systems, or eCommerce platforms.
Many traditional banks are rebranding themselves or creating a sub-division of neobank to stay in the competition. In Jan 2023, there were over 350 neo-banks in existence and working. Bloomberg expects the number of neo banks users to reach 224 million by 2026.
3. Fintech companies are more aware of green initiatives
Yep, you are not hearing it wrong. Financial go green?
Corporations search for more environmentally sustainable solutions as the concern about climate change and preserving the environment reemerges. Fintech is quick to grasp the opportunity and is already developing an eco-friendlier version. They are known as “green fintech” and are expected to be among the leading fintech trends.
This technology may sound strange, but we have some examples to have a grasp of it:
Joro is a green fintech designed for customers who are heedful of their financial sustainability. The app will calculate the consumer’s carbon footprint based on purchasing data.
Stripe, one of the giant unicorns, recently started investing in sustainability with Stripe Climate. The app allows businesses to allocate their revenue to carbon removal initiatives.
Mastercard has also globally released its Carbon Calculator. The tool will give customers insights into their carbon footprints while offering solutions so that they can contribute to reforestation through smart spending decisions.
|Although only 8% of fintech founders categorize themselves as “sustainable fintech,” investors are increasing their investment. The VC investment in green fintech has gained more than $40 billion through venture deals from 2020 to 2021. |
On the other hand, green fintech start-ups are sprawling globally, and many can be found in Switzerland, Spain, Singapore, and Sweden.
4. Buy Now Pay Later will increase despite the concerns
As its name implies, Buy Now Pay Later (BNPL) allows customers to pay a certain amount in advance and pay the remaining balance later.
This emerging fintech trend is often interest-free, thus appealing to many customers and eliminating complicated approval standards. With BNPL, businesses can have more sales and attract more customers.
A report by TechMagic has pointed out that 60% of customers surveyed have used BNPL services. During the pandemic, this trend of fintech has helped struggling households complete their purchases of clothing, electronics, and many other essential items. Most eCommerce sites now include BNPL as one of their main payment methods or work on BNPL’s implementation.
Despite BNPL’s merits, there are several concerns that most people underrate or neglect. Customers either overspend their accounts or don’t understand their situation. A survey from The Ascent points out that 17% of BNPL customers are likely to be late on their payments, and 18% are likely to do that. Another survey from Accrue Savings showed that 28% of Gen Z and 22% of Millennials often overspend, and 44% of consumers who have used BNPL have already missed a payment.
|This has created a niche market for Save Now, Buy Later (SNBL) – a fintech model that recently caught the attention of investors in late 2021 till now. |
This model is nothing new compared to traditional savings in banks. But for a long time, banks haven’t found a way to monetize it.
SNBL works directly with services or product providers, allowing the customers to put aside monthly savings to receive discounts or good interest rates from the providers. This model is promised to help sellers deal with abandoned carts and drive more conversions. Meanwhile, SNBL will receive a percentage from every purchase. Multiply is the first SNBL platform with 250K+ active users in 2 years since funding.
5. Using Regtech for accuracy and efficiency
Regulation technology, or regtech, is a valuable tool for financial institutions to manage complex databases while abiding by the law. Regtech utilizes cloud technology, machine learning, and big data analytics to detect and prevent risks. It connects and facilitates communication between organizations and regulatory agencies.
Thanks to regtech, you can use data without disruption, compliance is monitored, and financial crimes can be traced. There are positive signs and predictions that the regtech industry will thrive. Junipe Research predicts a 200% growth between 2022 and 2026.
6. Adopting Low code & RPA for process automation
Using automation tools to optimize your operation and reduce costs is nothing new. We all like having robots and service workers do mundane paperwork and data tasks. Gartner reports 80% of finance companies have already used RPA or plan to do so.
Yet, it has one issue. There is too much automation software. Next thing you know, your business is using various tools without connection, and you have to invest a ton for integration.
To solve this, many businesses have turned to low code for process automation. You can use low code’s point-to-click configuration to build applications rapidly. This fintech trend also allows customization; thus, you can craft a tool that best fits your business.
Most low code platforms use RPA technology. You can rely on its ability to develop and deploy process automation. With this, you no longer worry about messy workflow and lack of collaboration between teams. A centralized tech hub is much more beneficial than a scattered system.
7. Aware of cybercriminals with their new tactics
As global fintech trends emerge and expand, so do cybercriminals!
Data from Trend Micro reveals a 1.318% increase in cyber-attack on the banking industry between 2020 and 2021. The first half of 2021 also recorded a 22% rise in phishing attacks and 38% in attacks targeting financial apps.
Cybercriminals and their attacks can cause severe threats to industries, especially finance. Many IT professionals have warned about the risk of cybercriminals developing new tactics to get around security. Two of the most common high-tech cyberattack tactics are deepfake and AI infiltration.
- Deepfake uses AI and machine learning to gather information and imitate a person’s image and voice. The first deepfake-related incident happened in 2019 when criminals faked the voice of an executive of an energy firm and successfully stole $243,000.
- Besides using deepfake, cybercriminals also target the machine learning systems of many banks. They attempt to breach analytic systems because these are often overlooked. Plus, machine learning is a relatively new technology, and protection is yet fully developed, thus making it easy for hackers to get into the system.
8. Voiceprint authenticator among password, faceID or fingerprint
It’s common to see biometric authentication nowadays. But these are not enough to prevent cyber threats from looming over fintech businesses. Therefore, passwordless authentication like voiceprint is being pushed and deployed as a new security option.
Voiceprint technology utilizes a user’s voice and sets it as the password for devices or accounts. The technology of this fintech trend can pick up 1,000 micro-characteristics in a person’s voice to verify their identity at the login stage. It is ensured to identify users quickly in half a second.
The First National Bank of Omaha adopted the Pindrop voiceprint platform and saved 2.5 million minutes in handling customer service calls. The implementation also reduced fraudulent account takeovers by 50%. There are, however, concerns that deepfake technology can easily penetrate this security layer.
9. Also consider: On-demand pay as one of your features
On-demand pay or earned wage access is a type of payment that allows workers to request part of their paycheck before the next pay period.
On-demand has helped employees deal with unexpected expenses and relieved some financial stress. A survey on working individuals in the US and UK showed that 35% of people were in financially stressful situations and could not pay expenses between pay periods.
The same survey also points out that about 20% of people are willing to use the on-demand pay option if it is available. ADP’s statistics report that 80% of workers are ready to take a job that provides on-demand pay over one that does not offer it, making it a notable fintech future trend.
You don’t need a whole app to start with On-demand pay. Instead, developing it as one of the features, especially for banks that focus on individual and businesses clients.
10. The need for AI and ML in Fintech won’t cool down
The global market for AI in fintech is estimated to reach $26.67 billion by 2026. More than 90% of fintech companies rely heavily on AI and machine intelligence. A case study reports that implementing AI helps reduce 20% of the investigation workload when combating fraud. Meanwhile, Accenture said a financial business can expect a 2-5x growth in customer engagement with AI
AI is capable of managing client data and preventing fraud. It also offers suggestions on management strategies and detects human errors. AI is capable of interacting with clients directly through chatbots and self-learning apps. Along with AI, machine learning models analyze factors to identify fraudsters before they can cause any actual harm.
11. DLT will break into the Fintech world
Distributed Ledger Technology (DLT), or Decentralized Finances (DeFi), is a fintech trend where blockchain meets fintech. DLT ensures that every transaction initiated on blockchain and maintained by the ledger will be instant, secured, undisturbed, and free of supervision. DLT covers multiple areas and possesses a myriad of apps like decentralized payment platforms, insurtech software, and open banking APIs for innovative banking services.
This fintech trend is supported by different technologies like digital wallets, zero-knowledge identity proof, and smart contracts. DLT gained $15 billion in revenue in 2021 through digital asset exchanges and is expected to thrive in 2023.
12. Digital mortgages with proptech
77% of loans issued to US households are mortgages, and the US mortgage loans have added 1$ trillion between 2021 and 2022. Since mortgage loans are still extremely bureaucratic, entrepreneurs are gradually adopting one of the latest fintech trends – digital mortgages.
Along with digital mortgages, proptech can help reduce the time and effort required to apply for a mortgage. It makes getting approval quick and repaying it cost-efficiently while still adhering to regulatory regulations.
Fintech Technologies That Might Be Downtrend
Not all fintech trends stay relevant forever; some are losing their traction or disappearing from the game. There are several fintech trends that are highly expected to become irrelevant soon.
- Covid-19 initiatives: Now the world has overcome Covid-19, and restrictions have been loosened, Covid-19-centric projects are no longer relevant. Most populations are no longer inclined to shop online solely. However, the efficiency and convenience provided by embedded finances will allow fintech products to stay alive.
- Cryptocurrency exchange: Following the bankruptcy of FTX crypto exchange and cryptocurrency cost inflation, the public has lost interest in digital currency. Investors now recognize that any money in pure cryptocurrencies would likely be lost and retreat from the unpredictable market. 2023 is expected to be the year crypto exchanges are reevaluated, and the fintech industry will be reshaped. While the future of crypto is uncertain, this is not the best time to start investing.
- (Un)stable coins: the question about a stable coin’s lifespan is yet to have a finite answer. The interest rates might get hiked, causing the market to cut back on everything except the essential investments, of which stablecoins are not one. If investors lose trust in them, stablecoins may crash. A stablecoin crisis might cause catastrophic consequences for the bond market and other financial businesses.
From our analysis of the top 12 fintech trends, we hope you get a clearer picture of the potential ups and downs of the market. During this turbulent period, it’s a great time to dive deep into research and find opportunities that potentially arise. Nevertheless, the success of a Fintech product lies in its core value and application performance. In this case, a Fintech Software Development Company like Synodus, can be a strategic partner for your product development or digital transformation!
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