The year ahead looks full of fintech innovation, with the acceleration of trends underway and new developments on deck. Though the pandemic years were challenging, financial technology (fintech) companies took the spotlight. Businesses and customers opted for digital finance from home and remote locations and embraced a range of contactless fintech innovations. Those developments set the stage for banking, payment, and investment developments in 2023.
At the same time, there’s been a slight slowdown since 2021, a banner year for fintech. A report from CBInsights showed investments of $10.7 billion in Q4 2022, down 46% from Q4 2021. That contraction may be due to the general economic outlook this year. Against that backdrop, the fintech sector is going strong and building on the successes of the past few years. Here are the fintech trends to watch for in the coming months.
Shift to digital and cashless payments
Digital payment services are already used all around the world, but customers and merchants can expect to see more innovation and even faster payment support from fintechs in 2023. Digital payment processing is fairly established and flexible inside individual countries, but e-commerce retailers and employees working abroad continue to experience delays in cross-border payments. They sometimes face exorbitant fees or unfavorable currency exchange rates from legacy banks. That situation is changing with many fintech companies working to offer real-time payment options and secure processing and transaction support at lower cost.
More customers in 2023 are foregoing their credit and debit cards and paying with digital wallets directly from their smartphones and smartwatches. While the pandemic encouraged consumers to choose contactless payment, it’s the sheer convenience of no-card and no-cash that’s giving innovative payment options, like digital wallets and QR code payments, true staying power.
Disruption from neo banks
Retail customers and businesses have grown accustomed to using digital channels for everything during the pandemic, and that includes banking. Regulatory changes have taken place in many countries that support more interoperability in the financial sector. This shift towards open banking is making it easier for smaller, specialized fintech companies to enter the financial marketplace as “neo banks” or challenger banks. These companies are disrupting the financial services sector with innovative offerings that have not traditionally been available from legacy banks.
For example, some neo banks are investment apps that let people direct their savings towards sustainable companies. Some feature dashboards that analyze spending patterns and provide automated investment advice. Most neo banks leverage their smaller size to offer more flexible, high quality, all-digital credit cards, savings accounts, or microloans. In contrast to mainstream banks, they eliminate fees or keep them low by not maintaining brick and mortal branches. As neo banks become more prevalent in 2023, many are likely to enter into partnerships with traditional banks and offer joint services.
Popularity of Buy Now Pay Later (BNPL)
Given recent economic forecasts, a payment option that incorporates a short-term loan promises to be popular for consumers in 2023. Buy Now Pay Later (BNPL) is an innovative payment strategy that lets customers acquire goods and services now in exchange for future payment, often without interest.
Brick and mortar and e-commerce merchants can engage fintech vendors and offer a BNPL option during checkout. Budget-conscious customers are loving the chance to get a high-ticket item by making a small initial payment and a series of scheduled monthly or biweekly installments. Savvy merchants love it, too, as it increases their conversion rate. Look for BNPL at more Point of Sale (POS) touchpoints in the months ahead.
Advancements in artificial intelligence and machine learning
The financial sector relies on advanced technology, and Artificial Intelligence (AI) and machine learning (ML) are an essential part of the puzzle. AI and ML let companies do more with data and fintech companies have the expertise to gather, process, analyze, and leverage data better.
For example, fintech companies design software that analyzes account, investment, and spending data, and correlates that data with other factors. Those insights can be used by banks and credit institutions to get market forecasts and tailor products and services to individuals or specific demographics.
AI and ML are also making internal banking processes easier, faster, and more secure, and removing any chance of human error. Vast improvement in chatbot technology is making it easier for fintech companies, neo banks, and innovative legacy banks to offer personalized service at lower cost. Given the excitement around ChatGPT, your base level of financial or investment advice is likely to come from a high-performing conversational bot in 2023.
Growing prevalence of blockchain
Blockchain – the distributed, peer-to-peer network that underpins cryptocurrency and other digital transactions – will continue to grow this year. Many are hoping that blockchain may be used to accelerate and lower the cost of cross-border payments.
Many major financial services, including payment platforms and credit card companies, already support cryptocurrency payments and acquire and trade assets stored and secured on blockchain’s electronic ledger. Despite some recent setbacks in crypto markets, observers expect blockchain activity to continue to grow in 2023 and more companies to add cryptocurrency to their payment options.
2023 is the right time to leverage fintech opportunities
While other sectors might see setbacks in the days ahead, the momentum gained in fintech over the past few years promises to bring more innovation, more opportunity, and more growth. Savvy businesses, investors, and customers are looking to fintech for better services in their everyday financial activities. Those who rely on the financial sphere to run their operations are leveraging fintech trends to add value to their businesses. Many are exploring strategic partnerships and implementing cost-effective financial solutions over the long-term.
As the financial system becomes more inclusive and sustainable, it’s the right time for companies to seize competitive opportunities available to them.
Want to learn how fintech innovations can accelerate your business and connect you to an increasingly cashless society ? Contact OTT Pay to speak to one of our Customer Care Representatives. Discover how we can help you take advantage in payment and transaction processing technology, and a whole suite of fintech services.