Fintech is a mixture of the terms financial and technology. It refers to companies that use technology to improve or automate financial services and operations. Also, fintech invokes a rapidly expanding sector that benefits both consumers and businesses in a number of ways.
The Fintech industry offers a myriad of uses, ranging from cryptocurrency and investment apps to mobile banking and insurance. In 2023, there are 10 fintech trends that are particularly notable, including the rise of decentralized finance, the adoption of artificial intelligence, and the growth of P2P lending.
As consumers increasingly embrace these technologies, it’s important for businesses to stay ahead to stay competitive in the digital finance revolution. Here, we have to mention the top 10 trends that the Fintech industry should look for in 2023.
Let’s take a quick glimpse!
Top 10 Fintech Trends to Watch Out in 2023
The FinTech sector is expected to embrace more efficiencies in financial processes by 2023. The way companies conduct their financial operations will change as a result of ongoing changes in the market. Here are the top 10 fintech trends to watch out for in 2023.
#1. Artificial Intelligence in Fintech
According to the World Bank, innovations in fintech have enabled 1.2 billion unbanked people to access financial services. At the same time, almost 3.5 billion people still do not have access to a bank. This makes them susceptible to exploitation by expensive moneylenders or loan sharks in the informal financial sector.
However, AI and machine learning algorithms can reduce this discrepancy. AI and ML algorithms in fintech that support financial transactions like banking and lending will have an unbiased opinion on who has access to banking in 2023.
Furthermore, data-driven business models can also be implemented in the financial sector. This can especially help banks achieve a model that produces higher revenue while creating a successful multi-channel experience for their customer base.
#2. Peer-to-Peer Lending
Peer-to-peer (P2P) lending is one of the popular forms of lending in the alternative financial sector that will see more of it this year and beyond. But how exactly does it work?
A finance app development services provider states that P2P lending is a type of alternative lending in which investors and borrowers are connected directly through an online platform operated by a third party. It eliminates the need for traditional banks as intermediaries and reduces costs, offering more profitable loan solutions. This type of alternative loan involves three parties: a borrower, an investor, and the online platform, which facilitates the interaction between them.
For example, Capitalize, a UK-based P2P lending provider, connects business owners with lenders to provide funds for various purposes such as buying new locations, expanding staff, etc.
This alternative lending method caters to both the consumer and business markets. Many small and medium businesses and startups are driving demand in the FinTech space. In a short time, the P2P lending market has gone from being a niche to becoming one of the main and preferred forms of financing.
In 2023, the alternative finance sector is expected to experience growth with an anticipated CAGR of 6.3% from 2022 to 2028. That’s right. It’s time to get on board and join the movement toward more cost-effective and convenient financing options for both start-ups and existing businesses. Take advantage of this exciting opportunity to revolutionize your financing strategy!
#3. Embedded Finance
Integrated finance has a massive ecosystem; this year, it is anticipated to expand dramatically. The integrated payments sector is likely to expand by 40.4% annually, according to the researchers.
Companies can boost customer experience and revenue by offering comprehensive offerings throughout the customer journey with integrated finance. Includes financial services, including banking, credit, investing, payment processing, loans, and insurance.
Buy Now Pay Later (BNPL) is a rapidly expanding field of integrated finance across the board. With this payment method, customers can place an order today and pay for their purchases later, usually in a series of payments.
#4. RegTech – Regulatory Technology in Fintech
“The RegTech industry is expected to reach a staggering $44 billion by 2030.”
RegTech has lately become a mainstay of the FinTech industry. What exactly is RegTech and how significant is it?
Among all the industries in the world, the financial industry is one of the most highly regulated. RegTech is anticipated to transform the regulatory environment this year by offering cutting-edge technology solutions to compliance-related issues. As the name suggests, regulatory technology is a subset of FinTech that uses technology to monitor regulatory processes.
Companies in the regtech sector typically deal with concerns around tracking, reporting, and compliance. Although the word first debuted in 2008, the sector has seen a lot of development lately. This growth is expected to continue as alternative finance, blockchain, and AI become increasingly involved.
The development of regtech has made it possible for companies to automate almost every step of the compliance process. RegTech will advance its solutions to help financial institutions identify and mitigate risks for years to come using cloud technology, machine learning, and big data analytics.
#5. DeFi and Blockchain
The first thing to note is that DeFi addresses peer-to-peer transactions quickly and for free. According to recent research, more people are beginning to recognize the benefits of cryptocurrencies for payments abroad. In 2023, decentralized finance appears to dominate the FinTech market.
Similarly, blockchain is revolutionizing the way money is transferred internationally. It is faster, more accessible globally, and has cheap processing costs. In the next ten years, blockchain can increase the global economy to $1.76 trillion.
With a 29.7% market share, the banking sector has the largest global distribution of blockchain market value. Another PwC report predicts that 2025 will be the tipping point in the widespread use of blockchain technology in all major economies.
Bonus Visit: Latest Mobile App Development Trends
#6. FinTech Companies Initiating Green Finance
Blockchain is just one sector that is taking green initiatives to combat climate change. The FinTech industry is also engaging in environmentally sustainable practices by helping companies integrate donation initiatives into their operations. And in 2023, this will become commonplace in the industry.
Stripe is an example of a financial sector corporation investing in sustainability. The Stripe platform allows businesses to allocate a portion of their profits to initiatives to reduce carbon emissions.
Same Mastercard introduced a carbon calculator tool for the banking industry globally. It gives people information and knowledge about their carbon footprint and gives banks the ability to offer ways for consumers to contribute to reforestation through informed spending decisions.
By the year 2023, we can expect more Green FinTech companies to populate the industry to achieve a carbon-neutral global economy. These initiatives will not only help protect our environment but will also create a better future for generations to come.
If you want to start your own, find developers who can help you incorporate these practices into your business. In the end, it’s an investment worth making and one that will help our planet greatly in the long run.
#7. Smart Contract
Smart contracts digitize trust so that transactions are secure and executable anywhere. It does this without referring to the complex technical, legal or philosophical foundations of contracts.
In smart contracts, the parties send cryptographic keys as digital signatures. Contracts are stored electronically instead of on paper, and the codes are virtually tamper-resistant and promise to operate precisely and predictably.
Multiple computing devices each obtaining the same copy of the initial digital contract serve as the analog of a token smart contract. Because of this, it is essentially impossible to violate the legitimacy of the contract.
Not only that, but these systems, which today make up what is known as a public blockchain, would monitor the execution of the contract until all its conditions are met. This further streamlines financial transactions from virtually anywhere, anytime.
#8. BNPL – Buy Now Pay Later
Buy Now Pay Later (BNPL) is a short-term financing option that allows you to defer payment for products or services until a later date. Unlike traditional financing, BNPL often comes with no interest, making it an attractive option for many.
With point-of-sale installment loans, customers make a partial payment at the time of purchase and pay the remaining balance later. Industry insiders predict an increase in the popularity of BNPL for financial transactions in 2023, and the big players in the fintech world are already joining this trend.
The financial industry has the potential to be shaken up by BNPL. For consumers, it’s a great alternative to borrowing from traditional banks that can have sky-high interest rates or strict approval standards. By attracting customers who want the option to pay later or in multiple installments, it could result in increased sales for merchants.
For financial companies, BNPL is a remarkable growth sector that can be both a challenge and an opportunity. On the one hand, it could compete with your usual lending products, but on the other, it could create new business opportunities for those who find ways to make it work for them.
Ultimately, this payment option allows buyers to have more control over their financial decisions and offers companies the opportunity to offer value-added services. As per a mobile app development company, if you run an eCommerce site, BNPL could be the perfect asset to add to your services.
In 2023, the use of open banking will reach levels never seen before among the new fintech trends. It’s because customers are heavily dependent on technology in many facets of their financial lives. Thus, financial institutions will be in charge of satisfying this need and providing a wide range of BaaS solutions in line with the most recent technological developments.
Banks will need to create open API platforms to offer specific banking goods and services to fintechs to participate in the open banking and BaaS ecosystem. Banks can offer more capable developer portals with API documentation and sandboxed test environments for fintech themselves. They can quickly integrate desired financial services with this assistance. Virtual accounts as a service, POS financing, and other possibilities are some of the prospects offered by BaaS.
#10. Digital-only Banking
Digital banks are one of the fastest-growing trends in the FinTech sector, completely replacing traditional banking. Popularity is fueled by convenience, and digital banking is redefining ease. Paperwork is easier than ever, and customers don’t have to waste time going to a facility or standing in line.
However, that is only the beginning of the problem. Banks provide a number of benefits on top of all of their accessibility offerings. Demand is increasing as a result of cross-border transactions, minimal fees, immediate peer-to-peer transfers, and perhaps even investment options.
In fact, it is anticipated that 2.5 billion people will be using exclusively digital banks worldwide by 2024. Thus, FinTech’s shift towards digital banking will continue.
The future of the Fintech Industry is Quite Bright!
• The Fintech industry is expected to reach $174 billion in 2023, according to reports. Moreover, it is anticipated to reach $188 billion in 2024.
• Over 26,000 fintech startups are currently operating worldwide.
• According to Statista, the number of US fintech-based personal loan agreements has increased by 33%.
• Some experts predict that by 2026, the fintech market is expected to reach over $37 billion.
• For financial services like check cashing, the 9 million unbanked households in the United States pay an annual fee of between $200 and $500 on average. Through digital direct deposit, fintech helps individuals avoid these fees.
• According to research, chatbots will enable banks to save approximately $7.3 billion by 2023.
• According to Statista, it is anticipated that digital peer-to-peer (P2P) lending will reach $1 trillion by 2025.
• The Financial Services Global Market report projects that the market will reach $37,343 billion in 2026 at a compound annual growth rate of 9.6%.
• By 2023, it is anticipated that the insurance industry will save nearly $1.3 billion through the utilization of artificial intelligence.
It is a challenge to make predictions about the coming year. However, 2023 will undoubtedly be an important year for the financial industry due to the myriad of regulations, market trends, and technological advances.
It is important to keep up with the top 10 fintech trends influencing the financial industry, such as DeFi and blockchain, RegTech, P2P lending, and artificial intelligence. Even if you do not operate in the fintech industry, developments in this field can significantly influence your business.
Therefore, it is best to look to the professionals at Quytech for a smart solution to your business. Get in touch with our experts, we will be happy to serve our best services.