January 4, 2023

Fintech Trends To Watch Out For In 2023

The fintech industry is teeming with lucrative new opportunities: Here’s a taste of what’s to come in 2023.

The financial technology or fintech sector is quickly replacing traditional banking systems with increasingly versatile digital solutions. This is welcome progress that makes financial transactions and operations faster, safer, and easier for both consumers and businesses. After all, fintech solutions aim to bridge the gap between financial organizations and their clients through convenient and user-friendly digital interfaces.

Over the years, we’ve seen fintech interfaces in the form of smartphone apps, websites, smart credit cards, trading platforms, AI-powered lending systems, and more. And as technology advances and new financial demands emerge, fintech interactions continue to evolve.

What does 2023 have in store for financial technologies? Let's look at the top fintech trends to keep an eye out for in 2023 and beyond — and, more importantly, what these trends mean for businesses and the financial industry.

The latest fintech trends

Fintech’s influence on everyday life and business operations is only growing as financial companies and software developers try to get the most out of the available technologies. In no particular order, here are five of the most impactful fintech trends poised to disrupt the financial landscape:

The growing sophistication and success of neobanks

Neobanks, also known as digital or online-only banks, offer all the services you’d expect from a traditional bank but have no physical footprint. Instead of brick-and-mortar establishments, neobanks operate exclusively online, primarily through apps and websites.

The neobank model has several benefits over conventional banks, including lower startup and running costs, customizable user experiences, faster response and operations, universal access, and more secure transactions. All these benefits are passed down to the account holders in terms of banking convenience and flexibility, low transaction fees, high interest rates on savings, and low interest rates on loans.

Although internet banking is not exactly new, purely online banks have only emerged within the last decade or so. Research by Publicis Sapient reveals that more than 20% of all neobanks operating in April 2021 had launched in the previous 12 months. However, neobanks are already making massive headway against traditional banks. They’ve significantly impacted the financial industry by taking a 16% share of the SMB banking market.

These trendy new banks could very well be the future of banking. Amdocs predicts that digital-only banking will acquire a quarter of the banking market and become ubiquitous in the next five or six years. On the same note, more and more physical banks are launching digital-only counterparts to keep up with the trend.

The looming financial makeover with blockchain and cryptocurrency

Historically, banks have shied away from blockchains and cryptocurrencies, and mostly for good reasons. But these technologies have now matured enough that fintech players are beginning to show interest in their capabilities.

Blockchain allows for fully decentralized fintech systems that can be used for verification, data and privacy protection, transaction processing, and contract execution. The decentralized nature of blockchain and the fact that blockchain ledgers cannot be altered guarantees utmost security and transparency.

Crypto is also making its debut in mainstream finance. Some big U.S. banks are dipping their toes in the cryptocurrency waters, while others are making even bolder moves. For instance, Mastercard Inc. recently launched Crypto Source, a pilot program set to start in early 2023, to enable consumers to buy and sell various digital assets through their bank accounts. If successful, Crypto Source will introduce crypto trading capabilities to countless banks across the globe.

Incorporating blockchain and cryptocurrency technologies in everyday banking will indeed be a game-changer. For example, crypto is already a much preferred cross-border payment solution — it only needs a strong fintech backing (like Crypto Source) to take it to the next level.

Images by Loanspark

Artificial intelligence and autonomous banking

Artificial intelligence (AI) is increasingly becoming a big part of fintech operations. It provides endless automation capabilities that greatly simplify fintech interactions, reduce costs, eliminate risks, and enhance user experiences.

AI applications in modern fintech systems go beyond smart chatbots to sophisticated robotic process automation systems. These minimize human input from major financial decisions, creating what's now dubbed "autonomous banking" or "autonomous finance." The idea is to enable businesses and individuals to access time-sensitive financial services, such as loans and payments, without the otherwise slow and sometimes erroneous human intervention.

Other intriguing AI-based trends include the integration of financial services with Internet of Things (IoT) devices, Big Data analytics systems, voice-enabled transactions, and augmented reality (AR) or virtual reality (VR).

A 2020 survey found that about 90% of fintech companies had already implemented AI in their processes. We should see even more AI applications and adoptions in the future as analysts expect the AI fintech market to grow by 25.3% CAGR over the next five years.

Innovative real-time payment systems

Real-time payments (RTP) are becoming more popular going into 2023, spurred on by the need to support on-demand purchases/transactions and international fund transfers. RTP is a payment processing method that enables immediate 24/7 transfers between bank accounts without the typical 1-3 business day wait. This is possible thanks to robust banking APIs developed in bank-fintech partnerships.

So far, 60 countries support real-time payments, and more are preparing to sign up. Also, the global real-time payments transaction volume is expected to reach 427.7 billion by 2026, accounting for over a quarter of all global electronic payments. This uptake puts RTP on track to becoming a global payment solution.

The idea of instantaneous digital payments is fascinating to financial companies and businesses. It means more streamlined checkout systems for businesses and customer financing opportunities, such as POS funding and buy-now-pay-later options, for lenders.

The rise of embedded finance

Embedded finance refers to the integration of financial services into non-financial products or services. This can include providing payment options, financial management tools, lending products, or insurance services alongside other non-financial B2B or consumer offerings.

Embedded finance is now commonplace in various business communities as it penetrates even deeper into B2B and B2C markets. In a recent survey by Accenture and Plaid, 47% of U.S. non-bank institutions said they were planning to offer embedded finance in the future to increase customer retention and lifetime value. Giant brands such as Shopify, Mindbody, Amazon, Lyft, and many others are already leading the way.

In most cases, embedded finance is powered by bank-fintech partnerships and open banking initiatives. But some embedded finance programs have nothing to do with banks. And unsurprisingly, traditional banks are losing the fintech companies vs. banks battle. In fact, banks’ dominance over the SMB funding space is gradually waning.

Images by Loanspark

Make the most of fintech trends today

All these trends, and many others, represent lucrative business opportunities for eager entrepreneurs. So, do not let them just pass you by.

The good news is that Loanspark can help you seize the embedded finance opportunity, the most disruptive fintech trend today. We make embedded lending a reality for non-financial and financial companies. Through our co-branded partnerships, B2B businesses can tap into our fintech expertise and technologies to develop and support favorable lending solutions for their customers. With Loanspark, you can roll out a new funding offer in as little as 14 days without incurring any overhead, navigating endless red tape, or taking unnecessary risks.

Loanspark is your guide-light in navigating the murky but rewarding B2B lending landscape. Call us (1-877-81-SPARK) today and start leveraging the best the fintech world has to offer.

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