The fintech industry is undoubtedly a force to be reckoned with, and the year 2023 has been no exception. The predictions are that the fintech space will see an unmatched surge in numbers and hit the $174 billion mark in 2023 alone.
The banking industry has witnessed a tremendous rise when it comes to adopting fintech solutions, as users have shown an unprecedented inclination towards being tech-savvy. Be it embedded finance or SaaS, there are many tech trends that are indeed shaping the fintech sector in 2023.
Let us deep dive into the top 6 trends that are on their way to defining the fintech industry’s future in 2023 and even beyond, and which will also aid businesses as well as consumers in making their lives stress-free and accessible to a significant extent.
Machine learning and AI
The first trend that is shaping the future of fintech is AI technology. Be it machine learning or artificial intelligence, both are effectively being used in risk management, payments, investments, banking, and much more. In the broadest sense, AI is used to define machines that have the ability to perceive their environment and, at the same time, take actions that maximize their possibility of success. Machine learning happens to be an application of AI that makes use of algorithms in order to learn from the data as well as identify patterns that happen to be within it.
Apparently, fintech firms can make the most of both technologies so as to automate processes such as fake loan origination and fraud protection and at the same time give out more precision-led insights when it comes to customer behaviour.
By leveraging such tools, businesses can go on to reduce the costs pertaining to manual labor while also, at the same time, elevating the entire performance’s accuracy as well as efficiency.
When it comes to the fintech sector, embedded finance has surely gained traction and is undoubtedly poised to become one of the dominant trends of 2023. The term itself describes a broad category in financial services as well as products that may be used with a certain framework or platform. Users can better manage their finances without having to switch between numerous apps or websites when such services are embedded inside the existing platform or app.
Besides, buy now, pay later has become the fastest-growing embedded finance model where customers can make purchases initially and split their payments over a set time period. Because of this, the experts forecast that the embedded financial services market will grow by 40.4% per annum in the years to come.
Software as a service- SaaS is another bulging trend to look out for in 2023, as it is said that it is advancing in the right direction and is all set to hit the $623 billion mark this year at a CAGR of 18%.
The firms can go on to access and pay for the software applications within the cloud with SaaS services without even having to install them on their computers or even servers. This goes on to eliminate many concerning overhead costs, thereby allowing firms to focus their resources on building customer experiences.
Apart from this, using SaaS also provides access to powerful tools that come with advanced security protocols when it comes to data storage and management, which are pretty expensive and challenging for individual companies to execute themselves.
It happens to be a financial technology that enables customers to securely share their financial data with third parties, thereby offering them more control as well as flexibility when it comes to their finances.
It makes way for convenience for users and also opportunities for businesses in order to access new markets, bring out innovative products and services, and enhance efficiency by way of data exchange. Open banking brings about many possibilities for payment companies, banks, and fintech organizations to make optimal use of customer data. By way of open banking, users get to have a greater degree of control over where they store their financial data, rapidly transfer it across different organizations, and allow third-party providers access to their data whenever required.
Open banking can indeed revolutionize how individuals manage their finances and interact with organizations since it gives them unparalleled choice, control, as well as transparency.
It enables physical devices that are connected to the internet to collect data, assess it, and then act on it, either with or without any human intervention. The implications for fintech happen to be rapid, as banking has gone on to become more efficient, comfortable, and secure because of the IoT.
Banks can make use of sensors that happen to be embedded in their products so as to monitor customer activities and thereby automate responses based on their preferences that are either pre-set or behaviours like fraud detection algorithms, as well as automatic payments that get triggered by modifications in the spending patterns of the customer.
Apart from this, the voice recognition tech is also used for authentication purposes, making the login process seamless as well as enhancing security by ensuring that accounts become more challenging to hack.
Since technology continues to change at a rapid pace, blockchain happens to be one of the enterprising trends in the fintech arena. Blockchain is a digital ledger that keeps records as well as authenticates various kinds of transactions. It enables users, organizations, and machines to safely transfer digital assets without having to rely on any central authority or third-party intermediary.
The decentralization signifies that the blockchain technology can be used for numerous financial applications like trading, transfers, and payments. Besides its security benefits, blockchain also has potential implications when it comes to cost savings because of its distributed nature. For instance, reducing the need for expensive intermediaries such as banks and brokers can significantly cut the cost associated with international financial transactions. Moreover, since all these transactions happen to be stored on an immutable public ledger, there happens to be an increased transparency that may help in enhancing the financial system’s trust across the world by way of reducing fraud as well as delays in settlement durations.
It is well to note that fintech will continue to be a driving force of the future, and by 2023–24, a greater use of blockchain, AI, and IoT in financial transactions is expected. No wonder; one can anticipate that the automation as well as integration can grow more sophisticated, allowing users to access more customized services that suit their individual requirements. As innovations in tech continue to shape finance, companies have to stay ahead of the curve or else risk being left behind.