Due to technological advances and innovative thinking from market leaders, the FinTech sector is now experiencing something of a renaissance. Currently, financial technology is evolving in tandem with market changes to fulfill international regulatory standards and serve customers’ expectations.
I predict that in 2023, the industry will continue to be disrupted by powerful technology breakthroughs. These advances will enable the sector to improve customer experiences, strengthen business propositions, and increase revenue. Let’s explore the most prominent trends that will shape this innovative industry in the coming year:
Banking institutions face increasing pressure to keep up with the rising demand for financial services FinTech firms provide. Still, thanks to the advent of open banking, they may work together with these firms instead of against them. Open banking is becoming a significant emphasis in the financial technology sector, which is a trend that has the potential to improve customer convenience significantly. With open banking, third-party apps are granted permission to access and manage customers’ banking and financial accounts.
Integration that is seamless across various banks, financial institutions, and FinTech startups has the potential to give tremendous value to customers. According to a survey published by Allied Market Research, the market for open banking is expected to expand from its current value of $7.295 billion in 2018 to $43.152 billion by 2026.
Through a safe and straightforward link between the customer’s bank and their preferred financial app, open banking enables customers to reap the benefits of their financial data. Since the European Union (EU) first offered individuals access to their banking and financial data in 2015 with the promulgation of the Payment Services Directive Two (PSD2) rules, open banking has been gaining pace.
RegTech is a relatively new term in the FinTech industry. As its name indicates, regulatory technology is a subset of FinTech that employs technology to oversee regulatory procedures. Typically, RegTech firms address issues with tracking, reporting, and conforming to regulations.
Although the phrase was coined in 2008, growth in this industry has been meteoric in recent years. As such, it is anticipated that this trend will persist. The RegTech industry will be worth an estimated $44 billion by 2030, according to research by Custom Market Insight. To put it in perspective, it was just $8.2 billion last year.
Why, then, do we see this shift now? Overall, the development of FinTech is essential to the expansion of RegTech, because a side effect of more services moving online is increased vulnerability. The lack of oversight in the digital banking sector creates an environment ripe for scams, hackers, and other security risks.
Source: Emergen Market Research
Over the last decade, cryptocurrency has gained widespread use throughout the world. There is no way to avoid the conclusion that the global financial system will one day be dominated by cryptocurrencies and the platforms on which they are created.
Especially today, when fraudulent online activities and frauds are prominent in the cryptocurrency field, it may be intimidating for novice cryptocurrency investors to navigate the business. Several new genuine cryptocurrency exchanges have recently emerged on the market (and several have gone bankrupt!) to satisfy customers’ ever-increasing requirements. This action may assist in reducing crypto fraud and guarantee that novice traders have a more positive experience overall.
Peer-to-peer (P2P) financing prospects, made possible by multi-service FinTech firms, have made the democratization of lending a reality. Historically, credit unions have had a strong position in the P2P industry, but in recent years, FinTech firms have begun to take the lead by creating more user-friendly digital platforms that bring together lenders and borrowers. Not only banks and credit unions that are offering P2P services to their consumers anymore; other businesses are also.
P2P financing appeals to younger customers who may have previously regarded borrowing as dangerous because of the service’s low entry barrier and flexible repayment terms. Additionally, P2P lending enables borrowers to get loans without extensive paperwork or a guarantor.
Continuing advancements in artificial intelligence technology will ruffle feathers in the corporate world while also lowering operational expenses. Legacy systems, segregated and “dirty” data, and other obstacles have prevented the financial services sector from fully realizing the benefits of AI and machine learning.
AI’s unprecedented potential is quickly replacing other technologies in the financial and banking sectors because of its better performance in picture and speech recognition, voice assistants, navigation applications, and automation. Financial institutions must commit to the technology fully to fully realize the customer and business advantages of artificial intelligence (such as improved personalization, higher efficiency, risk and fraud detection, and improved CRM).
Source: Research and Markets
APIs in the financial technology industry provide new communication channels between banks and their consumers, opening the door for new entrants to the financial services sector. Payment processing, client data collection, access, and other monetary services are some FinTech APIs’ uses. In addition, third-party developers often use them to create novel software and web-based offerings. Financial innovations are anticipated to proliferate in tandem with the rise in API use.
So far, the API movement is already profoundly affecting the financial sector. Banks and other financial institutions are beginning to use them to expand their service offerings and enhance their client relationships. As more individuals learn about the benefits of using open APIs, we may anticipate even more significant progress in the financial industry.
Another FinTech innovation that has the potential to explode in the future years is embedded finance. Thanks to embedded financial technology, customers may pay for ancillary items like debit cards, investments, insurance, and loans in one place, rather than dealing with many companies.
Users and service providers alike may reap several advantages from integrated finance. On the one hand, users may make substantial purchases with necessary add-ons in a short time, thanks to this technology. On the other hand, the providers benefit from integrated financing because it helps them foster loyal customer connections with bundle-buying customers and strengthen ties to complementary service providers.
As 2023 approaches, it is undeniable that the FinTech sector is on the verge of experiencing significant changes. From the advent of mobile payments and cryptocurrencies to the growing usage of artificial intelligence and machine learning, it is an exciting moment to be a part of this dynamic and rapidly-changing industry. Hence, the drive toward open banking and the emergence of RegTech demonstrate a focus on enhancing the client experience and ensuring that the financial sector functions in a transparent and regulated manner.