What are the Top Fintech Trends in 2023?

fintech future
Aran Davies
Blockchain Expert | Developer | Writer | Photographer

FinTech” of “financial technology” has the products and services offered by banks and financial institutions more customer-centric. Cutting-edge technologies and innovations helped fintech companies transform the financial industry. The following fintech trends are worth watching:

1. The spread of blockchain technology in the financial services industry: One of the key fintech trends

In our guide to fintech technologies, we explained how blockchain is already important in fintech. The prominence of blockchain in financial services is growing, and the following examples illustrate that:

1A. The growth of DeFi (Decentralized Finance) apps

Decentralized finance (DeFi) apps use a decentralized model to provide services. They can disrupt traditional businesses in the world of finance.

DeFi apps are DApps (decentralized apps) running on a decentralized blockchain. Many DeFi apps are built using the Ethereum blockchain network.

Blockchain developers use the Ethereum Virtual Machine (EVM), a development platform to build DeFi apps. DeFi apps run smart contracts. Smart contracts help DeFi apps to provide transparency, immutability, and efficiency.

The following are a few examples of DeFi:

Example #1: Stablecoins

Stablecoins are cryptocurrencies with in-built price-stability mechanisms. Cryptocurrencies witness massive volatility in price, which slows down their adoption. Stablecoins solve this problem.

Stablecoins might be pegged to fiat currencies like USD or precious metals like gold. Tether (USDT) is an example of stablecoins.

Example #2: Decentralized exchanges

Crypto traders often use centralized crypto exchanges to trade cryptocurrencies. Hackers routinely target centralized exchanges. Centralized exchanges go against the grain of decentralization, which is a key promise of blockchain.

Blockchain developers have built decentralized exchanges (DEXs) to solve this problem. Uniswap is an example of DEXs.

Example #3: Decentralized crypto lending platforms

Traditional banks and financial services institutions have stringent rules and processes for lending. Many people can’t access credit due to this, which impacts many small businesses.

As we explained in our guide to the future of fintech, decentralized crypto lending platforms can solve problems like this. Platforms like Aave, Maker, and Compound bring lenders and borrowers together without an intermediary. They enable borrowers to earn interest on crypto loans they disburse.

1B. Use of blockchain technology to expedite global payments

Cross-border payments take time in the traditional finance industry. Multiple intermediaries and time-consuming processes make the settlement of cross-border payment transactions a complex process.

Blockchain can improve the scenario with its distributed ledger and immutability. Ripple is already a well-known blockchain-based global payments solution. We can expect more blockchain platforms for cross-border payments in the future.

1C. Central Bank Digital Currencies (CBDCs)

Central banks of several countries plan to issue CBDCs. These are blockchain-based digital versions of the currencies of the respective countries. Experts believe that CBDCs will provide privacy, transferability, convenience, accessibility, and security.

2. Growing investment in IoT (Internet of Things) by the fintech industry

The financial industry is increasingly investing in IoT. IoT can offer the following advantages to fintech companies:

  • It allows banks to track the devices used for committing a financial crime and their location.
  • Banks will be able to use voice and facial recognition together with IoT to identify their customers.
  • IoT and AI can help banks analyze past transactions and identify suspicious consumer behavior.
  • IoT systems collect vast data. Fintech companies can gather insights from this by using AI/ML, which also helps to provide better customer support.

3. Greater spread of digital banking and mobile payments

Digital banking has delivered unprecedented convenience to consumers. They can avail of various banking services using their computer or mobile, which includes accessing their bank accounts. The trend of digital banking will only grow. A GlobeNewswire report estimates that the global digital banking market will exceed $10 trillion by 2027.

Mobile payment has transformed the global payments landscape. Mobile payment apps and wallets deliver never-before-seen convenience. They will become even more popular. A Fortune Business Insights report states that the mobile payment market will grow from $1.54 trillion in 2020 to $11.83 trillion in 2028.

We expect to see a growth of digital-only banks too. They have done away with the brick-and-mortar infrastructure for customer-facing operations, and they entirely use digital infrastructure. A few well-known digital-only banks are Square, Monzo, Tangerine, and Revolut.

4. The growth of RPA (Robotic Process Automation) in banks and financial institutions

RPA is already important in fintech, and we expect this trend to become more prominent. Robotic process automation uses software robots (“bots”) that identify and learn human operations.

An RPA system can train these bots to perform repetitive tasks. Banks and financial services institutions have many manual and repetitive tasks. Therefore, using RPA in the finance sector can significantly improve operational efficiency and reduce costs. A Juniper Research report estimates that revenues from RPA in the banking and finance sector will grow from $200 million in 2018 to $1.2 billion by 2023.

5. Growing focus on voice-enabled payments

Voice-enabled payment is an emerging trend in the fintech market. Consumers can execute a payment transaction using their voice.

These financial transactions use a combination of voice recognition technology and payment processing services. Users can transfer funds using voice-enabled payment processing systems offered by Venmo and PayPal.

Consumers can also make voice-enabled payments using Amazon’s Alexa or Google Assistant. They typically use them to make online purchases.

6. Increasing use of virtual cards

The use of virtual cards is emerging as one of the key fintech trends. Virtual cards protect customers better due to robust security features.

Traditional credit cards are plastic cards issued by credit card companies. Data breaches are frequent in today’s world, and hackers often get access to thousands of credit card information.

Consumers often find their physical credit cards compromised by hackers. They need to go through a complex process of canceling their credit cards in such scenarios.

Virtual cards are digital credit cards for one-time use only. A bank offers it only if you have a physical credit card account with it. Virtual cards have a unique card number, CVV, and expiry date.

Customers can use it for one online transaction. Hackers can’t make use of the card information since the card is valid for one-time use only. You need to generate another virtual card for another transaction.

7. Autonomous finance: Financial products enhanced with automation

Autonomous finance is becoming important, and we expect this trend to grow. The term “autonomous finance” refers to using cutting-edge technologies to make digital processes in the finance sector more efficient. Autonomous finance can significantly improve the user experience.

Signzy, an Indian start-up is an example of companies working on autonomous finance. The company uses ML, optical character recognition (OCR), intelligent character recognition (ICR), and object detection to automate back-office operations in the financial industry.

8. Higher focus on security by banks and financial institutions

Cyber-attacks and financial crimes continue to increase, and cybercriminals continue to attain greater capabilities. We can expect the fintech sector to invest more in cybersecurity. Banks and financial services institutions will augment their security capabilities in the following ways:

  • The cybersecurity and fraud prevention teams will work closely together instead of working in silos.
  • Banks and fintech companies will use AI and ML to identify and mitigate emerging threats.
  • They will use biometrics for customer identification.
  • Banks and financial services institutions will use multi-factor authentication (MFA) instead of relying on passwords.
  • As the regulatory scrutiny on financial data protection increases, developers of fintech apps will focus on mitigating top application security vulnerabilities.
  • Banks and financial institutions will invest more in data encryption, API security, authentication, and DevSecOps.

9. Growing prominence of Artificial Intelligence (AI) and Machine Learning (ML) in banking and financial services

Fintech startups and traditional banks alike are investing heavily in artificial intelligence, and this trend will only become more prominent. They will use AI for the following purposes:

  • Strengthening cybersecurity solutions with AI and ML;
  • Preventing fraud;
  • Extracting actionable insights from vast data sets including unstructured data;
  • Robo-advisors for investment and asset management;
  • Increasing the efficiency of algorithmic trading;
  • Creating automated trading strategies and testing them;
  • Creating tailored offers for consumers;
  • Providing personalized portfolio management services;
  • Improving customer service by using AI-powered chatbots.

10. Open banking: One of the emerging fintech trends

The fintech industry is focusing notably on open banking, and this move can deliver great convenience to consumers. Open banking enables 3rd party applications to access and control the banking and financial accounts of consumers.

Seamless integration between different banks, financial institutions, and fintech companies can offer significant value to consumers. An Allied Market Research report estimates that the open banking market will grow from $7.295 billion in 2018 to $43.152 billion by 2026.

11. Massive rise in the usage of big data solutions in the financial industry

The financial industry has a massive volume of data, and it’s available in varied formats. Financial institutions need to process this data in real-time. This makes big data essential for the banking and financial services sector. Investments in big data are high, and they will grow further.

Fintech companies use big data for the following purposes:

  • Developing better customer segmentation strategies;
  • Improving cybersecurity solutions by combining big data with AI/ML;
  • Managing risks better;
  • Improving customer service.

12. Growing investment in RegTech (Regulatory Technology)

The banking and financial services sector witnesses growing regulatory scrutiny, therefore, investments in RegTech will grow. RegTech is a collection of emerging and established technologies. It enables banks and financial services institutions to comply with ever-increasing regulatory requirements.

RegTech includes solutions for monitoring and reporting financial processes. Companies developing RegTech solutions use Cloud computing, big data, analytics, AI, and ML. A MarketsandMarkets report estimates that the RegTech market will grow from $7.6 billion in 2021 to $19.5 billion by 2026.

13. The growth of “Fintech-as-a-Service”

Fintech-as-a-Service” refers to fintech companies offering their APIs to other businesses. These other businesses can integrate these APIs, therefore, they can have financial capabilities in their existing products and services.

Fintech-as-a-service solutions can help with many functions like pay-outs, remittances, identity verification, fraud prevention, and virtual account services. As observers state, the market for fintech-as-a-service will grow notably.

14. Investment in quantum computing by banks

We already see large banks investing in quantum computing, and this trend will grow. Quantum computing is currently under research and development. It uses principles of quantum mechanics to deliver a massive increase in computing power.

Quantum computers will quickly execute computing tasks that take a lot of time currently. For quantum computers, the future holds notable promises. JPMorgan Chase is investing in quantum computing. Several other banks like HSBC and Japan Post Bank are also investing in it.

15. Growth of embedded finance

Embedded finance refers to offering financial products or services by non-financial providers. We expect it to grow notably.

A few examples of embedded finance products/services are “buy now, pay later” schemes, point-of-service lending, and point-of-service insurance. A BusinessWire report mentions that the embedded finance market will grow from $43 billion in 2021 to $138 billion in 2026.

Conclusion

We reviewed the important fintech trends that are augmenting the fintech revolution. If you plan to develop fintech solutions, hire developers from DevTeam.Space.

FAQs

1. What technologies contribute to fintech?

Fintech includes the following technologies: cloud computing, web technologies, mobile technologies, AI/ML, IoT, blockchain, RegTech, big data, analytics, and security.

2. What are some examples of fintech products and services?

The following are examples of fintech products and services: mobile banking, digital banking, cryptocurrency trading, DeFi, mobile payments and wallets, “InsureTech”, portfolio management apps, robo-advisors, stock trading apps, and algorithmic trading.

3. Which are the prominent fintech companies?

Some of the well-known fintech companies are as follows: Visa, MasterCard, Intuit, Cash App, Affirm, Block, PayPal, Goldman Sachs, Upstart, Western Union, Klarna, Robinhood, Coinbase, Stash, and Alphabet.


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