Tech Trends that will define fintech in 2023
The fintech industry is constantly evolving and improving, and 2023 is no exception. It is predicted that the fintech space will multiply and reach $174 billion in 2023.
The banking industry has recently experienced a massive surge in adopting fintech solutions as users are becoming more tech-savvy. From embedded finance to SaaS services, there are several tech trends that will shape the fintech industry in 2023.
The first trend that will undoubtedly shape fintech's future is AI technology. AI and ML can revolutionize banking, payments, investments, risk management and more.
AI is a broad term used to describe machines with the ability to perceive their environment and take actions that maximize their chance of success. ML is an application of AI that uses algorithms to learn from data and identify patterns within it.
Fintech companies can leverage both technologies to automate processes like loan origination or fraud protection while providing more accurate insights into customer behavior.
By leveraging these tools, businesses can reduce costs associated with manual labor while simultaneously increasing overall performance accuracy and efficiency.
In the fintech industry, embedded finance has been gaining traction recently and is poised to become the dominant trend in 2023.
The term "embedded finance" describes a broad category of financial services and products that may be used within a certain framework or platform. Users can better manage their finances without switching between several apps or websites when these services are embedded inside an existing app or platform.
What's more, "Buy Now Pay Later" is the fastest-growing embedded finance model. Customers can make their purchases first and split out their payments over time with this service. As a result, experts predict that the market for embedded financial services will expand by 40.4% annually over the next several years.
SaaS (software as a service) is another hot trend to watch out for in 2023. It is said that the SaaS sector is advancing in the right direction and will hit the $623 billion milestone in 2023 at a compound annual growth rate of 18%.
With SaaS services, companies can access and pay for software applications hosted in the cloud without installing them on their servers or computers.
This eliminates many associated overhead costs and allows organizations to focus their resources on developing customer experiences instead.
Additionally, using SaaS provides access to powerful tools with enhanced security protocols for data storage and management that would be difficult or expensive for individual firms to implement themselves.
Open banking is a financial technology that allows customers to securely share their financial information with third parties, offering them more control and flexibility over their finances.
It offers convenience for customers and opportunities for businesses to access new markets, create innovative products and services and increase efficiency through data exchange.
Open banking opens up many possibilities for banks, payment companies and other fintech firms looking to leverage the potential of customer data. Through open banking, customers have greater control over where they store their financial data while also being able to quickly transfer it between different organizations or allow third-party providers access to their data when necessary.
Open banking can revolutionize how people manage their money and interact with financial institutions since it provides unprecedented transparency, choice, and control.
IoT enables physical devices connected to the internet to collect data, analyze it and then act on it without human intervention. The implications for fintech are vast as IoT has made banking more secure, efficient and convenient.
Banks can use sensors embedded into their products to monitor customer activities and automate responses based on preset preferences or behaviors—such as fraud detection algorithms or automatic payments triggered by changes in customer spending patterns.
Additionally, voice recognition technology is being used for authentication purposes, simplifying login processes and improving security by making accounts more difficult to hack.
As technology continues to evolve rapidly, blockchain is one of the most exciting trends in fintech. Blockchain is a digital ledger that records and verifies different types of transactions.
It allows individuals, organizations and machines to securely transfer digital assets without relying on any central authority or third-party intermediary. This decentralization means blockchain technology can be used for various financial applications, such as payments, transfers and trading.
In addition to its security benefits, blockchain has potential implications for cost savings due to its distributed nature. For example, reducing the need for costly intermediaries like banks or brokers can drastically reduce the costs associated with international financial transactions.
Furthermore, since all transactions are stored on an immutable public ledger, there is increased transparency which could help improve trust in financial systems worldwide by reducing fraud and delays in settlement times.
Fintech will continue to be a driving force of the future. By 2023-2024 we can expect greater use of blockchain, AI and IoT in financial transactions. Automation and integration will grow more sophisticated. As a result, consumers will have access to more tailored services that better suit their individual needs. As technological innovation continues to shape finance, companies must stay ahead of the curve or risk being left behind.
- Sergio Tang is the Chief Transformation Officer at Vivela