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The top 10 fintech trends to watch in 2023

Monday, December 19th, 2022

Futuristic cityscape showing network lines to represent top fintech trends 2023

We are witnessing a golden age of innovation in the financial industry, driven by technological development and innovation by market influencers. 

Once a disruptive force and now an enabling one, fintech continues in its new phase of evolution, working with traditional finance to create a sector built to last. 

With the fast evolution of the sector, it’s important to keep up with fintech trends to ensure agility in the industry. Fintech skills in short supply in 2023 continue to be in management and emerging technologies, with programmes such as Ulster’s FinTech Management Masters aiming to help bridge the industry skills gap. 

Below we outline our predictions for the top fintech trends to watch in 2023.

1. Blockchain technology

Originally established to rapidly transfer digital assets such as stocks and bonds, blockchain technology is now being used to make a multitude of financial processes more efficient.  

Blockchain has the potential to boost the global economy by $1.76 trillion over the next decade, with the most significant growth happening in China ($440bn) and the US ($407bn). 

The banking industry holds the highest distribution of blockchain market value – with a 29.7% share that is set to grow further as investors rush to increase the reach of blockchain services and consumers increasingly adopt blockchain wallets (jumping from 11 million globally in 2016 to 40 million as of 2021). 

Still an emerging technology, however, blockchain has much room for further growth and PwC analyses suggest that 2025 will be the tipping point when blockchain is adopted at scale across world economies.

2. Green finance

“A sustainable financial system is […] one that creates, values and transacts financial assets in ways that shape real wealth to serve the long-term needs of an inclusive, environmentally sustainable economy.

–  UNEP Inquiry into the Design of a Sustainable Financial System (2016)

Sustainability is more than just a buzzword; it’s a global priority for business. Within finance, there is a growing emphasis on green finance, a practice that concerns itself with the two-way interaction between the environment and financial activities. 

Similar terms used to discuss green finance include responsible investment (RI), environmental, social and governance (ESG), sustainable finance and climate finance. 

Green finance acknowledges that the economy is dependent on environmental stability and that contemporary financial policy must seek to minimise environmental impact for the purpose of environmental health and economic prosperity. 

Equally, green finance is about managing environmental risks, future-proofing organisational strategies and taking steps to align products and services – such as loans and investments – with environmental sustainability.

3. Embedded finance

Embedded finance is the integration of financial services into any organisation, without the need to redirect customers to traditional financial institutions. 

With embedded financial systems, things like lending, payment processing or insurance can be done through non-financial organisations, while still complying with regulations. 

“I think the easiest way to think about embedded finance is how you take non-financial or non-traditional financial products, and you infuse financial services through them.”

 – Sofiat Abdulrazaaq, CEO and co-founder of Goodfynd, a food truck ordering application that uses embedded payments, in conversation with BuiltIn. 

The potential of embedded finance is already clear to see, as more and more retailers offer short-term loans through apps like Klarna and digital wallets enable instant contactless payments. What’s more, this is just the beginning. 

The embedded finance market value is expected to exceed $7 trillion in the next 10 years – double the combined worth of the world’s top 30 banks! 

The flexibility and universality of embedded finance mean that there is a lot of potential for new and emerging fintech organisations to revolutionise traditional ways of transacting. 

4. AI-based payments and solutions 

As financial institutions adopt AI and machine learning for analytics, there is the potential to cut global operating costs by up to 22% by 2030, making projected savings of around $1 trillion. 

AI-driven digital assistants and chatbots are now able to answer customer questions, monitor spending and recommend products based on a customer’s preferences, such as travel or phone insurance. Additional personalised services, made possible through the application of natural language processing, include the ability to make payments and receive personalised advice at any time. 

One important element of AI technology is its ability to better predict human actions. As a result, AI and behavioural finance go hand-in-hand, helping analysts see patterns in seemingly random human behaviour.  

What is Behavioural finance? 

Behavioural finance focuses on how human psychology influences economic markets, and, in particular, how psychological factors impact market outcomes.

See our behavioural finance guide for a more in-depth answer. 

Some consider behavioural finance to be the future of fintech, bolstered by the development of data analytics and the availability of massive amounts of consumer data. This data, used in tandem with artificially intelligent algorithms, makes for an increased ability to predict consumer actions and provide personalised services based on these predictions.

The study of behavioural finance is an established academic specialism taught as a standalone module on the FinTech Management MSc.

5. Digital exchange and trading platforms

Moving money around the world is made easier with digital exchange platforms and the potential for these platforms to become priorities for financial institutions is high. Apps that automate transactions between countries, both efficiently and affordably, will be in high demand. Blockchain is also a crucial component to secure those transactions. 

While this capability has been reserved for users of digital exchange platforms until now, in 2023 we will see wider adoption of digital exchange technology across traditional finance institutions, increasing the efficiency and security of transacting worldwide. 

6. Peer-to-peer finance and credit

The democratisation of lending is made a reality with the rise of peer-to-peer (P2P) finance opportunities, available through multi-service fintech companies.  

Credit unions have long dominated the P2P market but, in recent years, fintech companies are taking control by developing efficient digital platforms that connect lenders and borrowers. Even non-financial companies are starting to offer P2P finance and credit to help their customers manage their finances better. 

Though P2P finance is not without its risks (a lack of credit protection and financial security being two key challenges), the service appeals to millennial consumers who may have previously considered borrowing to be a risky option. P2P finance also allows consumers to receive credit without a lengthy application or a guarantor.  

7. Hyperlocal financial services

In a similar vein, hyperlocal financial services are also picking up in popularity. One example of this is the rise of neighbourhood banks that operate in rural areas to provide financial services for local communities. Predictions also suggest that urbanisation is leading to more demand for hyperlocal services in cities. 

Within developing and emerging economies, this resource is critical to local development. As many as 1.7 billion people around the world still do not have access to financial services. In Bangladesh, for example, half of all working-age adults remain unbanked.  

By building upon financial inclusion in developing nations through hyperlocal services, fintech can tap into new markets while also helping to build a more equitable world. 

8. Digital-only banking

As banks tighten their lending standards, consumers are increasingly turning to alternative financial services in order to manage their money. New digital-only banks, such as Monzo, Revolut and Starling, now offer efficient and affordable alternatives to traditional institutions and serve a digital native population.  

For this reason, professionals with expertise in software development are in high demand as more and more digital applications launch to market. 

“The existing bank regulatory regime creates significant barriers for technology companies looking to challenge traditional banks. In the United States and Europe, the core function of holding customer deposits may be performed only by bank. In addition, access to traditional payments systems and cards networks is generally limited to banks.

But banks are subject to a comprehensive and ongoing regulatory regime affecting virtually every aspect of operations. That is hard to square with the fast-moving, trial-and-error, higher-risk-appetite approach common at young technology companies.”

–  Skadden, Fintech Disruption: It’s not that simple 

9. RegTech

RegTech is helping tackle some of the industry’s biggest challenges by “facilitating the delivery of regulatory requirements more efficiently and effectively than existing capabilities.” (Financial Conduct Authority definition). 

The increasing complexity of regulation in fintech means companies face higher compliance costs and even heavy fines for non-compliance. The necessity for fintech firms to find compliance solutions makes for expanding opportunities in RegTech. 

Challenges ahead 

One issue for the international fintech market is the ongoing need for traditional financial services companies to enact key functions related to regulatory concerns. This outdated regulatory landscape means that fintech organisations are now having to work with traditional banks to achieve progress, leading to a closer relationship between tradition and innovation. 

10. Collaboration, not competition

It may not be something we’re used to hearing in finance, but collaboration will be one of the key fintech trends to look out for in 2023. 

Usually in all-out competition with each other, traditional banks must embrace collaboration with fintech startups and established names (and vice versa), working together to redefine the financial industry. 

Old names in the financial sector can opt to invest in fintech startups to gain a foothold in emerging, digital-only banking industry, while fintechs will need to connect with traditional institutions to overcome regulatory obstacles. 

The top fintech innovations on the radar of traditional banks include instant spending notifications, categorisation of spending, security measures, convenience, innovation, cryptocurrency trading abilities, accessibility and financial education.

Lead the future of fintech with a FinTech Management MSc 

Ulster University Business School’s FinTech Management MSc is a part-time, online Masters programme designed to address technological changes in the financial industry and prepare professionals to embrace change and evolution in fintech leadership roles.

While earning your Masters qualification, you will also gain exposure to exciting career opportunities in a fast-paced industry, examining the drawbacks of traditional finance and building the skills to drive innovation in the sector.

By covering a broad range of financial theory and practice, the FinTech Management MSc teaches a balance of technical and soft skills, with the aim of producing industry-ready graduates with the broad skill set to thrive in an ever-evolving sector.

Want to know more? Please visit our programme page. 

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