Top fintech trends in 2023: a comprehensive report

2023 04 05

The fintech industry is as vibrant in many ways as ever before. Yet, 2022 was the year when we went (and somewhere still going) through the shaking economic situation caused by inflation in the world. Also, let us not forget the crypto crash, tightening financing or evolving market tendencies to meet new users’ needs and increasing global regulatory demands.

Indeed, the fintech industry has been through a lot – thus, we are counting down the fintech trends that we can expect from 2023. Based on our own analysis, we invite you to dive deeper into different fintech tendencies.

Be ready to explore everything that is cooking inside the global fintech ecosystem – from statistics about the fintech situation in different countries to dominating predictions that enable and shape new changes for fintech companies worldwide.

Discover the current world’s fintech landscape

Digital payments are the new norm. Nearly 9/10 Americans use some type of digital payment solutions, and the number of Americans using two or more digital payment methods has risen from 51% in 2021 to 62% in 2022;
The banking revenue landscape is changing. In the last three years, the banking industry in the US has experienced an extreme reduction in net interest margin, dropping from 3.33% in 2018 to 2.57% in 2021. Roughly 50% of traditional banking businesses see fintech companies, such as PayPal and Square, as huge threats;
Time to transform your value proposition. Nearly 3/10 of Gen Z and Millennials call a digital bank their primary checking account provider, and this trend is likely to grow. In addition, it is forecasted that in the upcoming years, financial institutions will share 50% of the revenue with fintech partners while bringing value to their customers;
Open banking is slowly gaining pace outside the EU. Along with implementing the Central Bank of Kenya’s National Payments System Vision and Strategy 2021-2025, Kenya continues speeding up and enabling the modernisation of the payment landscape, including the open banking area. Open banking makes its way to Mexico, which continues working on the Mexican central bank digital currency (CBDC), which was initially planned to be launched in 2024. Colombia has high plans for highly extending its open banking ecosystem across the country after the established first open banking regulation in the country in 2022. In addition, EU speeds up its open banking game by upgrading PSD2 to PDS3, a forthcoming framework that regulates electronic payments and the banking ecosystem in the European single market area (EEA).

Sources: McKinsey; Cornerstone; Central bank; Newsbitcoin; Fluid; Seon.

Top 7 fintech trends to watch in 2023

In this comprehensive fintech overview, we gathered multiple fintech stats and classified them into 7 main trends.

We welcome you to explore how information security, payment modernisation, digital transformation, neo banks, personalisation, fintech types and sustainable finance & investments might enable new decisions and perspectives in the fintech ecosystem during 2023.

#1 Cyber security is more vital than ever before

Focus on information security. 75% of global financial services companies are concerned about their reliance on the cloud, DevOps-driven application development and remote working that have increased the number of cyber attacks;
Security – a top priority for businesses. A recent Gartner report shows that 42% of organisations consider security one of the top five factors when choosing a new software provider. It shows businesses give a more significant focus on ensuring high-level cyber security;
Fintech users have growing privacy concerns. 61% of mobile banking or online banking service users are concerned about the amount of their personal data collected, while 54% of fintech consumers think that advancing technologies make their personal data less secure. It only proves an increasing need for financial institutions to provide crystal clear privacy guaranties;
Need for transparency in private data management. Financial service providers hold massive amounts of sensitive customers’ data. 46% of users expect their fintech service providers (mobile banking or online banking) to communicate how they share or use personal data with third parties – proving the demand for privacy and security measures always be visible as well as easy to understand;

Sources: Trendmicro; MEF; Gartner.

#2 Payment modernisation is paramount

Person-to-microbusiness payments. Microbusinesses and small businesses have successfully used payment apps like PayPal or Square card readers. Yet, the necessity to enhance such apps’ back-end infrastructure rises. This improvement would expand payment functionalities, enabling better customer experience and minimising risks of malicious thefts;
Legacy wallet vs digital wallet. Fintech customers’ habits show we can expect a boom in the use of digital wallets. The number of customers who own three or more digital wallets has increased from 18% (2021) to 30% (2022). The number is also expected to grow in the upcoming years;
Consumer bill payments. In the US, households across the states pay at least 15 billion bills every year. This scales the demand for mobile banking functions involving push notifications and real-time confirmation of payment receipts that would help create a flawless bill payment process;
Commercial just-in-time payments. The necessity for just-in-time payments grows in wide-ranging audiences, such as small businesses that tightly handle cash flow or corporate customers who need to manage their intra-day liquidity more closely;
Direct deposit for hourly & temporary workers. At least 17% of US employees work with temporary contracts. Therefore there is an always-growing demand for an efficient payment system that helps save a lot of costs in processing prepaid cards;
Automated e-invoicing solutions. Companies that switch from paper to e-invoices can save up to 70% of the cost per invoice – showing the high value of automated invoicing and proving the modernisation need for this payment type.

Sources: McKinsey; McKinsey.

#3 Spiking automation and digital transformation

Accelerated digitalisation. Financial companies continue expanding their range of fully digital financial services, majorly focusing on self-service digital channels (mobile banking apps and online banking channels);
Smart robots and chatbots. In the upcoming year, financial institutions will continue (fully or partly) automating their customer journey with the help of various AI-based tools – here, Chat GPT raised a bar significantly. This helps to shift from a stress-level banking experience and offer more personalised products and various full-time financial services, enabled by chatbots as well AI robots;
Balancing between AI and human connection. Although fintech service customers do not mind AI-based functions or operations, when it comes to more complex requests or conversations – 40% of customers prefer talking with a real person and even get frustrated if they do not have this option;
Saving operational costs with AI. It is predicted that using AI tools will help reduce bank operating costs by 22% until 2023 – meaning it can save up to around 1 trillion dollars ahead. Also, 86% of financial institutions consider AI adoption critical for business success.

Sources: Money-gate; Sinch; Fivedegrees.

#4 Keep an eye on neobanks

Fewer costs – more chances to emerge. In 2023, neobanks will need to turn to new sources of revenue. It is predicted – neobanks that can cut costs down and raise efficiency in reaching profitability will most likely emerge stronger than others;
Neobanks consolidation. Today’s world faces the peak of digital-only banks’ demand. As customers master trying and getting various financial services online, having a standard face-to-face banking experience may bring more frustration than benefits. From the business perspective, neobanks can lower startup costs or charges and improve service speed;
Innovating faster. Averagely, neobanks deploy updates 4.6x more frequently than the incumbents. This way, neobanks continue winning the game by always ensuring a smooth user experience and fixing all appeared bugs;
(Expected) more investment from traditional banks. Neobanks play the role of filling the gaps caused by traditional banks by offering technology-powered banking services. Thus, it is expected that more traditional banks will start investing more in neobanks seeking to achieve better customer experience.

Sources: Builtformars; Money-gate; Acuity.

#5 Sustainable finance and investment

Aligning EU taxonomy & SFDR. The EU has begun executing the Sustainable Finance Disclosure Regulation (SFDR). This helps set out clear rules for reporting sustainability and ESG factors in investment and also driving new business needs. In general, SFDR will highly improve transparency around sustainability claims made by investors and financial market participants;
Fight against greenwashers. Financial regulators in the EU and the US pressure sustainable funds, clearly labelling themselves and their sustainability objectives. More obligations are planned to be created and implemented by 2030 to stop funding greenwashers;
Younger investors fuel ESG activism. Younger investors seek to enable environmental initiatives within their investing decisions. Nearly 80% of investors aged 41 and younger want to empower the environmental practices of the companies they invest in, creating opportunities for new or tailored products;
Undergoing a low-carbon transition. Worldwide, banks have implemented more than 71 policies to divest from thermal coal, and more than 1 300 banks have committed to divest from fossil fuels putting pressure to look for ways to diversify their revenue stream.

Sources: Anthesis; Esg clarity; Stanford Business; Bloomberg.

#6 Fintech personalisation needs to watch more closer

People want to chat directly with their bank. Two-way messaging is a brilliant opportunity for banks seeking to level their customers’ satisfaction since 53% of users are frustrated when they cannot message their bank;
More personalisation. Financial companies need to step up their personalisation game – roughly 9/10 customers want personalised financial recommendations from their bank. In contrast, only 3/10 of financial service users actually receive that;
Strengthening cooperation between traditional banks & fintech companies. Digital evolution forced some traditional banks to acknowledge the technology-driven demand and opportunities offered by fintech companies. Thus, it is expected to see more partnerships between traditional banks and fintech companies to provide a convenient experience for financial service customers and enable new products.

Sources: Sinch; Moneygate.

#7 Fintech types you should take advantage of in 2023

Insurtech. An always-increasing number of insurance claims is the major booster of the growing insurtech market. It is expected that the global insurtech market size will expand at a compound annual growth rate (CAGR) of 51.7% by 2030;
Embedded finance. With a full range of banking, credit, investment, payment processing and other financial services, the embedded finance sector is rising notably. Now, it is forecasted to grow by 40.4% annually
Crowdfunding platforms. As the need to go to a bank or take a loan physically goes down, there is more room for fundraising through the crowd. Now, the crowdfunding market is foreseen to witness a CAGR of over 16% until 2026;
RegTech. Knowing how strictly regulated is the fintech sector, regtech, aka regulatory technology demand, is flourishing with the predicted 200% market growth between 2022 and 2026;
Robo-Advising & Stock-Trading. Two AI and ML-based newbies are gaining a lot of attention in the fintech market – robo-advisors help by automatically giving data-driven tips on decreasing clients’ costs, while stock-trading apps enable investors to perform all operations on their smartphones ;
Budgeting apps. The fintech industry enjoys seeing remarkable growth in budget apps. In 2021, the global budgeting apps market secured a value of USD 190.62 million, which is expected to grow up to USD 310.28 million by 2027.

Sources: Grand view research; Five degrees; ein des ein; Juniper research; Research reports world.

And we did not forget about crypto – it just goes through winter right now…

Steady crypto penetration. Cryptocurrency penetration remains stable regarding actual ownership (15%) and those who expressed interest (14%) compared with previous years;
Less interest in crypto ownership. Nearly 2/3 of McKinsey survey respondents say they do not have any interest in owning cryptocurrencies, naming volatility and long-term viability as one of the main reasons for that;
The bottom has yet to be reached. Crypto analysts predict that cryptocurrency prices will drop again before bottoming out – bitcoin prices might fall down to $10,000 or lower, influenced mainly by the US Federal Reserve’s tightening monetary policy and rising interest rates;
More regulations for the crypto market. Regulators and policymakers started renewing existing laws or creating new ones. For instance, the EU continues pushing through the Markets in Crypto-Assets (MiCA) Regulation, considered the most comprehensive regulation of cryptocurrency markets, while Biden’s administration has proposed stablecoin regulation in the US;
Slower adoption of Decentralised Finance (DeFi). Today’s DeFi regulation is insufficient to ensure transparency and faces significant structural issues. This skyrockets the need to tighten the existing regulations even more, making it more complex to adopt DeFi services.

Sources: McKinsey; Sacbee; Coindesk; Beincrypto; Forecast.

We came a long way by exploring what is coming to us in 2023! Yet, from the analysed trends, we can see that the fintech market experiences realignment, where customers play a significant role. Today’s customers want to communicate, make financial decisions and have different banking operations right in their arm palms. More concretely – mobile banking apps.

Thus, financial institutions seeking to maintain their competitive advantage, enhance customer satisfaction and increase revenues need to strive in their mobile banking experience.

If you are among these companies – wanting to build new or upgrade your current mobile banking app – FinCell team is here to help you out.