2023 FinTech Industry Trends

As we head into a new year, there is a lot of work to be done in the fintech sector, but as it is growing rapidly, I believe 2023 is going to be a pivotal year. As well as improving the efficiency of how customer service is delivered, we are also seeing an increase in financial inclusion, which in my opinion can only be a good thing.

According to a survey conducted by a world-leading open banking platform, Plaid, in July 2022, inflation has reduced financial confidence, but consumers claim that fintech is helping them survive the economic downturn.

Consumers use savings tools to achieve both short- and long-term goals, as well as applications for payments and liquidity management to provide stability. Fintech is proving its worth, especially with the largest group of digital users, Gen Zs and Millennials.

The Plaid survey showed that digital acceleration is most prevalent in the younger generations. Figures show Gen Z continued to rise (93% in 2022 vs. 87% in 2021) as did the percentage of Millennials and Gen Xers who reported using digital tools and apps to manage their finances (Millennial: 91% in 2022 vs .95% in 2021; Gen X: 82% in 2022 vs. 89% in 2021).

AI

By 2023, AI algorithms for financial software development will have a greater influence on who gets access to which financial services and how much of it. But by creating solid systems that look after end users, fintech companies must be able to balance the scale that these algorithms provide with unprecedented ethics in application. Prejudices have been known to be “baked” into algorithms unknowingly by those who created them. Ethics play a big role in public adoption, because after the Apple Card algorithm incident, which gave men higher credit card limits than women, there was a lot of public outcry.

Financial inclusion

The introduction of innovations such as artificial intelligence has enabled fintech companies to deliver financial services at scale, and over the past ten years, 1.2 billion unbanked people have gained access to financial services, according to the World Bank. This achievement was made possible by fintech.

However, 1.7 billion more people remain unbanked, many of whom live in developing and underdeveloped countries, so the path to global financial inclusion through financial software development is still far from complete.

As a result, the African and APAC regions have seen an increase in VC fintech investments. According to experts, Africa’s financial services market will experience an “aging” that will see annual revenue growth of 10% until 2025.

Similar to how APAC fintech investment increased despite the global economic slowdown, reaching $41.8 billion in 2022 H1, more than doubling the $19.2 billion seen in 2021 H1.

2023 will mark a turning point for fintech investment and the expansion of financial inclusion globally.

Contactless transactions

The fintech industry’s biggest player is the payments sector, which has made the greatest progress in recent years. The rise of contactless payments, which is already on and will continue to be an important trend in the fintech market in 2023, is the latest significant change in this innovative sector.

When the pandemic was at its worst, a digital payments company saw a sharp increase in contactless transactions on its platform, and that’s when consumers really embraced the technology.

Cash transactions decreased from 49% to 38% in the same time period. However, over the next year and beyond, this decline in cash will be crucial for fintech and e-commerce.

Venture capitalists

Next year, VCs will come back to the table and invest. But there will be far fewer companies around to invest in. This should make for an interesting summer in 2023 with too much chasing money and too few opportunities. I expect this will cause some concern in the VC industry.

Conclusion

The evolution of financial software and many new fintech innovations will have a big impact in 2023.

Many areas need to be explored as the industry is still in its early stages of development.

What is clear is that consumers have been helped by fintech over the past three years of global challenges. Customers claim that as the system navigates its own future, the way forward will be an industry that provides stability, flexibility and opportunity.

To reach the next level in fintech, where people use it for all their financial needs, it must move towards increased collaboration across the ecosystem to ensure an open and fair financial system that is all-inclusive.