The fintech revolution: What will shape the industry in 2023

As we approach the end of 2022, it’s time to start looking ahead to the trends and developments that will shape the fintech industry in 2023. The following year promises to bring challenges and opportunities for fintech companies and their customers, from new technologies and regulatory changes to changing changes. consumer preferences and business strategies.

In this article, some of the industry’s leading fintech experts will explore their predictions for 2023 and consider how they could impact the industry. From the ongoing implementation of making tax digital to the growing importance of environmental, social and governance (ESG) concerns, there is much to look forward to in the fintech world.

In the great legislative race, Europe is playing catch-up

Approaching 2023, Open Banking and tax are expected to be two key areas of change, driven by legislative changes or lack thereof. In Europe, there is a need to catch up with other regions in adopting open banking, while tax faces challenges such as implementing Making Tax Digital (MTD) and the BEPS 2.0 compliance deadline. These changes will present challenges and opportunities for fintech companies and their customers in the years to come.

According to Eyal Sivan, left, head of open banking at Axway, Europe’s progress in open banking has been slow: “Although Europe pioneered open banking with the PSD2 regulations, their efforts have been seen by many as lacking at best fall and an outright failure at worst. Balkanization of standards, inconsistent implementations and lukewarm enthusiasm from the incumbent banks have led them into Gartner’s Trough of Disillusionment.’

However, Sivan predicts that this will change in the coming year: “As the Europeans observed the successes of those who followed, especially in Brazil and the Middle East, they began to revise their approaches. While PSD2 was centered around payments with data sharing added afterwards, the upcoming updates to the legislation will more than likely have a broader focus on generalized data sharing, open finance and even open data as Europe catches up with its peers.’

The same impact of game-changing legislation is valid for the tax industry. According to Russell Gammon, right, Chief Solutions Officer at Tax Systems, the impact of Making Tax Digital (MTD) on the tax industry is expected to continue into 2023: “HMRC and tax professionals will have learned from MTD for VAT which has now largely become ‘ BAU’ for enterprises, now handling the next wave as MTD for ITSA takes center stage for the next 18 months or so.’

However, Gammon notes that there is still a lack of clarity from HMRC on the MTD for corporation tax: ‘The MTD for corporation tax is set to pilot in 2024, but there has been continued silence from HMRC for over a year now. This means that many are unsure whether they expect to find out more about this legislation in 2023 or not until the following year.’

Gammon advises companies not to wait for this legislation, but to use what has been learned from MTD so far to prepare for what is to come: “For many, this will be very important – even with the best technology in the world, implementation will involve a culture and process change… One thing that is certain is a need for clarity in timetables and timetable for reporting – will HMRC push forward with quarterly reporting? This will be the cornerstone of the legislation and will drive the technology necessary for compliance. A formal line in the sand is needed in 2023… With the importance this strategy will have in many organisations, my advice is not to wait for legislation. Take what we’ve learned from MTD so far and apply it to CT returns so you’re prepared for what’s coming when it eventually comes.’

As balloons will tell you, there is a cost to inflation

As we enter 2023, businesses and individuals should be prepared for inflationary pressures that will increase the cost of living and operations. Hugh Scantlebury, CEO and founder of Aqilla, warns that it will be important to monitor income and expenses to manage these changes closely and effectively.

“The serious problem for next year comes from inflationary pressures, which cause increases in food, fuel, energy and resources. For businesses and individuals, living and operating costs will rise. Although wages will increase accordingly, all these things must be accounted for, so we must monitor much more closely what comes in and what goes out, he says.

He also emphasizes the importance of having a solid analytical reporting system in place to identify changes and make the necessary interventions. “When we look at the accounting area, it is critical that systems cope with these changes and monitor gross margins, monthly profitability costs and fixed expenses. Having a decent analytical reporting system is essential to identify heat graphs to show where changes are happening and make early interventions when needed.’

However, Scantlebury acknowledges that managing these changes can lead to increased workload. “The management of all this will unfortunately lead to an increased workload, but it is important that it is done. We’ve seen the consequences if you don’t: things can get out of hand very quickly – just look at Stripe, Amazon, Meta and Twitter. It is not only important to have a good business. You must run a good business. And it’s about accounting and finances – it’s tracking all the different activities, so you don’t suddenly discover big holes in your finances.

The effects of inflation and the economy will also greatly affect the tax industry in 2023. According to Bruce Martin, CEO of Tax Systems, ‘2023 will be about doing more with much less’. “Not only will all businesses be tightening their rising costs, but there is a serious shortage of skilled professionals in the tax industry,” he adds.

Demand for professionals with knowledge of technology is high, but access to quality developers is stretched thin. To meet this ‘war for talent’, Martin suggests that the finance and tax sector should undergo a digital transformation, automate manual tasks and focus on training and development.

ESG: turn the market from black to green

As we look to 2023 and beyond, increasing environmental, social and governance (ESG) pressures will push financial institutions and other large businesses to adopt net zero policies. According to Andrew Doukanaris, left, Business Director Fintech Europe at Intellias, “ever-increasing environmental, social and governance pressures will drive financial institutions, like most other large businesses, to adopt net zero policies. Faced with the very real threat of climate crisis and plastic pollution, emissions will be minimized and the use of plastic will be reduced. In 2023, consumers will be encouraged to replace traditional plastic cards with e-wallets and mobile contactless apps instead.’

While younger generations, especially Gen Z and Millennials, are likely to be the first to embrace these changes wholeheartedly, older generations are expected to eventually follow suit. Doukanaris predicts that it will take around 10 years for plastic cards to be completely phased out, but notes that they are likely to see a significant decrease in circulation as early as 2023. “Plastic cards will not be completely eliminated in 2023, but in about 10 years from now predict that there will be no plastic cards in circulation, he says.