Fintech in 2023: Predictions From Enfuce, Dreams, DivideBuy, Xero

Fintech is at an inflection point amid rumblings that the industry is “losing its luster”. We have seen companies struggling to raise new funds, reports of falling valuations, fire sales, layoffs and hiring freezes. Some fintechs have closed abruptly, while others have said goodbye before they’ve even had a chance to say hello.

Throughout January Fintech Times, we share industry predictions for 2023 as well as ideas for “moving fintech forward” over the next 12 months.

Today we hear the expectations of leaders in Enfuce, Dreams Technology, DivideBuy and Xero.

Fintech can become a “force for good”

With a recession seemingly inevitable across the developed world in the coming year, there will be less money for innovative fintech entrepreneurs, says Denise Johansson, co-founder and co-CEO of European cloud-based issuance and processing pioneer Enfus.

“It will be interesting to see what impact the recession has not only on innovation more broadly, but also what kind of entity can drive innovation. We expect partnerships to prevail in 2023 as smaller companies come together to weather the storms, bear the economic the burdens and innovate at pace.

“Recessions often create opportunities and streamlined ways of doing things, and since fintech already offers more agile and cost-effective solutions for financial services, we expect that any economic downturn will naturally create more opportunities for the fintech industry.

“Recession also provides an opportunity for systemic change. In our view, fintech must go beyond functionality and become a force for good. In a crowded marketplace, having a clear purpose that has a positive impact on people’s daily lives is the salient characteristic that will capture the attention of consumers.

“Fintech shouldn’t just be about producing solutions to business problems – it needs to be an ongoing powerful current that defines the future landscape for everyone. Whether it’s ESG, helping financial inclusion or social mobility, fintech has solutions that can make immediate and long-term differences to the benefit of wider society, and we know that in the coming year this will be more important than ever.”

B2B fintech sector “will boom as third-party collaboration multiplies”

Henrik Rosvall, CEO and co-founder of Dream technologya provider of engagement banking solutions, says that ever since the pandemic began, banks have been forced to accelerate their digital transformation
processes.

He says: “Although many have found that building their own digital solutions is not only time-consuming but also extremely expensive, there have been several regulatory changes in third-party policy that have come into place in recent years, which have enabled a number of of partnership opportunities between banks and fintechs.

“As we move into 2023, the circumstances caused by the cost of living crisis will put even more pressure on financial institutions to further digitize their services and meet the changing needs and wants of consumers. Consequently, the number of banks cooperating with third-party providers will increase drastically, which means that the level of growth and investment in the B2B fintech space will reach new heights.

“Additionally, B2B business models are more sheltered from market volatility than their B2C counterparts, and less vulnerable to rising inflation and interest rates. As the overall decline in spending continues to worsen in 2023, we can expect loan requirements to fall and defaults to increase, which will further help make B2B fintechs an attractive proposition, both for financial institutions and the investment community.”

Fintechs will face a time of transition

Teresa Byrnesales manager at DivideBuya European POS finance company, believes that with the economic challenges facing much of the world, 2023 will see a shift in focus from growth to profitability for many fintechs.

“Retailers have had a tumultuous couple of years due to the pandemic, but have shown admirable resilience and flexibility, pivoting sales from bricks and mortar, going fully online and embracing hybrid business models that combine the best of both worlds.

“However, merchants are now facing rapidly declining profit margins due to inflation and product scarcity caught up in the supply chain. However, we are seeing more merchants looking at ways to own the customer experience, which they know is a key driver of increasing purchase frequency, especially under difficult economic trading conditions.

“Discounting and offering alternative ways to pay will inevitably be key trends for merchants in 2023, as will leveraging the value of their payment data. Merchants are really starting to see this value in their applications themselves now, be it in owning the customer experience or fine-tuning their customer loyalty schemes. We believe that the value of this data will only increase in the coming year.

“Not all merchants will have the ability, financially or technically, to leverage payments as a feature in-house, but instead will need to seek third parties to help them build tailored, flexible solutions that give consumers more control over their finances – and the ability to adjust if necessary.

“So while we believe 2023 will bring ongoing economic turbulence, it will also be a year in which responsible lending becomes paramount, enabled by exciting partnerships with the potential to buffer both consumers and merchants from the shocks through more flexible ways to pay.”

Built-in services will help small businesses grow

Chris O’Neill, growth manager at cloud-based accounting software platform for small businesses Zerosuggests that embedded technologies will continue to gain momentum in 2023.

“Embedded Finance, the integration of financial services such as lending and payments with non-financial business infrastructures without the need to redirect them to traditional financial institutions, is rapidly gaining ground. As apple add buy now pay later functionality i iPhone or Zero add a “pay now” button to invoices with Stripe and GoCardless which seamlessly integrates with our platform.

“In 2023, we can expect digital platforms to roll out new value-added products and services that provide more actionable insights based on customer data and tailored experiences. Embedding financial services also means that these services are linked to existing data sources to gather the customer information needed, and this is where open banking innovation supported by local mandates comes into play.”

“Currently in the US, open banking innovation is market-led. But with the CFPB pushing for new rules in 2023, along with trade associations like FDATA, ETA and FDX, we could see a new wave of financial tools and innovation for small businesses.

“Core fintech products that have remained unchanged for two decades will increasingly be designed around customer-led experiences and powered by data connectivity and open platforms. For example, open banking APIs enable banks and financial institutions to gather rich and reliable accounting information based on a company’s health and cash flow, to give lenders confidence they need to raise capital and small businesses quick access to funds.

“Ultimately, these technologies have the potential to help small businesses more easily access a wider range of financial services for faster access to funding and seamless workflows.”