Fintech Trends to Watch in 2023 – Forbes Advisor INDIA

87% – that’s a great number for a new year, especially for the Indian fintech industry. This is the figure that indicates the rate of adoption of fintech products by consumers in India, and it beats the global average by 23%.

This figure was revealed in the Economic Survey 2022-23 conducted by the Government of India. Another recent EY study estimates that by 2030, the fintech market in India will have a turnover of $200 billion and will have $1 trillion under management.

Bolstered by the government’s active regulations and robust regulatory environment, India now hosts more than 2,100 fintech companies, placing it as the world’s third largest provider of fintech services. All thanks to young companies established in the last five years which constitute 67% of the total fintech companies in India.

The pay later market is growing

Against the background of expected regulations in 2023, there will be much more clarity for the pay-as-you-go category, which has seen its share of scrutiny. Pay later companies will be able to move forward more confidently, and on the flip side, customers will gain much more confidence in small credits.

By 2023, later-paying fintech companies will be able to offer credit to underserved customers more efficiently and at scale. This will help the category enter the mainstream and be seen as a viable option by the masses.

As more merchants adopt cashless payment systems, consumers will be able to track their spending in real time, giving them more control over their finances. Furthermore, companies will benefit from faster transactions, lower transaction costs and a reduced risk of fraud.

Cyber ​​security and fraud prevention

As financial institutions become more dependent on technology, cybersecurity and fraud prevention will become even more critical. By 2023, we can expect to see many more fintech companies investing in cyber security measures to protect their customers, data and reputation.

By using artificial intelligence and machine learning, fintech companies will be able to identify fraudulent activities and repeat defaulters much more successfully. Today, these features are supported by warranty models that prevent an increase in automatically approved defaulting customers.

Fraud prevention is an important aspect of cyber security, so financial institutions will use advanced algorithms and machine learning to not only detect fraudulent activity, but also prevent losses. This includes monitoring account activity, flagging suspicious transactions and implementing real-time fraud detection systems.

Open banking and API integration

Open banking is a growing trend that allows third-party service providers to access customer data through open application programming interfaces, also called APIs. It can create a more competitive marketplace, drive innovation and increase transparency.

By sharing customer data with third-party providers, financial institutions can offer more personalized services and better products. Customers can also benefit from a more seamless banking experience, as they can access multiple financial services through a single platform.

By 2023, we can expect to see more financial institutions embracing open banking and API integration to improve their customer offerings. This may include integrating payment services, investment platforms and budget tools into a single platform.

The rise of AI in Fintech

Expert financial advisors agree that AI technology will revolutionize financial planning by 2023. AI-powered software can analyze vast amounts of financial data and create personalized investment strategies based on an individual’s preferences and risk tolerance. This is possible through sentiment analysis.

Chatbots may be able to identify customer problems and solve them using local languages ​​and even dialects. AI-powered chatbots can also act as virtual financial advisors, offering guidance and support that may not have been available to younger generations in years past.

It is predicted that AI will take over some of the tasks traditionally handled by human financial advisors, bringing greater efficiency, speed and accuracy in financial management.

Return of DeFi and Blockchain

As the DeFi ecosystem in India continues to grow, we can expect to see a wider range of innovations emerge. For example, we can see the development of new DeFi applications that specifically cater to the needs of the unbanked population in India. These applications can provide access to financial services such as microloans and insurance, helping to bridge the gap between the traditional financial system and those who have been excluded from it.

Looking to the future, we can expect to see continued growth and innovation in the Indian decentralized finance and blockchain ecosystem. As more entrepreneurs and businesses explore the possibilities of these technologies, we can see the creation of new economic models that challenge traditional notions of finance and commerce.

Ultimately, the success of decentralized finance and blockchain in India will depend on a number of factors, including regulatory clarity, technological innovation and user adoption. But with the right conditions in place, it’s clear that these technologies have the potential to revolutionize the Indian economy and empower individuals across the country.

Embedded Finance is going to see a boost

Embedded finance allows customers to enjoy banking-related services from non-banking businesses without disrupting their customer experience and journey.

Some examples of embedded finance include when customers can subscribe to an online course and make a payment on the course website itself or when customers take a taxi ride and pay for it in the service provider’s app.

By 2025, embedded finance is projected to be worth $141 billion, driven by demand from traditional companies such as vehicle manufacturers and hotels. By 2023, more than 70% of financial services and fintech are expected to build embedded financial products and services.

Credit score will be more accurate

Be it institutions, entrepreneurs or regulatory bodies, everyone is seeking faster and more efficient methods to analyze customers’ financial and credit profiles, prevent fraud and automate credit approval. Innovations such as using customers’ online activities to predict credit behavior and AI-powered credit scoring will become very useful tools to streamline this process and make it more cost-effective.

Neobanking will become hyperfocused

With neobanks seeing massive growth globally and in India during the pandemic years, it stands to reason that they will continue to expand. In 2023, neobanks will use their deep understanding of customers and their access to data to develop hyper-focused products and services that cater to different segments such as new credit customers, students, retirees, salaried women and more.

Fintechs will get wiser

Above all, fintechs that are used to growing all over the place will see ground in 2023. With Indian regulators becoming more aware of the relationship between fintechs and their customers, we can expect more guidelines that help shape the category into one that is sustainable, responsible and compliant. Fintechs will also become wary of unnecessary costs and will focus on making money sustainably.

The bottom line

To conclude, while volatile geopolitics and an economic recession have made things difficult, the Fintech ecosystem is looking very bright. The fintech industry is constantly evolving, driven by advances in technology and changes in consumer behaviour. 2023 will witness significant trends in AI and machine learning, blockchain, digital banking and mobile payments, cyber security and fraud prevention, and open banking and API integration.

These trends have the potential to transform the financial services industry and offer more personalized, convenient and secure services to customers. 2023 looks set to be a watershed year for the way digital banking and finance develops in the country and around the world.