Six transformative trends that will shape fintech in 2023

Laurent Descout, CEO and founder of Neo, gives his forecast for the top six trends driving change in fintech in 2023. From digital payments to agility, the ecosystem and more.

Currency hedging will become a necessity to cope with market volatility

In 2022, market volatility and a prominent rise in the dollar’s popularity increased as investors rushed to buy more of the currency amid fears of a looming global recession. As the dollar increased in strength, many American companies that trade overseas saw a drop in earnings. The dollar’s rise has since moderated, but currency markets continue to fluctuate.

“The importance of locking in prices before buying and selling goods and services is now more critical than ever. Substantial losses due to volatility and fluctuations in the value of currencies, in this case the dollar, should raise alarms for firms that continue to ignore currency hedging.

Companies will seek to make cross-border payments more efficient and cost-effective

SMEs send and receive more cross-border payments now than before the pandemic. We have seen a rapid acceleration of volumes over the past 12 months, and in part this reflects a very notable increase in demand for borderless payments across the market.

“Companies face ongoing problems when paying suppliers in different countries. The challenge is that cooperation with traditional banks involves limited and incomplete payment information, which makes it difficult to reconcile payments. The high level of fees that banks apply to these payments also hurts SMEs competitiveness More businesses are buying into a more streamlined, integrated approach that can deliver significant cost savings.

Supply chain disruptions will continue into 2023

“The Covid-19 pandemic and the current geopolitical situation have only exacerbated existing problems within supply chains such as long cross-border payment cycles. Inventory days are a key factor when looking at supply chain disruptions. When the shipment of goods is delayed, the number of inventory days increases – the time each item or stock is in stock.

“The problem is that traditional approaches to cross-border payments are complex, lengthy and expensive, increasing inventory days. This means seeking a solution to lower payments through technology is critical for cashiers.”

Corporate banking will emerge from the shadows of consumer banking

Business-to-business customers are beginning to insist on the same seamless real-time transactions they expect as consumers. The traditional corporate banking model remains prone to inefficiencies and suffers from a lack of investment. Banks’ IT budgets are often channeled into updating their own legacy systems that are unable to communicate effectively with each other and third-party systems. What businesses really require is a single interface where they can perform financial forecasting as well as all their audits and cash positions in real-time, regardless of currency.

“These shortcomings – the lack of investment in new platforms and the absence of multi-currency management tools – are why many treasurers are desperate for an alternative to the traditional corporate banking model.

The payment market will continue to grow

The fintech sector has seen investment decline this year, but the use of digital payments remains an important growth area in the sector. A report by Visa and MIT Technology Insight found that by 2022, 37% of global business leaders will engage in cross-border transactions using fintech.

Companies are now looking for solutions to speed up payment processes across national borders while being cost-effective and transparent. When working with traditional banks, it is more challenging for businesses to reconcile payments which can delay the shipment of goods.

Treasury’s technology transformation will accelerate further through increased integration

There is still a widespread lack of integration and many legacy systems, all of which continue to hinder cashiers. As such, they are forced to rely on fragmented technology and processes to manage multiple but interconnected functions across payments and currency risk.

As currency hedging and cross-border payments become more prominent, the desire of cashiers to have all their services in one integrated platform will increase. Integrated systems can provide greater monitoring of your treasury in real time and utilize the insights to make faster and better decisions.