Tech trends that will shape the Fintech industry in 2023

By Paridhi Gupta, VP Product, axio

The future is about democratizing innovation-led financial services. An example of this is RBI’s 2025 Payments Vision, which aims to provide safe, secure, fast, convenient, affordable and accessible e-payment options to every user. While the future of Fintech looks promising, there are certain challenges that the industry must overcome. For example, 9,103 bank fraud cases were reported in the financial year 2021-2022, amounting to a loss of around INR 604 billion.

Fintech is therefore set to develop around secure, smooth and simplified payments. Here’s a look at the top 5 technology trends that will define fintech in 2023.

1. Open banking services
The most impactful development in the financial sector is open banking. Seamless access and interoperability between different financial entities to provide flexible consumer services will revolutionize how customer data is recorded, maintained and shared between service providers. Technology will act as an instrument for the account aggregator framework to enable the new age banking practices. It will help replace elaborate terms and conditions with simplified user consent for data sharing at a granular level. In addition, closing the security gaps to mitigate breaches at these hot spots will drive innovation in the cyber security domain.
2. Voice as biometric
Multi-factor, knowledge-based authentication will be reinforced with voice-based payment authorization. SaaS-based solutions to make hands-free trading available to the customer via digital payment solutions, eliminating OTP and other time-consuming methods, will take center stage. Freedom from accessing bank details for every transaction will be the main goal of innovation in AI-based voice recognition. The focus here is multi-language support without dialect restrictions, enabling faster check-out and eliminating the unstated mandate for high-speed internet connection that persists today.
3. Embedded Finance
Embedded Finance is projected to see a tenfold increase in revenue, reaching $230 billion by 2025 and enabling fintech to unlock deeper customer relationships beyond transaction flows. The popular contextual credit option will spark innovation across industries, bringing new technologies to scale, which could lead to technology-driven M&A in the banking and fintech industries. As they expand their parcel services, companies must maintain transparency with customers and regulators.
4. Optimization of cloud storage
Advances in financial interoperability and security are currently paving the way for a revolution in data storage and sharing. This is where storage optimization becomes indispensable. Expanding into untapped markets, in sync with the core theme of “E-payments for everyone, everywhere, every time” in the Payments Vision 2025, will drive the evolution of cloud storage optimization in terms of efficiency, cost and security. Continuous scaling is necessary for an all-encompassing approach. For example, in India, the Public Credit Registry (PCR), proposed by the RBI, will address information asymmetry across lenders and redefine the customer data storage landscape.
5. Extension of UPI on credit
With the integration of Single-Block-and-Multiple-Debit (SBMD) within the UPI framework, RBI has opened up a plethora of opportunities for fintech companies to tap into. This new feature allows customers to block a specific amount for a specific merchant, who can then continue to charge this blocked amount until it is used up. This makes automated payments faster and easier. The constant innovation of UPI and its rapid adoption will challenge the incumbents in the payments and credit space to stay on their toes as customer convenience will increasingly become the deciding factor in determining volumes.

Final thoughts
The banking universe is converging towards an ecosystem of seamless and interoperable services for both individuals and businesses. Consumer data, transactional interoperability and deep security are the touchpoints that bridge the operational gap between consumers and providers of financial services. The economy requires greater financial inclusion, which can be achieved through innovation in technology and expansion of the regulations. The impending openness will surely make the protection of user data and user assets more challenging. A consolidated effort by fintech, banking, non-banking and public bodies to increase reach and security and facilitate affordable credit can stimulate economic growth.