The future of Fintech in 2023

At a rate of 87%, India is way ahead of the global average of 64% in the FinTech adoption race. By 2030, the promising Indian FinTech market is expected to generate $200 billion in revenue and $1 trillion in AUM, as suggested by a study conducted by EY.

As a home to over 2100+ FinTech companies, India is the third largest fintech ecosystem in the world. Of the existing FinTech companies in India, 67% were established within the last 5 years. The last 65 years have been nothing short of phenomenal for FinTech in India. Many things have changed since the introduction of credit cards in the 1950s. ATMs revolutionized cash withdrawals from banks, and the advent of the internet in the 1990s catapulted the fintech industry to new heights. Electronic payment structures, online business practices, portable banking services and bank digitization have also resulted in a significant change.

While 2022 saw the emergence of many new trends in the fintech sector. Many of these trends are going to become even more popular, while we hope for new ones. Here are some predictions for the future of finance and FinTech in 2023:

More people will choose “Buy now and pay later”

Since its inception, the “Buy now, pay later” (BNPL) model has received both bouquets and brickbats, with many questions surrounding the lack of transparency. By 2023, public authorities are expected to scrutinize and implement regulations requiring lenders to carry out affordability tests before approving loans. Startups believe that the regulator should find ways to address the challenges facing the BNPL companies although it appears to protect the customers and the public’s money.

Collaboration between banks and fintech players can increase credit access to the underserved segment and SMEs because 75% of MSME lending in the country is still led by banks. This will continue to be a huge opportunity for fintech players in 2023.

BaaS will evolve

The evolution of BaaS Banking-as-a-Service (BaaS) will evolve to include a wide range of features and overcome some of the previous limitations, allowing fintechs and legacy players to build truly unique offerings and achieve long-term customer loyalty. If financial institutions are serious about innovation, they need to start thinking of themselves as data companies by 2023. This mindset shift will set them up to embrace real-time banking and implement highly customer-focused solutions.

The rise of embedded finance

Embedded Finance is a type of fintech trend that involves the integration of financial services, such as wealth management, consumer loans, insurance and payments, into non-financial companies. In 2021, the global value of the embedded finance industry reached $43 billion, with experts predicting it will grow to $141 billion by 2025, driven largely by the embedded payments sector. In the coming years, expect to see companies using embedded finance to integrate financial services into non-banking products and business processes, as well as banks using it to curate the customs of SMEs.

Credit scoring will be transformed with embedded digital fingerprints

Financial institutions, internet lenders and other entrepreneurs are looking for fast and efficient methods to analyze new customers and loan applications, prevent fraud and automate the pre-approval process. Fintech innovations such as virtual fingerprints and AI-powered credit scoring can help streamline this process and make it more cost-effective. For example, banks can use digital fingerprinting to capture important user and customer information from their website and integrate it into comprehensive customer databases and reporting. This information may include details such as device type, location, ISP and mobile phone provider. Smart credit scoring, which includes data such as social media activity, IP analysis, assets and income predictions, can help lenders and financial institutions determine whether a user is trustworthy.

Alternative financing methods will become more popular

The use of alternative financing methods, particularly recurring revenue financing, is expected to grow in popularity in 2023. Recurring revenue financing allows businesses to convert their ongoing revenue streams into immediate capital. This method enables entrepreneurs to receive the lifetime value of their customers upfront, helping them balance cash flow with the cost of acquiring new customers (CAC).

Recurring income offers a flexible and accelerated way for a business to receive a quick increase in cash flow without the need for financial conditions such as collateral or guarantees that are often required in traditional debt financing.

In conclusion, we can say that despite concerns about the potential for economic recession in 2023 and geopolitical events, the fintech space is expected to thrive due to the acceleration of digital momentum caused by the pandemic.

END OF ARTICLE