The fintech sector has experienced rapid growth in recent years, with the use of digital financial services increasing globally. As we look towards 2023, it is clear that this trend will continue, with several key trends set to redefine the fintech space.
Digital payments to see further adoption
With a worldwide transaction value of USD 8,488 billion in 2022, digital payments will continue to be the most important fintech segment in 2023. With the UAE as one of the leaders in the fintech space, it is quickly establishing a solid base for the industry, the digital payments sector so a transaction value of $26.28 billion in the region alone. This trend is set to continue, with the number of users in this segment projected to reach 7.90 million by 2027.
The growth of digital payments can be attributed to the level of convenience and security and the increasing prevalence of mobile and online shopping.
Furthermore, with the rise of e-commerce and the shift towards contactless payment methods due to the Covid-19 pandemic, digital payments are likely to continue to be a key driver of growth in the fintech sector.
The spread of alternative financing after Covid-19
Another trend in the fintech sector is the rise of alternative financing. This relatively new sector had an average transaction value per user of $42.03k in 2022.
The growing demand for unconventional funding sources, such as peer-to-peer (P2P) lending and crowdfunding platforms, was evident post-Covid-19 due to the disruption we saw in traditional lending services. Because of this, we saw a trend in the sector towards a more flexible and personalized approach to lending and borrowing, allowing individuals and small businesses to access finance that may not have been available to them through existing channels.
The adoption of blockchain technology has also helped to massively facilitate the growth of this area, with the ability to automate P2P lending through smart contracts, which do not require trust in third parties.
With the growth of the side-hustle culture and more people focused on creating their businesses through individual endeavors, alternative financing is likely to see rapid growth in the following year.
The next wave of mobile banking
In addition to digital payments and alternative financing, the neobanking space is expected to show strong growth in 2023. This segment, which includes online banking and mobile-first banking apps, is expected to see revenue growth of 40.8 percent in the coming year in the UAE alone.
The popularity of neobanks can be attributed to their convenience, ease of use and focus on providing customers with a seamless and personalized banking experience.
In addition, the ability to offer users services such as checking and savings accounts, loans, investment products, etc., all through the convenience of a phone app, is not to be underestimated in an age where everything around is focused on moving completely into digital space.
The Potential of Stablecoins to Transform Financial Services
Stablecoins have already significantly impacted the fintech sector this year, enabling faster, cheaper and more secure financial transactions and providing a stable store of value. The market cap saw a peak of nearly $190 billion just before TerraUSD collapsed.
By 2023, stablecoins are expected to play an increasingly important role in the fintech sector, and the way financial services are delivered. They have the potential to revolutionize the way financial transactions are carried out, especially in cross-border payments.
However, mass adoption of stablecoins will depend on several factors, including their stability, security and regulatory environment. For stablecoins to achieve widespread adoption, they must be widely accepted by merchants and consumers, backed by recognized and trusted assets, and operate within a clear and consistent regulatory framework.
According to the Harvard Business Review, stablecoins could even facilitate how governments run remittance programs such as sending stimulus money. If these factors are addressed, stablecoins could achieve mass adoption by 2023 and become a widely used form of digital currency.
Measuring growth accurately is difficult, but development is inevitable
Although it is difficult to predict the exact level of growth the fintech area will see in 2023, there is no question of a slowdown.
With the trends we see today, it is clear that the space is experiencing a strong trajectory towards exponential growth. Countries like the UAE have already spearheaded significant developments in the fintech sector, serving as an indicator and a hub for the fintech space.
With the recent commitment to actively develop and adopt blockchain technology, there is a constant drive to innovate and lead the space.
Considering the pace at which the sector is flourishing here, with niches such as alternative finance and neobanking already playing significant parts in the region, these trends are likely to continue to lead the development of the fintech space.
Read: DIFC-based fintech firms net $559m in funding during Jan-Sep 2022
