Lately, there have been several mind-boggling innovations in the tech industry. From AI-enabled bots supporting customer service to 3D technology in healthcare – the wonders of tech are no surprise anymore. Currently, technology is doing its magic in finance by opening doors for financial technology – FinTech. It aims to compete with conventional finance methods in delivering financial services. In addition, FinTech is bringing many new inventions to promote financial stability.
Most entrepreneurs are already familiar with cryptocurrency and blockchain, but FinTech trends in 2023 are beyond this. As crypto markets have already crashed, blockchain technology is becoming the new ledger. Likewise, we will witness improved money circulation because of buy now, pay later, and embedded finance. These trends will give consumers financial independence while making business processes much faster.
Further, innovative payment solutions will enable people to move towards a cashless economy. Besides debit and credit cards, mobile wallets will likely become a popular exchange medium. If you are eager to learn more about this, keep reading. Here we have outlined six trends in FinTech to watch in 2023.
1. Embedded Finance
As people no longer prefer traditional finance methods, embedded finance is here to lead the way. It integrates all financial tools and services within the offerings provided by non-financial institutes. Hence, it covers services such as banking, leasing, investment, and payment processing and has extended reach to insurance. Among all forms, leasing is a notably growing sector. However, it comes with strict compliance protocols which only reliable software like EZLease can help fulfill.
Another innovation in this domain is that all embedded finance services will get access through APIs. It will enable customers to merge financial services into their products from scratch. Thus, ensuring service distribution is no longer an issue. Once that friction gets removed, any digital company can offer a financial service to its customers. Such trends will improve financial inclusion as finance-related products will be available for everyone.
2. Buy Now, Pay Later 2.0
The digital landscape has allowed people to split their payments into interest-free installments. Previously, the buy now, pay later (BNPL) was only for high-value items such as mobiles, laptops, and cars. It allowed people to purchase assets on the spot and pay for them over time, similar to short-term loans. In 2023, we will see BNPL become associated with online fast fashion brands that target Gen Z and millennial shoppers.
A few FinTech companies have started to partner with fast-food delivery apps, allowing consumers to eat now, and pay later. Even though the entire initiative is increasing reliance on debt, the interest-free payments eliminate default concerns. As BNPL expands further, FinTech companies must get their initiatives approved by Central Bank. The government plans to authorize legislation requiring lenders to make affordability checks before offering BNPL. In addition, some revisions are anticipated in BNPL advertisements to ensure these companies aren’t misleading consumers.
3. Alternative Financing
Undeniably, the global pandemic has been harsh on the entire world. Even though banks haven’t reduced the capital dedicated to supporting trade, the global finance trade gap has widened. That is where the role of alternative financing will come into play. It is a concept that focuses on business funding offered by non-financial institutions. Remember, none of these fundings are loans.
It is more like revenue-based financing (RBF) – a non-loan funding option. Entrepreneurs can repay this as a percentage of the business’s monthly revenue. Hence, the installments are neither scheduled nor fixed. Another name given to alternative finance is invoice factoring. It means a business’s outstanding invoices can get sold for a discount in exchange for immediate cash. Let us explain how.
Your customer might owe you $500, but they will pay after a month. If you need cash right now, the non-financial institute will be willing to buy the invoice at a discounted price. They will offer you $450 instead of $500 for the invoice. Although this practice has been around for some time, it only became popular in the recent eCommerce boom.
4. AI for FinTech
While most industries have already integrated artificial intelligence (AI), soon, banks will hop onto this trend. They will likely fine-tune their operations by incorporating AI into their routine activities. That would lead to massive cost reduction and decreased reliance on the workforce.
Further, AI can work with unstructured data, enabling financial institutions to unfold new trends and patterns. In addition, it can deal with the growing incidence of cybercrimes and financial frauds, providing top-notch security. Above all, AI offers the best customer service through its chatbots. It means customers can avail of banking support around the clock, opening doors to faster transactions and improved customer service.
5. Payment Innovations
FinTech innovations will change how people make payments. It enables people to make contactless payments through mobile wallets, identity verification technology, and innovative speaker systems. We have already witnessed a rise in mobile payments, but in 2023, mobile wallets will become a new trend. The digital natives – Gen Z, will explore the conversion of payment innovations. After all, they are the first to see the onset of cashless transactions.
In 2023, many more things will get covered by mobile payments besides online transactions. That includes in-store transactions and eCommerce shopping. Alongside offering customer convenience, it will push the global transaction value by millions. All in all, Gen Zs will be the most prominent drivers of payment distribution.
6. Blockchain Technology
Undoubtedly, 2022 has been nothing less than a rollercoaster ride for crypto traders and investors. More than $2 trillion of coins evaporated from the market, leaving people at losses. However, this fall is transient, and markets will evolve. But it doesn’t mean that blockchain technology will take a backseat. After all, blockchain has much broader applications, notably cross-border payments.
Making international payments for business is a hassle and expensive, but things will change with blockchain. It aims to address these issues with better speed and security in international payments. Since there is no involvement of a middle person – a financial intermediary- the transfer costs will be much lower.
In 2023, we can see that FinTech will revolutionize the financial sector in many ways. It aims to promote the use of payment gateways, enabling people to conduct business and transactions easily. Similarly, it supports easier account setups and payments, boosting eCommerce growth worldwide. Emerging technologies like blockchain and embedded finance will improve financial inclusion, looping more people into the finance horizon.
Read Dive is a leading technology blog focusing on different domains like Blockchain, AI, Chatbot, Fintech, Health Tech, Software Development and Testing. For guest blogging, please feel free to contact at firstname.lastname@example.org.