Fintech Trends That Will Impede the Banking and Finance Industry in 2023

Fintech Trends That Will Impede the Banking and Finance Industry in 2023

The year 2022 is the peak time to be a part of the Fintech space as the net worth of the fintech market globally is expected to reach approximately USD 305.7 Bn by 2023. This is also the time when fintech mobile app development companies are going to witness a boost in their business.
Based on the trends that are going to pop up in the near future, fintech-based companies are going to decide how industries will do business. Major technologies involved in the financial technology sector are Blockchain, Machine Learning (ML), and Artificial Intelligence (AI).

  • The increased collaboration between banks and fintech startups will be a key driver of fintech growth
  • AI, Blockchain, Data Analytics, and Cybersecurity tools will be part of key trends in 2020
  • In all, about 80% of banks have entered into fintech partnerships

Here are the top trends that are going to disrupt Industry in 2023

1. Data analysis

Artificial Intelligence and Machine Learning aid in the mining of internal and external data sources to gather useful data in order to predict market indicators and trends. Both of the technologies are going to play a huge role in determining what data is critical for the fintech industry to gather information about population consumption habits and market needs.

2. Personalization of content via Big Data and AI

In the last few years, Google and other market giants are exposing the benefits of data personalization in order to attract customers and gain loyalty among people. On the other hand, they are also attracting potential advertisers to place higher bids on target-oriented advertisements. Hyper personalization of content is possible because of big data and AI as these technologies help in storing, extracting, and driving insights. Financial institutions are also storing data as per the customer’s behavior and history to serve better and AI is facilitating the path to integrate real-time insights.

3. Blockchain and AI in the banking and loan sector

Financial institutions are using intelligent systems over manual review systems to process documents and papers. Nowadays, paper checks and documentation are vanishing faster than people predict because people are getting used to an alternative to doing those things without any hassle and they are never going to look back. That’s why financial institutions are continuing to partner with fintech. In fact, about 80% of banks have already entered into fintech collaborations. Blockchain will surely make packaging, securing, tracing, and exchanging much more efficient.

4. Robotic Process Automation (RPAs)

Reducing human touchpoints is extremely important in both B2B and B2C transactions. It consists of many things like one-click payments, approval, and rejection of transactions. Artificial Intelligence is ensuring the proper distribution to make transactions smoother and seamless. Today’s RPA is not explicitly programmed to perform tasks, although they can observe what people do and then automate or suggest enhancements. This includes processes such as risk assessments, security checks, data analysis, and reporting, as well as, most of the repetitive tasks.

5. Conversational Interfaces (Chatbots)

Platforms that have both voice and text-based automated processing systems are becoming the preferred method for businesses. Chatbots are making a significant impact on how businesses are communicating with end customers or users. They are also cutting down business costs by reducing numbers of customer support executives. 80% of businesses are projected to integrate some form of chatbot system in 2020. With a projected worldwide market size of more than $1.3 billion by 2024, chatbots will be a driving force for business communications.

6. Innovations in app-based payments

The first thing that every financial institution should consider is the exponential growth of mobile users, as well as, how apps are making an impact on the daily lives of people. The majority of people are relying on mobile apps for many financial activities such as making payments, shopping and tracking down transactions of any order. Customers want the payment to be instant and hassle-free. These mobile payment innovations are cutting down the dependency on cash.

  • Mobile apps are expected to generate $189 billion in revenue by 2020.
  • The Apple App Store has 2.2 million apps available for download.
  • There are 2.8 million apps available for download on the Google Play Store.

7. Smart contracts

Smart contracts simply digitalize transactions in a very safe and secure manner.
Consider two parties who agree on any transaction. Traditionally, they have to get a lawyer to make a contract on two pieces of paper. Once it is done, they call a witness to make sure the signees deliver the agreement faithfully.
When it comes to smart contracts, parties sign contracts using cryptographic keys as a digital signature and the contracts are encrypted into cryptographic code. These contracts are extremely robust in terms of security and execution.

8. Cryptocurrency as a payment method

In the last few years, payment businesses have gone through a revolution that started from Blockchain and fintech, then moved to AI and cryptocurrencies. The world is surely moving faster in terms of international payments. After getting banned from many states and countries, Cryptocurrencies are still on a path of totally changing the way we run financial transactions. More and more businesses are accepting payments via cryptocurrency as people are getting aware of how easy it is to make huge transactions.

9. Digital-only banking is on boom

Digital-only banks completely rely on virtual global payments and P2P transfers without any transaction fees. Some of them also allow buying and exchanging Bitcoin, Monero, Ethereum, and other cryptocurrencies. Such banking companies are growing in numbers all over the globe. The visits to bank branches are set to drop by 36% by 2022.

10. Microservices

Microservices is a hot buzzword in the financial industry as it breaks down applications into smaller chunks, making them more scalable and manageable. Many global companies are migrating themself into this system. According to the Microservice Architecture Market, “The microservice architecture market is expected to reach $32 billion by 2023, growing at a compound annual growth rate (CAGR) of around 16.17%.”

11. Financial Cybersecurity

Cybersecurity is among the top concerns for financial institutions as the majority of data is digitized. The percentage of cybercrimes is increasing which is not a good indicator.
In the 2017 Official Annual Cybercrime Report, the cybercrime cost was estimated to reach $6 trillion per annum by 2021. In 2015, that figure was $3 trillion. Hence, the protection of data at every aspect is extremely important and market giants are investing in Cybersecurity solutions to prevent cyber attacks.

12. Tokenization of assets

With the advent of tokenization, our way of investing is going to change radically. Tokenization refers to the issuing of Blockchain-based tokens (specifically, a security token) that represents a real, tradable asset digitally. These security tokens are created through an initial coin offering IPOs.

The benefits of tokenized assets are high transparency, cheaper transaction, and increased liquidity.

13. Secure payments

A new European regulation called the Payment Service Directive 2 sets requirements for merchants to keep a low fraud rate threshold and solid customer authentication. The regulation consists of 2 important points: in-app authentication and 3D Secure 2.0. The widespread adoption of these technologies and other authentication practices can reduce fraud remarkably and provide a more secure experience.

14. Liquidity and Return:

Fintech offers both, liquidity and return. The management of liquidity of assets is a key topic in the asset management industry. But it is not easy to maintain liquidity and provide high returns. However, over the past years, Fintech has opened an easy way for investors to enjoy benefits without compromising liquidity.

15. Crowdfunding

Crowdfunding is a way for businesses and startups to quickly and smoothly raise small amounts of investments from a large number of people. Some of the most well-known crowdfunding businesses include Patreon, Kickstarter, and CrowdRise.

The top example of a crowdfunded success story is Oculus V.R, the virtual reality hardware and software company from the United States that was crowdfunded through Kickstarter in 2012. Oculus V.R was able to raise nearly ten times its $250,000 goal, funding it with $2.4 million after which Facebook acquired the company for $2.3 billion in 2014.

16. Fintech Forex Revolution

The forex isn’t new. However, you can see massive changes in its nature just because of fintech. In fact, its evolution has been dramatic enough. Today, we think of forex as an investment method and the concept of forex is universally accepted. Fintech is opening many opportunities for customers and businesses, and tools are becoming more sophisticated and easy to use. These things allow customers to make strategies that result in more informed trades.

17. Video-based KYC

India is the first country to bring in video-based KYC for verification of the customer for financial institutions. On January 9, 2020, the Reserve Bank of India finally went on board with the concept of Video KYC (Know Your Customer).

A statement said, “With a view to leveraging the digital channels for Customer Identification Process (CIP) by Regulated Entities (REs), the Reserve Bank has decided to permit Video-based Customer Identification Process (V-CIP) as a consent-based alternate method of establishing the customer’s identity, for customer onboarding.”

The video KYC service will reduce the number of physical branches needed to complete customer verification as a lack of physical branches leads to a decline in the customer base.
In final words, Video-KYC is a boon for financial institutions. Like any other system, it might face some issues in terms of customer trust. However, companies can’t decline the potential for growth in this system.

18. Invisible payments

Imagine a future where you went to a shopping complex, purchased some items, put them in the bag, and then walked out when you are done, without any billing or checkouts. Companies like Amazon Go stores and Alibaba are already offering this ecosystem. This is possible via technologies like beacons, smart sensors, software, and IoT devices. According to a recent survey, by 2022, invisible payments might reach $78 billion in annual transactions. The main motive of invisible transactions is to provide smooth transactions without any requirement of credentials.

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