By assisting them in thriving during these challenging economic times and the cost-of-living crisis, FinTech companies will need to continue assisting their clients in 2023.
Consumers are using FinTech to control their finances in new and creative ways. For instance, using prepaid cards to limit their spending and using digital wallets to restrict specific spending categories. Many traditional banks are observing FinTech to learn what they are up to and how they might adopt some of these ideas. 2023 already appears to be a year of change for the FinTech industry, with cutting-edge technologies and strict regulations in place.
In 2023, businesses will see more of these offerings due to partnerships, mergers, and acquisitions. Here are some Fintech disruptions to watch out for:
Adapting enterprise models
FinTech, like consumers, must also deal internally with this stark new economic reality. In this time of economic turmoil, the payments industry is remarkably resilient. Many countries are experiencing inflation and interest rates that haven’t been seen in decades. As a result, consumer and business behavior, as well as payment dynamics, are changing. Fintech companies must, and will, nevertheless, adapt.
Sustainability and green financing
In the financial services industry, where the need to concentrate on environmental awareness has rapidly increased in the past few years, green finance will continue to be a hot topic.
This year, sustainable banking will enter a new phase that will make it part of life, going beyond just being a trendy term. Financial service providers and FinTech will work together more on cutting-edge sustainability initiatives like tracking carbon footprints and assisting customers in making moral decisions.
Green mortgages are a great example of this, which are intended to reward people who buy energy-efficient homes or improve their existing homes to increase their energy efficiency. Green loan programs will become famous as younger investors seek more ethical and climate-conscious investment methods. Financial service providers must innovate in sustainable practices to guarantee that their product has enduring appeal and genuinely benefits customers and the environment. Additionally, there is a chance to develop goods and services that other competitors in that market can use to support innovation at the level of customer offerings. Startups that want to grow may consider partnerships and acquisitional entrepreneurship as avenues.
BNPL programs are growing
Numerous businesses are now providing BNPL programs, which are growing in number. As prices rise due to inflation, people can purchase goods and services more affordably thanks to various credit options like buy now and pay later (BNPL). Consumers can use the BNPL system to make payments by scanning a QR code, one of its many advantages. However, the excessive late fees imposed by BNPL service providers and the fees levied by banks and credit providers who provide BNPL services may hinder market growth in the upcoming years. The BNPL market is getting stronger and stronger.
The growth of invoice factoring
Every business leader knows there can occasionally be a significant difference between revenue and cash flow, particularly when customers request lengthy payment terms and delay until the eleventh hour to make payments. By taking out loans against the value of invoices, invoice financing can assist markets in bridging that gap. Invoice financing is a short-term loan secured by invoices, in which a company borrows money against amounts due on invoices issued to clients. These trade receivables are then offered as collateral. Invoice financing is frequently used in the consumer goods, transportation, retail, and construction sectors. Since companies can receive cash immediately without having to wait for customers to pay them in full, invoice finance can be seen as one of the many options for business financing. Working capital is preserved as a result, and issues with the company’s credit and cash flow are prevented. Then, it can be used as a substitute for financing slow-paying accounts receivable or to satisfy urgent liquidity requirements. Invoice financing will play a significant role in the FinTech market of 2023 as cash flow continues to determine many businesses’ chances of success.
The development of cloud computing
In recent years, cloud technology has been crucial in assisting SMEs and large businesses, and in 2023, it will continue to play a significant role in the FinTech industry. Companies can reinvent themselves and pave the way for technology- and data-first work culture that fosters business continuity and digital transformation by utilizing cloud computing. Fintech services have made extensive use of applied agile technologies. Bank structures are intricate and have distinct functional areas. Modern banks, particularly neobanks, are streamlining their organizational processes and ensuring accountability in the face of widespread digitization by implementing agile technologies. Cloud computing is fuelling the exponential growth of the FinTech sector. As UK SMEs seek steady growth in 2023, scalability and flexibility should be their guiding principles. As firms navigate a recession in 2023, it will be crucial for businesses to always stay on top of their credit management game.
The emergence of embedded financing
Embedded finance is one FinTech trend anticipated to take off in 2023. Embedded finance benefits both the provider and the user in addition to the user. With the help of technology, users can make purchases more quickly and easily. Embedded finance offers a way for providers to improve customer loyalty with all-in-one purchases and keep solid relationships with the add-on providers. Embedded payments have simplified the payment process for businesses and end-users by removing barriers and satisfying the societal demand for even more convenience. However, some embedded lending platforms that could cause a credit crunch have only recently started conducting credit checks on users who want to use the facility. These platforms have been operating without regulation for a sizable amount of time.
The growth of AI
Artificial intelligence has been an indispensable instrument for FinTech companies for some time now. Robotic process automation (RPA) improves the speed and accuracy of operations such as report writing and financial data management (RPA). Removing human intervention from routine tasks allows for a reduction in staff. As a result, financial institutions are using AI that can adapt to work in a particular industry. It self-adapts to the conditions exhibited by learning from prior experiences with human-machine interaction. Companies’ operations are changing quickly thanks to RPA and AI, which significantly impact productivity and provide organizations with more profound insights from vast data.
Also Read: Challenges of B2B Payments and How FinTech Revolutionizes the Process
Growth of PaaS
Every business must prioritize customer retention. Many companies have used the platform as a service (PaaS) to raise and maintain retention rates. Customers can develop new add-ons for the product they initially purchased using the PaaS model. SaaS/PaaS providers will be able to provide customers with a much more individualized experience, which should boost their growth rate and customer retention. Markets have many brand-new features and add-ons planned for the very early 2023 release.
Making Tax Digital (MTD)
When it comes to filing taxes, businesses have been able to adopt new tools and technologies and a digital mindset. Some people may have found this change intimidating at first. Still, most people will have quickly seen the advantages of automating and maintaining a digital record of invoices, transactions, and tax filings. FinTech is renowned for its game-changing innovations, and 2023 won’t be any different. While some fight it, others fully embrace it. Fintech companies should more robustly construct their financial services to protect against shocks and disruptions like the one in 2022. Despite this, the opportunities are endless. Innovation and expansion will abound in 2023.
