Ten fintech predictions for the year ahead

The turmoil of the global economic landscape in 2022 has not halted progress and innovation within fintech.

2023 will be another year of fintech innovation and growth

It continues to be an exciting and dynamic sector, a vital cog in enabling business growth and seamless cross-border expansion. And 2023 promises to be just as exciting.

Here are ten fintech predictions for the year ahead.

#1 Embedded finance will enable cross-border commerce – Companies, regardless of location and size, will be looking for sustainable growth and new customers as the global economy slows. Cross-border payments sent by traditional financial institutions have a reputation for being slow and costly and this has been a hindrance to exploring new opportunities.

In contrast, embedded fintech acts as a uniting force between regulation and payment networks – it enables businesses anywhere to transact faster, cheaper and easier, allowing them to expand across borders and reach new markets and customers. More non-financial companies will embed financial services as part of their commercial offering in 2023.

#2 Super-apps as neobanks – Elon Musk has said the Twitter acquisition is part of a wider plan for the creation of a ‘super-app’, an umbrella app covering multiple different apps/services within it. Super-apps are already big news in Asia, and Musk is not the first to try and replicate it. Uber has long been trying to mirror the success of Asian super-apps such as Grab and GoJek.

But it will be financial services, rather than taxis or food delivery, that could hold the key to encouraging super-app adoption. Alongside bank deposits, securities, crypto and lending “as a platform” offerings, super-apps will be able to play the role of neobanks, challenging both traditional and digital banks by delivering a wider range of financial services for customers. They will also create more ways to engage with existing customers, opening new customer bases via partnerships and increasing app engagement rates.

#3 Smarter identity is (slowly) becoming a reality – Digital identity networks have been slow to develop, but we see them building momentum in 2023, giving individuals and businesses in more countries easier ways to complete know your customer (KYC) searches via digital platforms. This will speed up customer acquisition and onboarding and, assuming everything functions seamlessly, build trust in digital verification.

Of course, data security remains a concern for individuals and a major headache for businesses, particularly in regions with high payment fraud rates or in industries with fewer regulations such as cryptocurrencies, where the lack of identity markers remains a significant barrier to broader adoption.

#4 Crypto’s new dawn – Cryptocurrencies have not yet proved a suitable replacement for money due to their volatility and the lack of market regulation. However, recent high-profile crypto calamities have led to a re-evaluation of where crypto belongs and how it is used. Crypto 2.0 will have its sceptics, but it holds promise. Stablecoins, for example, may provide an alternative for everyday payments, and many governments across the world are now looking at them.

Likewise, more companies are exploring cryptocurrencies, including payments giants such as Mastercard, and some now accept them as a means of payment. Their entry into the market should help to accelerate the push towards greater compliance and risk tools, which will be necessary to ensure Crypto 2.0 avoids the pitfalls of the past.

#5 The rise of multi-currency treasury solutions – Smaller businesses looking to expand overseas need fund management systems that can simplify cross-border business. Expect multi-currency treasury solutions to feature prominently in their 2023 operational strategies. These allow businesses with international operations or international expansion ambitions to manage funds globally without the complexity, frustration and added expenses of managing multiple banking relationships, payment providers and fund flows across countries and currencies.

#6 Faster payment networks – As locally regulated real-time payment networks roll out globally, money will move much faster domestically and cross-border. Bilateral cross-border partnerships are increasingly sponsored by governments who recognise their power in helping the free flow of commerce. This is evident across the world. We see UK and European businesses adopting these networks to expand into new markets or hire across borders.

#7 An explosion of online marketplaces – Online marketplaces are expanding at around 15% per year according to a report by OC&C Strategy Consultants. To differentiate themselves, marketplaces will need to focus on the customer experience (including the speed of onboarding) and providing smart relevant services to their users. Against this backdrop, they will need to rely on payment and fintech-as-a-service platforms for more of their backend payment and financial services capabilities. Marketplaces that create platforms tailored to the banking and payment needs of the buyers and sellers within specific verticals will be best placed to fulfil client needs.

#8 Volatile payment preferences – Payment preferences are forever fluctuating, and it can be tough to keep pace with how businesses and consumers are behaving in different markets. For example, instant payments are now one of the biggest trends in Latin America, with Pix disrupting the payment options for in-store and online sales. In the UK, 29% of consumers have used Apple Pay for a recent online purchase. Given the huge amount of ongoing innovation across the payments industry, and end-users’ apparent willingness to try new approaches – anything that’s quicker, more convenient or likely to save money – it’s likely that preferences will continue to ebb and flow in the year ahead.

#9 Rapid adoption of virtual cards – Virtual cards will continue to surge in 2023 as they reinvent the way businesses handle their expenses, replacing inefficient manual checks and allowing accounts payable departments to concentrate on their financial obligations. Industries such as hospitality are seeing rapid adoption as virtual cards introduce new protection for all participants in a transaction. The sector is expected to grow to $60bn by 2030 according to Research and Markets.

#10 BNPL 2.0 and better financing options – Buy now, pay later (BNPL) originated with high penalties on missed instalments, hidden fees and a requirement for some percentage of funds to be paid upfront. BNPL 2.0 tries to remedy this by lowering these fees and providing a better customer experience with more transparency and incentive plans for its users. Another significant advantage for BNPL 2.0 is that it doesn’t affect the customer’s credit score, unlike instalment plans with traditional credit cards.

Global payments infrastructure makes these innovations possible. It allows companies to seek new opportunities across the globe, making the most of every opportunity they find. 2023 will be another year of fintech innovation and growth.