The fintech industry is constantly evolving and improving, and 2023 is no exception. According to the forecast for this year, the investment of fintech industry will grow and reach 174 billion dollars.
Banking industry customers have become more tech-savvy, so this industry has already implemented a number of fintech solutions. Embedded finance services and cloud-based software are some of the technology trends that will impact the fintech industry in 2023.
Artificial Intelligence (AI) and Machine Learning (ML)
AI and ML have the potential to transform investing, payments, risk management, banking in general and related industries. Artificial intelligence allows machines to respond to changes around them, making them more efficient. By finding patterns, machine learning improves future interaction algorithms based on old data. Fintech firms can use both of these technologies to automate fraud detection and loan origination, which will provide more accurate information about customer behavior as well.
More efficient chatbots
More and more financial institutions are using chatbots to improve customer service and automate their operations. Allowing people to focus on providing better and more personalized services, chatbots interact with customers in real time to provide them with the information they need, leading to greater customer satisfaction.
According to 2022, conversations between customers and chatbots have been noted to improve the quality of services provided. Chatbots seem to be better at handling grammatical errors, understanding slang and colloquial speech.
Embedded finance refers to a wide range of financial services and products that are accessed through a specific platform. When services are embedded in an existing app or a single platform, users manage their finances more efficiently without switching between multiple websites. An embedded “Buy Now, Pay Later” financial model is also rapidly evolving: customers can use the service to make purchases and then spread their payments over time. As a result, experts predict that the market for embedded financial services will grow at an annual rate of 40.4% in the coming years.
Voice Activation Technology
Because voice is the most natural way to communicate and one of the most difficult to mimic, voice support can help prevent fraud. Customers can use AI-enabled voice assistants to free up support staff to handle more complex customer queries, setting up payment reminders, resetting passwords, activating cards and processing payments.
Using hyper-personalization to adapt to millennials’ needs
Over the past few years, financial institutions have realized that millennials’ financial goals are completely different from those of the older generation. They are more likely and more likely to seek out ownership lease agreements, mortgages, and debt management solutions than business loans. Using artificial intelligence for hyper-personalization, the fintech industry will take meeting demands, preferences and choices to the next level by focusing on data provided by the customer. Information about past purchases, reviews, link clicks and impressions will allow AI to create patterns of customer behavior and inferences about them for enterprises. This can increase trust among existing customers as well as attract new ones.
Cloud Software Services (CSO)
According to reports, the investment of the CSO services sector is almost reaching $623 billion in 2023, at a compound annual growth rate of 18%. Companies can use paid cloud-based CSO services to access software applications without the need for installation. This approach will eliminate a lot of overhead and free up resources for organizations to focus on developing the customer experience.
In addition, utilizing CSO services will provide access to powerful applications with advanced data storage security and management protocols that would be difficult or expensive for individual enterprises to implement.
Blockchain technology allows devices, organizations and individuals to securely transfer digital assets without the involvement of an intermediary or central authority. Because blockchain technology is decentralized, it can be used for a variety of financial transactions, including trade, transactions and payments. In addition, blockchain will provide much-needed security and save money in the absence of costly intermediaries such as brokers and banks, can significantly reduce the cost of international financial transactions.
Open Banking is a financial technology that allows customers to securely share information with third parties, offering them flexibility and greater control over their funds.
It provides convenience for customers and opportunities to enter new markets, create innovative products and services, and increase efficiency through data sharing for banks.
Open banking offers many opportunities for banks, payment companies and other fintech firms looking to maximize the potential of customer data. With open banking, customers have more control over where they store their financial data, as well as the ability to quickly transfer it between different organizations or give third-party providers access when needed.
Open banking will enable a new approach to managing finances and interacting with financial institutions by providing unprecedented transparency, choice and control.
Internet of Things
The Internet of Things allows physical devices connected to the internet to collect data, analyze act on it without human intervention. Such capabilities are invaluable to the field of fintech, as they have already made banking safer, more efficient, and more convenient.
Banks have access to sensors embedded in their system to monitor customer actions and automate responses based on pre-set preferences or behaviors. Fraud detection algorithms or automatic payments initiated by changes in customer spending patterns are widely used.
In addition, voice recognition technology is used for authentication, simplifying login processes and enhancing security by making accounts more difficult to hack.
Shifting from growth to cost savings
The fintech industry is constantly evolving, and one of the most significant and anticipated shifts in 2023 is the shift from growth to cost savings. After the 2008 recession, many companies, especially in this industry, were able to prioritize growth as borrowing costs, inflation and wage growth remained low. In our new economic reality with continued inflation, this is changing.
Mergers and acquisitions are becoming a strategic move
In this new phase of slow growth, mergers and acquisitions may become a strategic option for many in the fintech industry – both for those without a robust balance sheet and for more financially wealthy players looking to acquire a larger market share.
Striving for compliance
As the pace of innovation in the fintech industry continues to increase, an increased focus on compliance and internal controls will be critical to help fintech businesses grow over the long term and be relevant to the health of the entire industry.
Combating digital identity threats
Fraud continues to be one of the most important challenges facing the fintech industry and the payments mechanism, as fraudsters are even more aggressively using personal data as a weapon. One of the newest threats to consumers is the emergence of “synthetic” identities – where fraudsters assemble a new identity from fragments of real-life identities. With these threats looming large over the industry, finding ways to help build security and trust will continue to be critical.
Changes in real-time payments
As the technologies that enable payments evolve, removing the “action” from transactions is becoming increasingly important to consumers and businesses. Consumers are looking for a simpler, faster, and more seamless experience, and it seems that more of these capabilities are on the way.
The next phases of the fintech industry
We have closely followed the development of the various phases of the fintech industry and look forward to the next wave of changes that will take place as new technologies and tools take root in our financial lives.
“I believe we are in what I like to call the ‘Empire Strikes Back’ phase of fintech. The last decade has been dominated by nimble startups stealing market share from banks. But the incumbents have realized the threat to the fintech industry and have three powerful weapons in their arsenal: distribution, licenses, and low cost of capital. I think the next decade will be defined in part by banks partnering with fintechs (rather than creating or buying them, which is both expensive and unproductive).” – Nik Milanovic (CEO and founder of the Fintech Fund) commented to the online portal “This Week in Fintech”.
Fintech will continue to be the driving force of the future. In 2023-2024, we can expect to see increased use of blockchain, artificial intelligence and the Internet of Things in financial transactions, with automation and integration becoming more sophisticated. As a result, consumers will have access to more personalized services that better meet their individual needs. As technological innovation continues to shape finance, companies must stay ahead of the curve or risk being left behind.
A2SEVEN is an expert in fintech and offers its services to select and implement the right solutions to help companies stay competitive and successful in today’s market environment.