FinTech, which is short for financial technology, has been a game-changing industry in the past decade. It has transformed the way we interact with financial institutions and is constantly developing. Every year, new advancements are introduced to meet the growing needs of customers. As a result, it’s essential for business owners and executives to understand the present state and future of FinTech to stay competitive and up-to-date. In this article, we’ll talk about the main FinTech trends shaping the market.
2023 FinTech Market Top 3 Trends
Rather than going into the detailed aspects of FinTech, it’s important to initially look at the general patterns that are changing the financial technology scene and analyze some market data. In this piece, we’ll explore the major advancements in the financial technology market that are transforming the industry in 2023.
- The Benefits of Web 3.0 and Blockchain for Security and Decentralization
New technologies like Web 3.0 and blockchain have greatly improved internet security and made it more decentralized. These technologies have become very popular because they have big plans for the future of the internet. People are now more interested in owning digital assets and this has made non-fungible tokens (NFTs) and cryptocurrencies very popular. Blockchain provides a safe and trustworthy financial system for the virtual world, and NFTs act as a proof of ownership for digital assets.
The latest version of the internet, known as Web 3.0, has brought about major changes to the financial services industry. This includes the use of advanced technologies like blockchain, artificial intelligence, machine learning, and the Internet of Things to provide customers with personalized and decentralized experiences. With blockchain, transactions can take place directly between individuals without the need for intermediaries like banks. Despite this, many banks are also adopting blockchain technology, as evidenced by J.P. Morgan’s Confirm solution, which uses blockchain to lower global payment costs. As a result, blockchain remains an important part of the fintech market’s growth. According to Markets and Markets, the size of the fintech blockchain market is expected to increase from $230 million in 2017 to $6,228.2 million by 2023.
- Role of Artificial Intelligence in Fintech Solutions
Fintech solutions use a lot of data, and artificial intelligence, specifically machine learning, is a good technology to handle and analyze this data. AI is useful for different aspects of fintech like managing risks, preventing fraud, reducing costs, providing personalized banking experiences, and automating tasks for both team members and customers.
AI can recognize patterns and use that information to help people spend less money or spend it more wisely. It can also help financial companies keep track of their customers’ finances by collecting and processing information about their bank accounts, credit cards, and investments. This can lead to personalized services like budgeting plans and analysis of spending habits.
The Royal Bank of Canada is using AI to make their customers’ experience better and to speed up the process of making new apps for them. They have their own private AI cloud, which can quickly analyze lots of financial data and make it easier to build and use AI-powered apps. This is just one way that AI is becoming more important in the world of finance. A company called Mordor Intelligence thinks that the AI fintech market will grow from $7.91 billion in 2020 to $26.67 billion by 2026.
- Embedded Finance: Integrating Fintech into Non-Financial Products
“Embedded finance” refers to the practice of incorporating financial technology into products that are not typically related to finance. This allows customers to do things like pay for a purchase in installments or add insurance to a product they’re buying. This approach can increase sales, provide useful information about customer behavior, and help products compete in the market. Although these kinds of payment and insurance options have been around for a while, they’re constantly improving and changing. A popular example of embedded finance is the “buy now, pay later” trend. The embedded finance market was worth $43 billion in 2021, and it’s expected to grow to $248.4 billion over the next ten years.
Fintech Lending Trends for 2023
In the past few years, online lending systems have become very popular in the financial technology industry. These systems offer loans, financing, and payment plans. By using advanced technology like artificial intelligence and automation, these systems can provide helpful assistance with lending.
New lending technology is changing the market by being more effective than traditional loan services. These lenders are more adaptable to different customer needs compared to banks, which usually offer loans for three to five years. The loans from alternative lenders are often short-term and have low-interest rates.
Trends in financial technology (fintech) lending depend on progress made in other areas. For instance, advancements in open banking enable non-traditional lenders to view your bank account data and analyze it, while machine learning assists in categorizing potential risks and understanding spending patterns. Lenders can save time when examining legal documents by using technology that combines Optical Character Recognition (OCR) and machine learning. OCR technology automatically extracts the required information from documents, allowing it to be processed without the need for manual labor.
- Peer-to-Peer Loans:
Alternative lending is a type of borrowing that includes different options like credit unions, microlenders, marketplace lending, and peer-to-peer (P2P) lending. P2P lending is a specific type of alternative lending where a borrower, an investor, and an online platform come together. The platform allows the investor to lend money directly to the borrower without involving traditional banks, which makes it a cheaper option. P2P lending is becoming more popular in both personal and business markets, with more small and medium-sized companies and start-ups using it to get funding.
Capitalise is a lending company from the UK that links business owners with lenders to assist them in acquiring funds for different goals like hiring more staff or purchasing new properties. Similarly, marketplace lenders present borrowers with various funding choices by joining them with both personal and organizational investors.
- Buy Now Pay Later
Buy Now, Pay Later (BNPL) is a way for people to buy things and pay for them later. It’s a type of short-term financing that’s becoming more popular. With BNPL, customers don’t have to pay any extra money (like interest) right away. One type of BNPL is called “point-of-sale installment loans.” This means that when someone buys something, they only have to pay part of the cost at that time. They can pay the rest later. BNPL is growing quickly, and many big companies are starting to use it. For example, Amazon is working with a company called Affirm to let people split up purchases of $50 or more into smaller payments over several months.
FinTech Payment Trends
Newer ways to pay for things have made it simpler for people to transfer money back and forth, which has helped break down obstacles between shoppers and businesses. This is why payment options are a really important aspect of the financial technology (fintech) world. So, let’s take a look at the most recent developments in this area.
- Contactless Payments
Payments without physical contact have been in demand for quite some time due to the introduction of NFC technology. This technology allows users to make payments by tapping their mobile device on a payment terminal. This not only makes the payment process simple but also minimizes physical contact, which has become important during the COVID-19 pandemic. QR code payments are also becoming more popular, even though they are not a new concept. According to Juniper Research, the QR code payment market is expected to be worth $3 trillion by 2025. Alipay is one of the leading companies in this industry, providing users with the ability to scan a QR code and direct the app to a secure payment page.
- Request to Pay Technology Reduces Transaction Costs
To reduce the expenses associated with making financial transactions, request-to-pay technology is a widely used financial technology solution that allows one person to ask another person for payment. If the recipient agrees, the money is transferred immediately. An instance of this type of technology is Zelle, which has joined forces with a number of banks, including Huntington.
The RTP technology is used by people and companies who ask other companies to pay their bills. This technology is safe because the payment requests are sent to a different billing address, so the payer’s private payment information is kept secret. The payer can decide if they want to approve or deny the payment, which makes it even more secure. As more banks start using RTP, businesses can see when payments come in right away, and it costs less to make transactions.
