TOP 7 Fintech Industry Trends in 2024

The financial industry has rather responded to the disruptive side effects of COVID-19, but it hasn’t come out of 2021 unharmed. Top fintech industry trends in 2023 are going to challenge it but also will make it stronger.

And though at least 50% of traditional banks are not covering their cost of equity, there is some good news, too. Global fintech investments in 2021 recorded 210 billion dollars with 5,684 deals. This amount tends to grow. Banking institutions investing in or forming strategic alliances with fintech businesses.

For sure, the fintech landscape is developing fast, so let’s look at the biggest trends in the fintech industry for 2023.

Embedded Finance

Wealth management, consumer lending, insurance, and payments combine embedded finance. This Innovation integrates financial services used by non-financial firms.

Among emerging fintech trends embedded finance grows the fastest. Fintechs helped the embedded finance business grow to a global value of 43 billion dollars worldwide in 2021. Experts expect the embedded payments sector to produce more than 60% of the value related to embedded finance. So it will expand to around $33 billion in the US exclusively and 141 billion dollars globally by 2026. This is going to shape further future financial technology trends.

Embedded finance trends 2023 will grow as more banks aim to become providers for non-financial companies. This way financial products can be a part of a bigger offering. For example, Starbucks could integrate a wallet for payments within its app, or Lyft may provide a debit card to their drivers. However, this does not qualify Starbucks or Lyft as fintech firms.

Latest examples:

• In June of 2021, company 10x Future Technologies secured 187 million dollars to extend its portfolio. They assisted institutions in developing next-generation services and solutions. This helps to improve the efficiency of outdated systems.
• The newest case of Spanish HUBUC startup, also known as AWS for financial services, has lately raised 10 million dollars in an early investment round for its embedded finance API.

Banks are starting to realize that the risk is that they’ll be reduced to commodity status and lose their consumer relationship. The progressive ones have established their own IT companies or engaged in digital enterprises or brands. These banks have access to many clients, financial services, brand trust, and brand awareness. So now they want to implement embedded financing to strengthen their offers.

Buy Now Pay Later

While the “buy now, pay later” model has sparked alarm recently. Customers can break payments into interest-free installments. And this internet practice is still growing.

While BNPL services were designed to split large purchases, they became associated with digital fast fashion retailers aimed at Gen Z and Millennial buyers. In the last week, BNPL has been chastised further as Klarna joined the food delivery startup Deliveroo, letting clients “eat now, pay later.”

Klarna issued the first-ever actual credit card in January 2022, while many major banks are moving toward digital cards. They enable clients to pay in different locations, both physically and digitally.

Although it is likely to grow further, BNPL will become more monitored in the UK in 2023. The authorities will implement regulations mandating lenders to do affordability tests before authorizing loans.

Searches for “BNPL” have increased by 140% since 2017, while queries for “how does Klarna operate” have also increased. The search volume increases in December, before the winter holidays. If you don’t get it - the time when people are under considerable economic pressure.

Credit Scoring and Embedded Digital Fingerprinting

Financial institutions, internet lenders, and other entrepreneurs want a quick, effective method for analyzing. It can help to analyze new customers and loan applications, prevent fraud, and automate the pre-approval procedure.

This work may be time-consuming and error-prone. Fintech innovations like virtual fingerprints and AI-driven credit scoring make the procedure cost-effective.

Banks, for example, may use digital fingerprinting to capture vital user and client information from the website. After that they can integrate it into thorough customer databases and reporting.

This information might range from device kind to location, ISP, and mobile phone provider.

Using smart credit scoring, lending and financial institutions may check if they can trust a user. It contains data such as social media activity, IP analysis, assets, and earning predictions.

Renewed Focus on Challenger Banks

In 2022, investors shifted focus dramatically to huge challenger banks:

• Chime had raised large VC investment rounds of 1.1 billion dollars,
• Revolut had raised 800 million dollars,
• and Varo had raised 510 million dollars,

as they strive for profitability. Competition for domestic market share remained fierce in the United States. Despite the exit of challenger banks N26 and Monzo Bank from the sector, due to regulatory issues, the sector remains vibrant.

Innovations like the Apple Card and Facebook’s Libra bode well for the online banking sector future. Big tech is steadily finding its way into banking. So will we see a big tech bank in the future? The simple answer is “maybe,” but “unlikely.”

Big Tech makes a lot of money from challengers and other financial institutions. They promote their websites, so Google wouldn’t want to eat into that revenue stream. The same is true for all web services that large IT companies provide to financial institutions.

Expanding into other financial services is not a viable large-tech strategy since it necessitates keeping assets on balance sheets. They may instead choose to become one of the channels via which challengers are supplied.

Growing M&A Rise and Partnership Between Banks and Fintechs

Partnerships are the future trends of banking and fintech 2023.

Latest examples:

• PayPal paid 2.7 billion dollars to buy Paidy,
• while Goldman Sachs paid 2.2 billion dollars to get GreenSky,
• and Square paid 29 billion dollars to get Australia-based AfterPay.

Bank and fintech partnerships will also grow in numbers and give exciting prospects. In recent years, a series of venture capital funds incorporating fintech as main partners have emerged. The aim of the collaboration between banks and fintech isn’t only to make a profit on one’s investment. Fund managers are looking for interesting technology for their partners, particularly regional and local financial institutions.

• Payment Services Directive 2 (PSD2) and open banking have forced banks to establish open APIs. This way they can promote increased engagement with fintech.
• PSD2 is a regulatory framework. It allows banks and innovative financial service providers to share secure access to their clients’ financial data. This results in a smooth collaboration between traditional banks and fintech. As a result, users now have more alternatives.

Bank and fintech partnerships will also grow in numbers and give exciting prospects. In recent years, a series of venture capital funds incorporating fintech as main partners have emerged. The aim of the collaboration between banks and fintech isn’t only to make a profit on one’s investment. Fund managers are looking for interesting technology for their partners, particularly regional and local financial institutions.

Payment Services Directive 2 (PSD2) and open banking have forced banks to establish open APIs. This way they can promote increased engagement with fintech.

PSD2 is a regulatory framework. It allows banks and innovative financial service providers to share secure access to their clients’ financial data. This results in a smooth collaboration between traditional banks and fintech. As a result, users now have more alternatives.

The future of fintech and banking industry partnerships may be safe and secure. Cybersecurity asset management and several levels of protection can assure it.

New Security Threats and Solutions

The development of digital services has increased financial fraud, cybercrimes, digital intrusions, and data breaches.

The latest global fintech trends 2023 may be Ransom-as-a-Service (RaaS). With Big Data and Machine Learning technologies, Reg-Tech can provide critical data on money laundering operations. It would lower the risk connected with the company’s compliance department. Additionally, Reg-Tech can decrease administrative costs, assure financial stability, and safeguard clients.

Сyberattacks on banks increased, incidences of fraud increased by 238%, and data leaks kept escalating. Finance had the second most expensive data breach.

Looking over the recent statistics on 2022, it becomes clear that security is more than a fintech pain point. It is a niche for fintech startups to take up and cover.

Cybersecurity will be the main fintech trend in the banking industry in 2023. The shift to digital channels has increased the area exposed to assault as well as the number of touchpoints that must be protected.

Hacker communities such as DarkSide even offer RaaS, ransomware as a service. These expert cybercrime teams operate like any other business. They advertise, provide customer service, and use negotiators to manage conversations with victims on their behalf.

These are bright new key fintech technology trends.

So, what can challengers and non-banks do?

• Preparing for a ransomware assault is the greatest form of defense.
• Collaboration is a win-win situation for the entire financial services industry and the larger fight against cybersecurity attacks.
• Awareness and knowledge exchange are crucial aspects of cybersecurity.

Knowing who you’re doing business with is one of the latest fintech trends in banking business. Globally, comprehensive financial fraud and anti-money laundering verification systems are required. especially given the recent sanctions put on Russian officials. Yet, there are various reasons for this procedure. Firms would conduct more precise investigations and achieve more productive end-to-end global financial fraud compliance.

Rise of Cryptocurrency and Central Bank Digital Currency

Only 10% of financial institutions expect to provide crypto investment services in 2023, with another 13% aiming to debut in 2023. Only 4% of existing crypto owners said they would not use their bank to invest in cryptocurrency because they would not change exchanges.

The main bank technology suppliers have joined forces with the NYDIG, located in the United States. They try making it simpler for mid-sized institutions to integrate cryptocurrencies into their core and digital banking systems. Payment networks are also getting in on the game. Visa has announced establishing a cryptocurrency consulting service for banks and merchants.

Surveys show that:

• today, less than 1% of banks provide these services,
• banks aim to give cryptocurrency awards in 7% of cases and crypto storage and safekeeping solutions in 8% of cases,
• 5% of credit unions aim to provide crypto custody and safekeeping services.

If central banks issue digital currencies, this viewpoint may shift. Even retail banking may change.

Yet, it would be different from today’s traditional cryptocurrencies, such as Bitcoin, since many blockchain solutions re-inventing many facets of contemporary banking. We don’t know what the future holds with cryptocurrency, but digital assets are where we expect a lot to happen.

What is the Future of Fintech and the Banking Industry?

The current trends in banking and fintech present both possibilities and difficulties. Before implementing them into your business, consider several questions:

• Will these new tendencies replace or supply the current models?
• Is the advantage offered by the top fintech trends genuinely improving existing business? Are they simply adding complexity that no one is looking for?
• What kind of adjustments must be incorporated into strategic planning?

Traditional banks used to withstand disturbance because of their scale and regulatory protection. In today’s climate, mounting evidence suggests these factors may be hurdles and assets.

On the other hand, efficient fintech will do things differently in decades to come. They will constantly shape their enterprises to meet the demands of their consumers, staff, and other parties.

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FAQ

What technologies contribute to the fintech industry?

Cloud computing, web technologies, mobile technologies, AI/ML, IoT, blockchain, RegTech, big data, analytics, and security are all examples of fintech technology.

What kinds of fintech services and products are there?

Mobile banking, digital banking, cryptocurrency trading, mobile payments and wallets, robo-advisors, stock trading apps, and algorithmic trading are instances of fintech products and services.

What are the most well-known fintech firms?

Some of the most well-known firms:

• Visa
• MasterCard
• Intuit
• Cash App
• Affirm
• Block
• PayPal
• Goldman Sachs
• Upstart
• Western Union
• Klarna
• Robinhood
• Coinbase
• Stash
• Alphabet