Fintech Trends to Keep an Eye on in 2023
Coping with the sustained COVID-19 outbreak, the global economic slowdown, crypto market implosion, disruption in the supply chain, and the constantly changing market environments became a new normal for businesses in 2022.
2022 heralded a new era of banking. Improvements were seen in all major banking segments, and this trend will continue in the next year as well. The next step in the evolution of open banking will be open finance. It will disrupt and reshape the foundation of financial services.
Whatever the twists and turns of the past year, one thing is sure - a positive upward trajectory lies ahead in 2023. Now let's jump on to the fintech trends that will shape the year ahead:
The Rise of Account Aggregators
The next big wave in the fintech industry is cashflow lending using new-age tools like Account Aggregator. Account Aggregator offers its users a secure way to share encrypted financial information with consent. User can manage their consent with the option to revoke it. Thus, giving control to the sensitive information back to the user.
It will potentially change how credit is distributed and will make it easier to evaluate and underwrite new-to-credit (NTC) and underbanked borrowers. Account Aggregator (AA) will revolutionize the financial services sector as UPI did for online payments.
Neobanks, Changing the Banking Landscape
We cannot discuss Fintech trends in India without mentioning neobanks. What makes this sector so appealing is that an increasing number of India's young working population see value in the personalised financial solutions provided by neobanks.
Last year, funding for Indian neobanks increased fivefold, and the figure is expected to reach $215 billion by 2023.
Despite regulatory obstacles, the global neo-banking sector has experienced exponential growth in recent years in terms of both customer base and market size. Neo-banks can improve the customer experience by bridging the gaps in traditional banking and streamlining the historically complex banking processes thanks to the limitless technological possibilities and digital transformation in banking.
Neobanks can also offer more competitive pricing for their financial products. Because they have lower overhead costs and are not tied to physical branches, additionally they can offer lower interest rates on loans, lower fees for banking services, and higher interest rates on savings accounts. Neobanks have an opportunity to act as a digital front-end to the core banking solutions.
ESG Investing and Sustainable Finance Are the Future
Financial institutional investors are paying more attention to companies that focus their growth strategies by thinking beyond profits and taking actions around sustainable practices. Today, sustainability is more than a catchphrase; it is a global business priority. Green finance, a practice concerned with the interaction between financial activities and the environment, is receiving more attention within the finance industry.
So, it is no surprise that ESG has recently attracted a massive investment capital. By 2025, according to Bloomberg analysts, global ESG assets will amount to more than $53 trillion, or more than one-third of all assets managed.
The next few years will see many organizations transforming their business models and will put ESG at the heart of their operations.
Personal Finance Management- Driving Digital Banking Engagement
The pandemic has accelerated the growth of digitization, and people across the world especially Gen Z, have drifted towards digital banking and fintech adoption. Through the personal finance management (PFM) solution, an individual can access all personal financial data in one place and make critical decisions through actionable insights along with personalized recommendations provided by the tool.
Given the massive shift taking place coupled with customers’ expectations/demands increasing constantly, there is a need to offer personalization services to customers that will benefit them in achieving their financial goals. This will lead to higher engagement for the banks and better services for the users. Personal financial management as a service is offering banks the opportunity to re-engage and re-enthuse customers like never before.
DigiLocker – Paperless Governance
Currently, documents issued by the government in India are in physical form. So, each time a person needs to share a document with a company to use their services, they must also share an attested photocopy of the document, either physically or digitally.
DigiLocker - short for Digital Locker - is a strategic step under Digital India, India's flagship program to transform the country into a technology-driven society and knowledge economy. DigiLocker, an e-Document repository, contributes to the vision of Digital India by giving people a safe platform to access documents on a public cloud. It is a digital document wallet where you can store your documents such as your driving license, PAN card, Voter ID, policy documents, etc.
Users can share their documents with different agencies without physically submitting them by digitally storing them in their preferred digital locker. With a focus on the idea of paperless governance, DigiLocker lowers administrative costs by using less paper and doing away with the verification process while acting as a secure document gateway.
As we progress towards becoming a $5 trillion cashless economy by 2025, several additional and important factors will continue to direct the fintech revolution in India.
While it is difficult to predict specific fintech trends with certainty because the industry is constantly evolving and new technologies and business models emerge all the time, it’s evident that during the past three years of global challenges, fintech has benefited consumers.
The trends listed here are merely prognostications of what lies ahead. Together, these trends will ensure that 2023 will have a profound impact on businesses. PFM, Account Aggregator, and ESG are three key trends to keep an eye on.