We predict that Green Finance, Smart Contracts, Embedded Finance, Digital Banking, and Artificial Intelligence will be the most important FinTech themes this year. As a combination of technology and financial services, fintech has been revolutionizing the global financial realm, how businesses run, and the payments area for more than ten years. When the fintech market initially began to appear as alternative financial services providers after the global financial crisis in 2008, they slipped into the established banking sector and began to take over sectors including personal finance, banking, venture capital, insurance, loans, wealth management, etc.
They provide new services and financial products as emerging financial players, upending the current financial landscape and appealing to the digitized society of the day. Financial institutions today must adapt or face collapsing. Modern brands gladly embrace emerging finance innovations for this reason. For instance, businesses like J.P. Morgan, PayPal, Amazon, Apple, Samsung, and others rose to the top of the financial industry.
1. Green Finance
Sustainability is more than just a catchphrase; it is a global economic necessity. The concept of “green finance,” which examines how financial activities and the environment interact, is gaining importance in the world of finance. Green money is referred to by terms like responsible investment (RI), environmental, social, and governance (ESG), sustainable finance, and climate funding.
In order to preserve the environment and promote economic growth, current financial policy must work to reduce environmental damage. This is known as “green finance,” which acknowledges that economic stability is built on environmental stability. In addition to risk management, future planning, and product and service alignment with environmental sustainability, green finance focuses on controlling environmental risks.
2. Blockchain Technology
Blockchain is not a recent concept, but it is revolutionizing how money is transacted around the world. Each transaction is recorded in a separate block connected to earlier blocks in the network, and the system is sometimes referred to as a “electronic ledger” or “distributed database.” To all participants, it is open. a very safe way of data storage that greatly lowers the risk of identity theft and data theft.
The global blockchain market will grow exponentially before 2030, reaching a value of $1,5 trillion. The largest payment processors, including Visa, Mastercard, and PayPal, have started utilizing cryptographic assets and enabling third parties to send payments using these channels. Right now, sending money abroad takes a lot of time and work. These difficulties can be overcome with the use of blockchain technology thanks to its enhanced speed, security for international payments, and lower prices.
According to growth data by industry, the banking sector, which now holds a 29.7% share of the market value for blockchains, is expected to grow as more customers use blockchain wallets and investors scramble to expand the reach of blockchain services (jumping from 11 mn globally in 2016 to 40 mn as of 2021). A favorable legislative environment, a corporate ecosystem ready to seize the new opportunities the technology presents, and an acceptable industry mix will all be necessary for blockchain to succeed.
3. Embedded Finance
Embedded Finance is a very broad term. According to study statistics, the global embedded finance business is predicted to increase rapidly between 2022 and 2030, with a CAGR of 23.9%, reaching over $7.2 trillion. There is a significant chance for emerging fintech firms to disrupt conventional business models due to the versatility and universality of embedded finance. For non-financial businesses to effectively combine their online and mobile applications with complementary financial service offerings, Embedded Finance offers an Open – API framework.
In the next ten years, the embedded finance sector is expected to grow to a value of over $7 trillion, which is double the combined worth of the top 30 banks in the globe. According to estimates, integrated finance will bring in 22.5 billion dollars in income in 2020. Buy now pay later (BNPL) is a distinctive type of embedded finance that is widely gaining popularity. Customers can use this method of payment to place an order today and pay for their items later, usually over the course of several instalments. As more retailers provide short-term loans via applications like Klarna and digital wallets supporting instant contactless payments, the promise of integrated finance is already clear. Aside from that, this is merely the beginning.
4. Artificial Intelligence
The advent of artificial intelligence has changed the finance sector. Automation enables the completion of vital and challenging jobs. AI can be used by fintech organizations to enhance chatbot conversations, personalize client care, and influence infrastructure decisions in order to combat cybercrime, money laundering, and fraud.
Who has access to particular financial services will be more heavily influenced by AI algorithms used in financial software development. In 2023, it will become more widely used in the fintech sector to make decisions regarding loan issuance, negotiation, and fraud detection. The public is now demanding answers on the ethical ramifications of AI in such mission-critical decision-making.
One of the most lucrative industries to adopt this technology is banking. By 2030, artificial intelligence technologies will lower bank operating costs by 22%. This might save up to $1 trillion in the future. AI-powered digital assistants and chatbots may now reply to customer enquiries, track purchases, and make product recommendations based on their interests, such as phones or travel insurance. Using natural language processing also makes it feasible to make payments and receive individualized advice whenever you need it.
5. Digital Banking
As banks tighten their lending standards, consumers are using alternative financial services more frequently to manage their money. Monzo, Revolut, and Starling, three new digital-only banks that target a generation of digital natives, now offer efficient substitutes for well-established institutions. Their clients don’t have to fill out any paperwork or visit physical places to open an account or get a new card. They offer a number of helpful services, including as contactless MasterCards, P2P transfers, tools for controlling spending, and overseas payments.
However, the banking industry quickly reacted negatively to the ability to buy and exchange cryptocurrencies. Innovators like digital banks already offer crypto-friendly payment methods. As a result, digital-only banking is growing in acceptance and profitability across the globe. Software development talents are in high demand as more and more digital applications hit the market.
The financial sector is one of those that is subject to the most regulation. RegTech is expected to restructure the regulatory framework by providing state-of-the-art technological solutions for compliance-related issues. Governments from all over the world will become interested in the FinTech sector as a result of the advent of alternative finance, blockchain technology, and AI.
The ongoing need for traditional financial services companies to perform important tasks related to regulatory issues is a challenge for the global fintech sector. Fintech startups must work with traditional banks to advance because of the antiquated regulatory environment, which strengthens the relationship between innovation and custom. Regtech is assisting with some of the biggest challenges the industry is currently facing by “facilitating the delivery of regulatory requirements more efficiently and effectively than existing capabilities.”RegTech been developed to help organizations streamline practically all of the compliance process’s steps. In the following years, it will develop its solutions to aid financial institutions in identifying and reducing risks by utilizing cloud technologies, machine learning, and big data analytics.
5. Smart Contracts
One significant FinTech development with numerous financial industry applications is smart contracts. It allows parties to use digital signatures—more precisely, cryptographic keys—to sign documents that are represented in a computer language. Smart contract execution is guaranteed to be precise and foreseeable.
Because to the fact that several computing devices would receive the identical copy of the original digital contract, smart contracts make it difficult for a contract breach to be legitimate. It is referred to as a public blockchain, and it ensures that the terms of the letter’s contract will be honored. The fintech movement is likely to grow and cross international borders, bringing smart contracts to practically everyone. Future DeFi fintech apps may aid in the standardization of smart contracts. For example, consider that customer need a mortgage. Customers can use a smart contract to borrow money instead of going to a bank and receive the money in a few minutes or less.
6. Bottom Line
Technology development and market influencer innovation have led to a golden age of financial innovation that is currently in full swing.
Formerly a disruptive force, fintech is now a facilitator working with traditional banking to create a sustainable sector. Future fintech trends suggest that the financial sector will undergo significant change in 2023 in a number of ways, such as by improving payment options and expanding the range of financial services, as well as by fostering international trade and the quick and effective adoption of no-fuzz transactions. The top fintech innovations in 2023 will mostly focus on embedded finance and digital-only banking. The sector will continue to change, and AI technology will help businesses reduce costs. SaaS platforms will continue to improve the user and customer experience in order to survive in the always changing industry.