Fintech or financial technology refers to the offering of financial services online through the internet. Innovation might cover everything from online payments to online banking and even cryptocurrencies and blockchain, among others.
Fintech has been evolving fast, and new trends emerge every year. Now, since we are already at the end of 2022, the latest trends in the fintech industry are anticipated to appear in 2023.
Below are some of them:
Embedded Finance for Companies and Customers
Embedded finance, which allows companies to provide financial products alongside consumer goods without requiring clients to go to a different supplier, is one of the largest trends in fintech. For instance, a retailer like Home Depot might let clients buy insurance for new appliances and the appliances themselves.
Another example is when stores offer payment plans for less expensive apparel or cosmetics. Both businesses and their clients benefit from this procedure. Companies get to provide a complete product that speeds up purchases and boosts consumer loyalty. Customers benefit from convenience and speedier transaction times.
The prospects for developing embedded payments are favorable due to these advantages.
Alternative Financing Offers
The COVID-19 pandemic virus has decimated regional economies and companies during a three-year rampage that has left its imprint on practically every continent. Because of countless layoffs, many people took out a loan on top of their initial loan just to make ends meet.
The world trade finance imbalance is constantly expanding even though a big majority (79%) of bank chiefs stated in a 2021 study that they didn't decrease the amount of capital devoted to supporting trade. It's why alternative financing has become significant.
Alternative financings provided by nonbank entities are referred to as alternative financing (or alternative finance). Several of these aren't even loans. One non-loan financing choice is revenue-based finance (RBF).
RBF is reimbursed as a fraction of the company's monthly revenue rather than in set amounts on a predetermined schedule. Another alternative financing is invoice factoring, which involves selling a company's unpaid bills at a discounted amount in exchange for quick cash.
Digital-Only Banks Provide a Completely Online-Based Service
Neobanks, or digital-only banks, offer similar services as regular banks but have no physical locations. Instead, customers only interact with bank employees and complete transactions online. Clients profit from higher interest rates on their deposits due to these institutions' cost reductions.
Neobanks provide several benefits over traditional banks, such as lower startup costs, quick customer service, superior user experiences, better security measures, and lower fees. Their market dominance will rise over the coming years as more institutions open and individuals become aware of their advantages.
AI-Enabled Advice and Payments
Several financial companies are now allowing consumers to pay via artificial intelligence (AI)-enabled payments due to the rising level of automation. Even though many businesses provide this feature, customers looking for more individualized services tend to favor it.
Financial institutions can provide individualized guidance to assist clients in making better-educated financial choices by implementing AI and machine learning. Customers may now manage their accounts, make and receive payments, and obtain recommendations on investments and healthcare goods using natural language processing, thanks to online banking.
Financial firms are also utilizing AI to develop digital personal assistants who can respond to inquiries, track spending patterns, and make product recommendations based on consumer preferences. Customers can, for instance, request recommendations for travel insurance from their banks based on their travel schedules.
AI may also be utilized to streamline some procedures and enhance customer support. For instance, a lot of consumer requests for bank access to their account are already handled by AI.
In addition, it's used to detect suspected fraud or money laundering activity, enhance risk mitigation via smart banking, and assist clients in understanding their financial products and advice more effectively than people.
Peer-to-Peer Finance and Credit
In 2023, peer-to-peer (P2P) finance and credit growth will also be a key trend. Numerous fintech businesses already offer this service. Some businesses enable customers to borrow funds from other customers without needing collateral. However, millennials who traditionally saw this form of credit as a risky alternative are increasingly embracing it.
Family members and friends were the first to employ peer-to-peer lending and credit. However, various financial firms, such as credit unions, traditional banks, and non-financial firms, are increasingly utilizing technology. Because there is no need for a drawn-out application procedure or collateral, P2P finance is practical.
Some P2P businesses don't even demand identification. For instance, a small business proprietor can ask for P2P loans to finance business growth. P2P lending and financing have been available from credit unions for many years. They are indeed the biggest financial organization providing this service.
We might already have seen quite an improvement in the fintech industry, but it was only the beginning. There are still more improvements and trends as we move forward. Thus, brace yourselves and prepare to be amazed by these expected new trends in the fintech world this coming 2023.