FinTech is known to effectively leverage different technological advances in its workflows. But which particular trends will dictate the future of this leading-edge domain?
The FinTech sector has been rapidly gaining momentum. By 2027, its global revenue is forecast to reach $125.18 billion while the total number of FinTech users is expected to exceed 7 billion.
The reason why FinTech solutions have risen to prominence is that they can address the shortcomings of the traditional financial services industry, upend the way financial services are structured, delivered, and consumed, redefine the pace of innovation, and, chiefly, set higher standards for user experiences.
But which FinTech trends will predetermine its future and go on to open up a whole range of further opportunities?
Read on to find out more about FinTech trends in 2023 and beyond, and discover how they are set to revolutionize the sector and make it more powerful.
Technologies predetermining the future of FinTech
Present-day FinTech solutions are predominantly reliant on high-end technologies and tools such as artificial intelligence (AI), cloud computing, blockchain, and the Internet of Things (IoT).
Let’s explore each technology in greater detail and see how they stand to transform the future of FinTech.
The global market for AI in FinTech is projected to reach $61.30 billion by 2031, which indicates that the technology will be widely incorporated into FinTech solutions.
Thanks to its transformative power, artificial intelligence can be used across a variety of FinTech workflows and operations, e.g.:
- AI systems facilitate fraud detection by monitoring financial transactions in real time and identifying abnormalities and deviations from a user’s typical habits;
- AI-enabled chatbots and virtual assistants can deal with basic customer requests that do not require the involvement of professional financial or bank consultants, allowing them to focus on more important tasks;
- AI data mining capabilities enable FinTech businesses to collect, process, and analyze chunks of data and transform them into actionable insights to enhance the customer experience and business outcomes.
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In a survey conducted by McKinsey among leaders in the financial services industry, around 54% of all respondents said that they were planning to shift at least half of their workload to the public cloud over the next five years.
Cloud computing has indeed become a widely sought-after tech among FinTech companies worldwide. It simplifies access to large volumes of data and provides a deeper understanding of customer behavior and preferences. Cloud computing also removes the need to invest in costly hardware and IT infrastructure for storing data and allows FinTech stakeholders to opt for flexible computing services and storage instead.
Cloud-based services empower FinTech businesses to ensure better security and protection of their customers’ data since cloud providers generally offer a range of security features along with automated and embedded security controls. These keep user data and systems safe from cyber threats and help FinTech businesses comply with industry standards.
In addition to this, dedicated security teams are highly responsive, constantly monitoring the state of security protocols and upgrading them to counter new security threats.
The global market size for blockchain FinTech solutions is projected to reach $8.7 billion by 2030.
The wider adoption of blockchain in FinTech solutions can be attributed to the increasing acceptance of cryptocurrency as a payment method. On top of this, blockchain-powered smart contracts can automatically enforce and execute the terms of FinTech agreements without involving any costly intermediaries, thus boosting trust and transparency.
Blockchain can also be applied to many other FinTech features, including:
Asset tokenization. FinTech platforms can be used for tokenizing a variety of physical assets such as commodities and real estate, and representing them in the form of blockchain-based digital tokens. This will help boost asset liquidity, trading, and settlement as well as provide more investment opportunities.
Identity verification. Blockchain can help FinTech businesses develop a tamper-proof, decentralized identity verification system and enhance the know-your-customer (KYC) procedure, which will allow all parties involved to enjoy a greater level of security and reduce fraud.
Credit scoring and lending. Blockchain facilitates more sophisticated credit score management and empowers lenders to access immutable records of transaction history to analyze and better understand the creditworthiness of a particular person.
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Internet of Things
IoT technology can upgrade the FinTech domain and help bolster some of its key workflows.
IoT-powered smart watches and rings allow users to enjoy secure contactless payment, while IoT-based point-of-sale terminals improve the entire purchasing process by updating inventory and processing transactions in real time.
For example, the Indian FinTech sector, which is expected to become a $1.3 trillion industry by 2025, has long been relying on the capabilities of the IoT to enhance customer experience and security while providing customers with novel payment options.
In addition to this, IoT devices can assist individuals in managing their personal finances. By collecting data on users’ spending habits and preferences as well as their saving and budgeting patterns, the Internet of Things can offer tailored recommendations, thus enhancing their overall experience.
Top 10 FinTech trends in 2023 and beyond
The FinTech domain is brimming with innovative concepts and developments. Below we present a list of the most disruptive FinTech trends to keep an eye on in 2023 and beyond (based on our research).
1. Embedded finance
Embedded finance is about integrating financial services into non-financial applications. Though the technology is not new, it is expected to be among the most disrupting FinTech trends in 2023 and beyond while the global market for embedded financial services is projected to be worth $124 billion by 2025.
The reason why embedded finance has been gaining wider traction is that it offers more convenient and faster payment options, helps non-banking businesses easily connect to actual banks (via APIs), offers a modernized user experience, and perfectly aligns with the principles of the financial future, namely convenience, speed, inclusivity, and innovation.
Thanks to embedded finance, businesses can receive financial services whenever they need them, without initiating a separate process in a new interface. This means that users no longer have to log into another website to make a bank transfer or fill in a loan application.
Though embedded finance is set to shape the entire commercial banking landscape, it’s particularly handy for small- and medium-sized businesses. These can benefit not only from modern embedded finance offerings but also at the same time from other value-added services such as financial management and analytics tools.
Plus, coupled with the advances of AI and data analytics, embedded finance can deliver financial services that are more customer-focused and frictionless, and enhance customer experience.
2. RegTech solutions
In today’s financial landscape, compliance with regulations and laws has become increasingly vital, but also challenging and time-consuming for financial institutions. The Global Regulatory Outlook 2021 report by Kroll reveals that a significant proportion of respondents expect compliance costs to exceed 5% of their revenues, highlighting a general recognition of its significance.
Regulatory technology, commonly known as RegTech, offers a solution to help alleviate this burden by allowing FinTech companies to streamline their compliance efforts. By leveraging sophisticated tools and technologies like artificial intelligence, machine learning, blockchain, and big data, RegTech empowers FinTech entities to handle regulatory processes such as compliance, reporting, and monitoring. This in turn enables compliance teams to focus on more complex issues and future planning, enhancing overall operational efficiency.
Across the globe, financial services firms and their compliance functions are gradually transitioning to automated environments, and RegTech solutions will help them with that. Moreover, according to Juniper Research’s Market Forecasts, Emerging Trends & Regulatory Impact 2022-2026 report, the global RegTech market is projected to be worth $203.5 billion by 2026, proving that it will make further great headway.
Explore comprehensive insights into the world of RegTech with our guide
Neobanks are another prominent FinTech trend, whose global market size is projected to reach $2,048.53 billion by 2030.
As one would expect, neobanks deliver money management and financial services in a digital-only format, i.e., they have no physical location or agency. As of writing, there are over 350 different neobank providers worldwide while the total number of neobank users is expected to grow to 376.9 million by 2027 (according to Statista).
The reason why neobanks are set to play a pivotal role in FinTech is that they offer benefits such as ease of use, lower fees, greater process efficiency, 24/7/365 availability, and easier account creation and access (even if users have a poor credit history).
Another great advantage of neobanks is their ability to offer personalized services and offerings to users through the utilization of artificial intelligence and data analytics, meaning that they can cater to the needs, requirements, and preferences of any customer segment, such as senior citizens, students, working professionals, etc.
On top of that, neobanks enable the issuance of popular virtual cards that make it possible for customers to easily and conveniently execute P2P transactions, make in-app purchases, and use other online payment procedures.
4. Decentralized finance
Decentralized finance is rising up to combat the challenges of the common centralized finance sector and reimagine the way financial services are executed. The global DeFi market size was evaluated at $11.96 billion in 2021 and is slated to hit $232.2 billion by the end of 2030.
The DeFi FinTech trend is gaining momentum due to the fact that it facilitates cryptocurrency transactions, which are becoming more and more popular day by day. It leverages the power of blockchain and smart contracts to redefine traditional financial systems and handle them in a decentralized manner.
DeFi has many advantages over its centralized counterpart. It is bringing us closer to the web3 future where users can transact directly and transparently with each other from any part of the globe, without involving any intermediaries or centralized authorities.
Apart from that, DeFi fosters financial inclusion, automation, and innovation, which is why it will continue building momentum within the FinTech landscape in the years to come and be regarded as one of the most critical FinTech trends.
Get a closer look at DeFi 2.0 and see what prospects it holds
5. Robotic process automation
Robot-assisted automation per se has become a sought-after trend among businesses representing various sectors, and by 2030 the robotic process automation (RPA) market is predicted to hit $30,850 million.
In FinTech, robotic process automation is set to become a real game-changer that empowers FinTech businesses to enhance their decision-making and set mundane tasks on autopilot. According to Gartner, around 80% of finance leaders have already implemented or are planning to incorporate the RPA FinTech trend into their workflows to boost overall productivity, reduce costs and errors, and just stay competitive in the wider market.
RPA duplicates human-intended tasks and is utilized in middle- and back-office workflows to automate various financial procedures within financial institutions. Its deployment extends to multiple areas such as period-end accounting and settlement activities, automation of transaction recording, report generation, treasury management, and the like.
RPA is expected to perform much more strongly and take on more complex business scenarios and duties, as cutting-edge technologies such as machine learning, optical character recognition, and analytics are integrated within it.
Another robot-assisted development worth highlighting is AI-powered robo-advisory which is expected to be widely used among FinTech apps in the future.
Robo-advisors offer algorithm-based financial advice and portfolio management services. They are reliant on computer algorithms and advanced mathematical models to provide investment advice, analyze financial data at scale, and handle portfolios on behalf of users. They are also capable of performing functions such as risk assessment, asset allocation and rebalancing, and recommendations for tax optimization strategies.
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6. Low-code platforms
According to the Low-code Verticals Study of 2022 by Mendix, around 63% of finance business leaders believe that low-code has great potential to simplify complex financial systems.
Low-code platforms indeed have the capability to become a disrupting FinTech trend among FinTech developers, empowering them to effectively create and embed sophisticated and scalable financial solutions.
Low-code development grants FinTech greater agility and cross-functional collaboration, enabling companies to quickly deliver innovative solutions and swiftly respond to market changes. It enables even non-technical FinTech stakeholders to take part in the app development process, which in the long run improves the quality and usability of the FinTech app.
Low-code platforms offer scalable architecture, which helps FinTech apps manage greater workloads and provide built-in connectors and integration features that allow developers to connect and interact with external systems.
Besides, low-code solutions come with inherent compliance features and auditing capabilities, making it much easier for FinTech developers to deliver compliant applications and thus save time and effort on compliance-related activities.
Security is not a trend, but rather a necessity. With regard to this, FinTech solution providers need to do everything they can to provide the highest level of security possible and keep their users’ data safe.
According to the IBM Cost of a Data Breach 2022 Report, financial organizations incurred the second-highest expenses as a result of data breaches in that year, amounting to an average of $5.97 million.
To battle the security challenge and stay afloat, FinTech businesses are required to come up with and implement robust security measures, such as zero trust technology and two-factor authentication.
Yet it is biometric authentication that is widely regarded as one of the most powerful existing security measures, offering a much higher level of security compared to traditional authentication methods such as passwords or PINs.
The global market for biometrics in banking and financial services is set to reach $15.2 billion by 2030, which demonstrates that the technology is expected to enjoy growing popularity among providers of financial solutions and become another trend in FinTech.
Biometrics technologies like fingerprint scanning, facial recognition, voice patterns, and iris scanning facilitate more effective and reliable identification while substantially reducing the risk of fraud, identity theft, and account takeover. So it’s no surprise that FinTech businesses everywhere are incorporating biometric technology into their solutions to safeguard the sensitive financial information of their users and bolster overall data security.
8. Open banking
Open banking is regarded as the bedrock of present-day FinTech, facilitating more convenient and efficient payments as well as simplified communication with users.
Open banking is widely viewed as an outstanding FinTech trend of the future because of the opportunities it offers. It facilitates secure interoperability within the financial sector by enabling third-party service providers to gain access to financial data from financial institutions via 100%-secure API-powered connections and strong authentication protocols. This helps drive industry-wide advances in financial services as well as fostering competition and enabling FinTech developers to design novel, more personalized solutions and tailored product recommendations for customers.
Open banking offers users increased control over their financial data, providing transparency and convenience. It also promotes financial inclusion by reaching under-served populations and granting them access to financial products and services. As a result, the number of open banking users worldwide is projected to reach 132.2 million by 2024.
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9. Green finance
Every industry must work toward the environment and sustainability agenda, and the FinTech sector is no exception. Green finance is set to become an important trend in FinTech, requiring businesses to design sustainable apps, promote and exercise sustainable development approaches, and just push forward sustainability and green consciousness.
FinTech businesses are eagerly rising to the challenge and coming up with ways to shoulder the environmental burden and promote green initiatives. Climate Tech VC reported that between 2020 and 2021, venture capital investment in green FinTech experienced a remarkable surge, doubling by 100%. This resulted in an impressive annual investment exceeding $40 billion, distributed across over 600 venture deals.
FinTech leverages the advances of AI/ML, big data, and blockchain to introduce cutting-edge, sustainable financial solutions that have the capacity to meet Environmental, Social, and Corporate Governance (ESG) goals. These include green bonds and lending, sustainable loans, eco-friendly cryptocurrencies, digital wallets, carbon-offsetting solutions, and many more.
In general, green (sustainable) finance will be a growing FinTech trend and FinTech firms will continue to play a crucial role in introducing, supporting, and promoting sustainable finance solutions, serving as a bridge between businesses and users and facilitating their joint efforts towards a carbon-neutral future.
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Personalization concludes our list of FinTech trends in 2023 and beyond.
Even though it may sound too generic and abstract, the personalization phenomenon is a very important and meaningful trend across all business domains these days, and its global software market size is expected to reach $5,162.47 million by 2030.
Personalization helps companies establish better relationships with their customers and provide them with more optimized, tailored solutions and offerings, which consequently helps win their loyalty — and that is precisely why FinTechs will continue to focus on personalization in the years to come.
The growing demand for personalized financial services is prompting FinTech to leverage the most cutting-edge technologies and tools to deliver hyper-personalized solutions and boost customer satisfaction and engagement. These include:
- artificial intelligence and machine learning algorithms for analyzing vast datasets and identifying patterns and trends;
- data analytics techniques for processing and extracting insights that can be used to personalize recommendations for financial products and services;
- natural language processing models for understanding and interpreting human language.
Overall, as the demand for personalized experiences continues to grow, personalization will remain a pivotal driver of success in the evolving world of FinTech and will remain one of the most paramount FinTech trends.
The FinTech industry is poised for continued growth and innovation throughout 2023 and beyond. As technology continues to advance, it will shape the way we access and manage financial services, and the top ten FinTech trends discussed in this article highlight the transformative potential of FinTech.
To stay ahead in this rapidly evolving landscape, businesses need reliable and customized FinTech solutions that cater to their specific needs. That’s where a professional financial software development company can make a difference. We at PixelPlex possess solid expertise in FinTech development and can create tailored solutions of any complexity, addressing your unique business requirements and ensuring a seamless user experience.
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