The future of Fintech in 2023 (2024)

With a rate of 87%, India is far ahead of the global average of 64% in the FinTech adoption race. By 2030, it is anticipated that the promising Indian FinTech market will generate $200 billion in revenue and $1 trillion in AUM as suggested by a study conducted by EY.

As a home to over 2100+ FinTech companies, India is the third-largest fintech ecosystem in the world. Out of the existing FinTech companies in India, 67% were established in the past 5 years. The past 65 years have been nothing less than phenomenal for FinTech in India. Many things have changed since the introduction of credit cards in the 1950s. ATMs revolutionized cash withdrawals from banks and the advent of the internet in the 1990s catapulted the fintech industry to new heights. Electronic payment structures, web-based business practices, portable banking, and bank digitalization have also resulted in a substantial change.

While 2022 saw the rise of many new trends in the financial technology sector. Many of these trends are set to become even more popular while we are also hopeful about new ones to come up. Here are some predictions about the future of finance and FinTech in 2023:

More people will opt to ‘Buy Now and Pay Later’

The “buy now, pay later” (BNPL) model, since its inception, received both bouquets and brickbats, with plenty of questions around the lack of transparency. In 2023, governmental authorities are expected to scrutinize and implement regulations requiring lenders to perform affordability tests before approving loans. Startups believe the regulator should find ways to address the challenges faced by BNPL companies even as it looks to protect the customers and the public’s money.

Collaboration between banks and fintech players can boost credit access to the underserved segment and SMEs because 75% of MSME lending in the country still is led by banks. This will continue to be a massive opportunity for fintech players in 2023.

BaaS will evolve

The evolution of BaaS Banking-as-a-Service (BaaS) will evolve to include a great range of features and overcome some of its previous limitations, enabling fintechs and legacy players to build truly unique offerings and gain long-lasting customer loyalty. If financial institutions are serious about innovation they need to start thinking of themselves as data companies in 2023. This mindset shift will set them up to embrace real-time banking and implement highly customer-focused solutions.

The rise of embedded finance

Embedded finance is a type of fintech trend that involves the integration of financial services, such as wealth management, consumer lending, insurance, and payments, into non-financial companies. In 2021, the global value of the embedded finance industry reached $43 billion, with experts predicting it will grow to $141 billion by 2025, driven in large part by the embedded payments sector. In the coming years, expect to see companies using embedded finance to integrate financial services in non-bank products and business processes, as well as banks using it to court the custom of SMEs.

Credit scoring will Transform with embedded digital fingerprinting

Financial institutions, internet lenders, and other entrepreneurs are seeking quick and effective methods for analyzing new customers and loan applications, preventing fraud, and automating the pre-approval process. Fintech innovations like virtual fingerprints and AI-driven credit scoring can help to streamline this process and make it more cost-effective. For example, banks may use digital fingerprinting to capture important user and client information from their website and integrate it into comprehensive customer databases and reporting. This information can include details such as device type, location, ISP, and mobile phone provider. Smart credit scoring, which incorporates data such as social media activity, IP analysis, assets, and earning predictions, can help lending and financial institutions determine if a user is trustworthy.

Alternative financing methods will become more popular

The use of alternative financing methods, particularly recurring revenue financing, is anticipated to grow in popularity in 2023. Recurring revenue financing allows businesses to convert their ongoing revenue streams into immediate capital. This method enables founders to receive the lifetime value of their customers upfront and helps them balance their cash inflow with the cost of acquiring new customers (CAC).

Recurring revenue offers a flexible and accelerated way for a business to receive a quick cashflow boost without the need for financial covenants such as collateral or guarantees that are often required in traditional debt financing.

In conclusion, we can say that despite concerns about the potential for economic recession in 2023 and geopolitical events, the fintech space is expected to thrive due to the acceleration of digital momentum brought on by the pandemic.

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