Seven global fintech industry trends to watch in 2023

Over the next 12 months, we'll see more disruption as innovations, like company cards and joined-up expense management software, regulations, and business models, continue transforming the financial services landscape.

As a customer-centric company, we've been busy working with customers to plan our roadmap for 2023, and we have our own perspective on the upcoming trends. We've also done plenty of external research across both b2c and b2b fintech orgs. Together, here's what we think next year's biggest fintech trends will be:

1. Consumers will continue to demand personalisation

Fintech companies have worked hard to make their services more personalised and relevant to their customers. This trend will continue into 2023 as they deliver more tailored experiences through artificial intelligence (AI) and machine learning (ML). There are many ways that AI can improve customer experience – by processing data faster than humans, for example – but perhaps the most obvious way is through personalisation.

Hyper personalisation and artificial intelligence (AI)

The top global fintech industry trends include hyper-personalisation and AI. Customers have become increasingly demanding and want personalised products and services that meet their needs. For example, many banks offer basic banking services but fail to meet the needs of millennials and gen z, who are looking for more than just money transfer and investment options.

Customers want their financial products and services tailored to their needs, so how will fintechs respond?

Often by using AI-based algorithms to get smarter about how they interact with each customer. This means offering advice only if relevant; tailoring offers based on previous purchases; providing notifications when a customer has reached a certain amount in their account, and more.

The steady rise of AI will make it easier than ever for businesses to tailor their offerings based on individual needs and preferences. And companies will be able to create personalised products and services at scale. The challenge will be understanding who their customers are so they can deliver relevant offerings across all channels and devices.

2. Embedded finance will continue to dominate the fintech sector

As digital forms of finance become more 'embedded' into everyday life, embedded finance will continue to dominate the fintech landscape. We're already seeing this fintech trend with Apple Pay, Samsung Pay, and Google Pay, for example. These solutions allow customers to use their phones as payment devices at retail stores, restaurants, and more — even though they're not necessarily paying with their phone carriers' digital wallets.

Embedded finance (powered by AI) will also become increasingly important to wealth management and investment advice. AI has already proven its worth as an investment advisor by outperforming human traders in many areas of finance, including trading stocks and bonds. In fact, AI is expected to account for 35% of all trades by 2025, although it may only be able to replace human investment advisors partially.

3. Money management gets more 'intelligent'

The field of AI-driven money management (powered by ML and AI) has existed for some time now. The idea is to automate manual tasks usually done by people while making processes more efficient and effective.

Machine Learning (ML) refers to a set of algorithms that can be trained on historical data to produce reasonable outputs for future cases. ML uses algorithms to automate financial decisions such as asset allocation and rebalancing.

Artificial Intelligence (AI) is a system that exhibits human-like behavior through self-learning capabilities rather than following specific instructions. AI-powered financial advisors, for example, can consider your personal preferences, risk tolerance, income levels, etc., before recommending suitable investment products based on historical data and market trends.

The benefits of intelligent application of money management through software solutions are numerous:

1) It increases transparency – You will know exactly what went into each spend decision and why. This info can help you identify areas where your strategy needs improvement or predict potential risks in your money management before they occur.

2) It reduces human error – Human error can lead to costly mistakes when manually managing your company's spend. You can mitigate this by using all-in-one spend management solutions like Payhawk. Our solution includes corporate Visa cards, AP, and more. We save hours of manual admin and reduce countless errors with features that include highlighting any data mistakes when submitting receipts and flags for costly duplicate subscriptions (via our subscription management feature).

3) It lowers costs – By automating much of the work involved in your money management, you can eliminate the need to add to your headcount to check through your finance processes and close the month.

On top of the concrete efficiencies, businesses can also get complete real-time spend visibility. At Payhawk, we transform huge amounts of user data into valuable information which CFOs and finance managers can use to set better budgets, pinpoint savings opportunities, and make better business spend decisions.

4. The Rise of Cybersecurity 2.0

Cybersecurity is a hot topic, but it's not new. Cybersecurity has been around since the dawn of the internet, and many of the techniques used to protect data online today are based on decades-old systems. Cybersecurity 2.0, however, is a movement that aims to improve security through technological innovation while also improving efficiency and effectiveness through processes such as:

Data security and privacy
As more companies adopt technologies like cloud computing as part of their business strategy, they must focus on data security. Cloud computing involves storing data in remote servers rather than on your own computer to solve storage issues on personal devices, which makes it vulnerable to external threats so that it won't lose valuable customer data or sensitive information about employees and partners. In addition, businesses also must protect customer data and ensure that they meet all GDPR.

Biometrics
Biometrics will also become a growing necessity as they can be used as an additional layer of protection against unauthorised access to sensitive information. Biometrics are unique physical characteristics you can't change if compromised, such as your fingerprint or voiceprint, making them more secure than traditional passwords or PINs.

Many companies are investing more time and resources into strengthening their security systems. This investment will ensure they can protect their customers' data against growing cyber threats, including ransomware attacks, phishing scams, and malware infections.

5. The rise of challenger banks

A challenger bank is a financial institution that offers traditional banking services but does not use a branch network. Instead, it uses technology to provide its services. They are typically online-only banks that offer banking products and services such as lending and deposit-taking. They appeal to customers who want more choices regarding how they interact with their bank and prefer digital channels over branches or phone calls.

Challenger banks are also known as digital banks, fintechs (financial technology companies), or challenger institutions. Since the advent of the pandemic back in 2020, challenger banks have become a more reliable banking provider for many people. And have become an integral part of the financial landscape, especially with billions worth of venture capital funding in the last decade alone.

However, not just startups are part of this revolution; existing banks are now also upping their game by adopting new technologies to serve their customers better. We will see more traditional banking institutions embracing fintech innovations in the coming years and creating new verticals or divisions within their organisations to serve customers better.

6. Persistent push for decentralised finance into the mainstream

In 2018, blockchain was one of the most talked-about topics by investors and businesses alike. Blockchain technology is defined as a decentralised database that maintains a continuously growing list of records (blocks) that are linked together and secured using cryptography. In other words, it's a new kind of internet database that allows people to store data securely without relying on third parties like banks or governments — hence the potential to disrupt many other industries, such as healthcare or insurance.

Blockchain offers a decentralised ledger system that has no single point of failure — making it difficult for hackers to get into your system. The best part is that any information stored on a blockchain can't be changed once entered into the system because all nodes within the network must approve any edits made prior.

Blockchain technology is already being used to streamline transactions in many industries. It's expected to have a huge impact on the financial industry, particularly regarding payments and fraud prevention. By 2025, many countries will have a central bank-backed digital currency in place and will use blockchain to facilitate cross-border transactions between countries around the world.

7. More environmental, social, and governance (ESG) initiatives in the fintech landscape

The ESG landscape for the fintech industry is still relatively new, and many measures are being launched to help advance these initiatives.

What are ESG Initiatives?

ESG initiatives are environmentally, socially, and governance-related activities that companies can participate in to ensure that their business practices align with their values and beliefs. These initiatives also help companies gain more visibility within their sector and ensure they can stand out from their competitors by making them more attractive to potential customers who want to know that your business is ethical and responsible.

What do ESGs look like in practice?

There are many different types of ESG initiatives that you could start taking part in if you want to make your company more sustainable. These include:

Sustainable infrastructure projects:

As the world population continues to grow, the energy demand will also increase. This increase leads to more need for energy sources that are sustainable, efficient, and clean.

Governments worldwide are focussing on renewable energy sources such as wind and solar power to meet this demand. They are also developing infrastructure projects focusing on water management, waste management, and recycling strategies.

A growing number of businesses are adopting sustainable business practices too. Many up-and-coming financial institutions have been at the forefront of this movement, but other industries have also started to take notice.

Financial inclusion:

Financial inclusion aims to ensure that all people have access to financial services regardless of their income level or geographic location. These services include savings accounts, credit cards, loans, and insurance products. Millions of people lack access to these basic financial services, such as savings accounts or loans that can help them build wealth over time or expand their businesses.

Several banks have partnered with fintech startups to help provide affordable mobile solutions for digital banking services such as payments and remittances to address this issue. These solutions are expected to remain effective well into the future.

Transition to low carbon economies:

Fintech has played an important role in providing financing for clean energy projects such as solar farms or wind farms which contribute towards reducing emissions while providing energy independence from fossil fuels currently being used mainstream.

Conclusion

According to PR Newswire, the global fintech industry is growing exponentially and is predicted to be valued at $305 billion (£267 billion) by 2025.

The fintech sector is still going strong despite the uncertainties ahead. And it's likely to continue to change how we travel, bank, pay bills, manage funds, etc. These fintech industry trends are expected to offer a better value proposition than the traditional systems and solutions that many have been accustomed to.

So, which fintech trend are you the most excited about?

Book a demo to learn more about how our spend management software could help you manage your spend in 2023 and beyond.