From tribe-based banking to embedded finance, Nick Root reveals what you can expect to see in the year ahead in fintech
The financial technology sector is rapidly evolving, with traditional methods of banking now being replaced with digital solutions to make things faster, easier, and more streamlined for both businesses and consumers.
Here are the top trends in fintech in 2023.
Virtual bank cards
Hailed as the future of financial spending, virtual bank cards are at the forefront of a revolution in business expense management. Since 2017, searches for the digital bank Revolut have increased by 143 percent, receiving an average of 1.3 million monthly searches globally.
Looking at Google Trends, we can also see that the term ‘virtual card’ has increased by 216 percent in the last five years and is currently at its peak. But how are they being used by businesses?
Perhaps the biggest reason virtual cards are increasing in popularity is that they offer more robust security measures, helping eliminate misuse by hackers and fraudsters.
They also reinvent the way companies handle employee business expenses. Every employee has a unique card, which means anyone can easily see who is spending what. Funds can also be assigned to team budgets, and purchases can be limited so that nobody spends more than what’s allocated.
Embedded finance
The success of embedded finance will be predominantly down to distribution, trust, and improved user experience.
Banking as a service defines an ecosystem in which licensed financial institutions offer non-banking companies access to their services, typically through APIs. It enables clients to embed financial services into their products or build new financial services from scratch.
The emergence of API-led banking services means distribution is no longer an issue. That layer of friction has now been removed, with any digital company able to offer a financial service without the headache and complexity that providing financial services used to bring.
Buy-now, pay-later 2.0
While buy-now, pay-later (BNPL) has raised concern recently, the online trend allowing customers to split their payments into interest-free instalments continues to surge.
Traditionally, BNPL services were used to split payments for high-value items, but they soon became associated with online fast fashion brands, targeting Gen Z and Millennial shoppers.
In recent weeks, BNPL was further criticised after Swedish fintech company Klarna partnered with the fast-food delivery app, Deliveroo, allowing customers to ‘eat now, pay later.’
And although many mainstream banks are steering towards virtual cards, in January 2022, Klarna launched its first physical credit card, allowing customers to pay in-store and online.
In 2023, although it is expected to expand further, in Ireland, BNPL providers must go through the Central Bank to be approved. BNPL will also be regulated in the UK, as the government plans to enact legislation requiring lenders to carry out affordability checks before approving loans. The financial promotion rules for BNPL are also set to change to ensure advertisements are explicit and do not mislead consumers.
Contactless wearables
The Internet of Things is making waves in the fintech sector, allowing consumers to pay for goods and services faster than ever with wearable technology.
Alongside smartphones, bracelets and smartwatches are now used to make payments instead of bank cards.
The Apple Watch is one wearable that took the world by storm, showcasing an upward trend in 2022. Smart rings are also on the rise, with searches for the revolutionary wearable increasing by 180 percent globally.
Regtech
A new buzzword you may have heard in 2022 is Regtech – but what is it, and why does it matter?
The rise in digital products means there is an increased risk of data breaches, cyber hacks, and money laundering – but that’s where Regtech comes in. Regtech is a group of organisations that solve challenges arising from a technology-driven automated economy.
The Regtech industry is expected to disrupt the regulatory landscape by providing advanced tech solutions to compliance issues that arise in the fintech sector.
Tribe-based banking
The term ‘digital tribe’ has become popular in recent years, used to describe online communities that share a common interest, and are usually connected through social media or other online platforms.
In the past, people from diverse communities have been uncomfortable with legacy banks because they have not been represented, don’t feel empathised with, and aren’t open to communication.
Banks need to be more authentic and receptive to communication in this new era. People from these communities will soon be looking for a bank that gives them a sense of representation and openness.
Nick Root is the CEO of Intergiro.
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