6 Fintech Trends to Embrace in 2023

By Ankur Rawat, Director, Products and Solutions, Banking and Financial Services, Newgen Software

The era of fintech has long begun and is here to stay. Customers now demand the privilege of modern, easy-to-access, and affordable financial services at their fingertips. Therefore speed, efficiency, and innovation are of the essence. The faster banks and financial institutions can render their services to match customer expectations, the better.

All these advancements have prompted digital leaders to embrace the many recent changes shaping the financial world and capitalize on them.  As competition rises and improvements continue, many cutting-edge technologies have permeated the world of financial services and notably reshaped it.

Let’s take a look at six technology trends that will transform the fintech landscape in 2023.

Open Banking to Enable a Superior Customer Experience

For a superior customer experience, open banking will prove to be a promising investment. When third-party financial service providers are given consent-based access to consumer banking transactions and other financial data through APIs, it’s called open banking. It guarantees rules-based client data collection, secure data access, and a reliable and robust banking system.

As per a 2020 McKinsey global survey on APIs in banking, around 75 percent of banking APIs are used for internal purposes, and banks plan to double the number of internal APIs by 2025. These open API solutions enable smooth integration and can readily integrate with fintech companies. This, in turn, will allow customers access to more customized products while providing.

AI/ML for Top and Bottom-line Growth

The growing domination of new-age technologies like AI/ML across every industry can no longer be denied, and the financial services landscape is no exception. When it comes to financial institutions, AI helps in bringing about top-line and bottom-line growth. For instance, AI’s ability to interpret customer data allows it to identify cross-selling opportunities, thereby helping to boost revenue. By automating routine tasks, AI also helps in operational efficiency.

Apart from rule-based credit scoring, AI/ML algorithms will also be leveraged by financial institutions to define their credit scoring systems. This intelligent technology-based precise credit scoring will allow for more personalized loan allotment decisions. AI/ML’s capability to understand past customer behavioral patterns will also be seen as an advantage and used for risk management and default reduction

User Experience-oriented Approach

How smooth and seamless is your service? How easy to use is it? How fast can it get the job done? These are just some of the questions crossing the minds of every customer who avails of any financial service.

Take this scenario for instance: A customer who is thinking of purchasing a car and is looking for a car loan comes to your bank’s website. What the customer gets are loan offers that are not personalized to fit his needs. He has to figure out the best loan option. What if you are able to anticipate the customer’s needs and offer him a loan that fits caters to his needs? An excellent customer retention strategy I would say.

Most banks today have digitized their online journeys but don’t offer a true digital portal.   A complicated portal with a lengthy and tedious form becomes a potential red flag. Customers today want an Amazon-style experience when it comes to financial transactions. They need a simple and intuitive customer portal, an omnichannel experience that allows them to access the portal anytime and anywhere, and an easy-to-understand interface that can fulfill all their requirements, free of any hassles. So financial institutions need to rethink their user experience that not only matches but also exceeds customer expectations and reduces the risk of abandonment.

Digital Lending Platform for Faster Loan Processing

With digital lending platforms, banks can now automate the entire lending process. As the lending process gets digitized, financial institutions will benefit in several ways. Loan processing will improve, decision-making will accelerate, adherence to regulatory compliance will improve, and there will be significant cost savings.

Digital lending platforms streamline the digital journey for all stakeholders –  customers, brokers, attorneys, appraisers, inspectors, and engineers. Financial Institutions will invest in digital lending platforms to enable consistency, enhance business efficiency, and optimize their loan underwriting procedure.

Seamless Onboarding with Fraud Management Technologies

Delivering a frictionless onboarding experience is no longer an easy feat for banks in the midst of rising fraudulent apps. To combat these concerns banks have begun focusing heavily on tools that can help mitigate fraud by boosting security and supporting customer-friendly processes for authentication.

Fraud mitigation is likely to become a top priority for banks in 2023 to deliver a high level of data protection. A platform that supports IP whitelisting, SSN/Email blocking, AI/ML-powered pattern recognition, and seamless integration with other vendors can go a long way in mitigating the menace caused by fraudulent apps.

Cryptocurrency usage in Banking

The rise of cryptocurrency has been subject to a considerable degree of doubt and skepticism by banks, who had perceived it as a grave threat. But this opinion has, over time, been experiencing a turnaround. Many well-known banks like JP Morgan and Goldman Sachs have started investing in cryptocurrency and infusing it into their services.

The decentralized nature of cryptocurrency and the added edge of additional privacy, secure payment, and ease of transactions make it a promising investment. Banks are embracing cryptocurrencies in diverse ways. Some are introducing their own cryptocurrencies in the blockchain landscape, offering cryptocurrency investments, and launching trading desks for cryptocurrencies like Bitcoin. Some are also rendering custodial services to customers to store and secure their digital assets like NFTs.

2023 will be a year dominated by digitized financial services

The fintech landscape will only continue to grow and expand in the coming years as technologies advance and digitization accelerates. Banks and other financial institutions will have to evolve and embrace this new digital era to avoid being left behind. Digital leaders must prepare to invest in a platform that can incorporate these trends and help them enhance and expedite their financial services.