Top 5 Fintech Trends of 2023

The fintech industry is continuously evolving due to the advances in technology, innovative business ideas, and changes in consumer behaviour - in more ways than we can count and it’s only going to keep growing! According to Tech Magic, the fintech market is estimated at US$698.48 billion for 2030, while in 2020, it was US$110.57 billion. That’s 6 times more in just a decade!

As we look into emerging trends, we can see why Fintech along with AI and Energy are hot topics for investors right now. Let’s look at the Top 5 Fintech Trends as of Quarter 2 in 2023.

Trend #1: AI and Machine Learning

By gathering data about customer’s accounts, AI enables financial institutes to watch a client’s financial health, reduce fraud, improve risk management, and control banking quality. In the startup world, we have seen progress with key pre-seed, seed, and early-stage startups implementing Generative-AI in their businesses and that they are often using it for financial advice, to automate processes, and create product recommendations.

Alumni Spotlight: AYLA, a fintech startup and SBC alumni, has already been on this path for a while as they are pioneering better ways to compare, manage, and pay for essential financial services through AI. AYLA has been recognized as one of the top Gen-AI companies in Australia, and they’ve achieved this not once, but twice!

Also, in 2023, we expect to see AI take personalization to the next level where fintech companies will be able to analyse data, monitor behaviours, and deliver personalised products that customers are exactly looking for!

Trend #2: Open banking

Open banking focuses on controlled financial information exchange, where account holders can accept procedures for safely sharing their financial data with nontraditional financial institutions. It has been predicted by Statista that by 2024, 63.8 million people will use open banking. In comparison to 2020, this is almost five times more. Open banking will bring opportunities for consumers to share their financial data and receive more tailored products and services that better meet their needs.

Trend #3: Neobanking

The next up and coming trend is Neobanking. A neobank is a financial tech firm that usually partners with a bank to provide federally insured bank accounts. Neobanks tend to have lower fees and more competitive rates than traditional banks. According to Statista, the number of people with at least one account with a neobank is predicted to reach a peak of 39.1 million in 2025, up from 20 million in 2021.

Trend #4: Embedded Finance

Incorporating a financial service as part of another product or service is embedded finance. Buy Now, Pay Later (BNPL) in e-commerce is the fastest growing embedded finance model, which allows customers who use point-of-scale instalment loans to make a down payment on an item and then pay the remaining balance later. For example, Amazon and Affirm are working to implement BNPL by dividing payments for purchases of US$50 or more into smaller monthly instalments, according to Tech Magic. This is completely transforming the way we interact with money!

Alumni Spotlight: Pencil, a fintech startup and SBC Alumni, is actively working in embedded finance. They automate a customer’s wholesale applications, trading terms, and payments all in one place, so they can have customers focus on what really matters - growth.

Trend #5: Decentralised Finance (DeFi)

Connected with the Cryptocurrency market, Decentralised Finance (DeFi) is growing more and more in 2023. DeFi uses emerging tech to remove 3rd parties and centralised institutions for financial transactions. Making loans, exchanges, and payment applications much easier! As the DeFi ecosystem in India continues to grow, we can expect to see a wider range of innovations emerge and global adoption. For example, we may see the development of new DeFi applications that cater specifically to the needs of the unbanked population in India.

It’s exciting to see how the fintech industry is evolving and what new technologies are coming our way as we continue to advance!

If you want to get involved with the future of fintech, consider investing in our Sustainable Fintech Fund. Learn more about it here.