The global economic climate in 2022 turned out to be tougher than we expected. But the Fintech industry is still evolving and growing. There is still huge potential and opportunities to satisfy an increasingly sophisticated and demanding customer base. Therefore, it is important to take into account the trends that will become driving forces.

What Fintech trends will affect the industry and influence the decision-making of the Fintech business more in 2023? 

Let’s dive into this question based on the report of the Velmie Market Research 2023. Most respondents expect Open banking to be the main trend, while API-ecosystems and AI & Machine learning come right behind.
 

1. Open banking

Open banking allows people to benefit from their financial data through the easy and secure connection they permit their banks to their favorite financial app. Open banking has been gaining traction since 2015, when the European Union first gave consumers control over their banking and financial data by promulgating the Payment Services Directive Two (PSD2) guidelines.

With rapidly growing demand for financial services, banks are in constant competition with fintech companies, but open banking gives them the opportunity to fight this pressure by partnering with them instead.

Regulatory freedom has fuelled the rise in open banking in Europe, the UK and Australia while customer demand and rising competition has been the driving factor behind the growth in open banking in the US, Japan, and Canada. 

Research and Markets expects open banking to grow at a compound annual growth rate of 24.4% from 2019 to 2026, the industry could grow even faster if Fintech participants and banks win the trust and custom of a potentially massive global customer base. 

2. API-ecosystems

The 21st century API is the technology that underpins the connectivity and partnerships between fintechs and traditional financial services companies and between fintechs and other fintechs in an ecosystem that unleashes the power of specialization, innovation, customer satisfaction and revenue-generation potential. When they were first developed in the 20th century (1940), few would have thought how these interfaces would transform the financial services industry.

Tech players like Netflix, Uber and Paypal have used APIs to the greatest effect – and have become household names. Next year, we can expect APIs to facilitate equally exciting financial services solutions that will serve millennials on a global scale for decades to come. 

Companies already maximizing the advantages of APIs show that there are no limits for savvy companies that successfully build and manage what can become complex but lucrative API ecosystems. Recent Deloitte Research found that more than a third (35%) of leading technology organizations were generating at least a quarter of their revenue through APIs. But some challenges need to be managed if you want to create an enhanced and seamless customer experience. Fortunately, sophisticated management systems and orchestration offerings can help you continually manage, maintain, grow and adapt your entire API ecosystem. 

“The backbone of the Velmie banking solution is the API ecosystem, which facilitates integrations with different service providers accelerating time to market for our clients.

To provide a seamless, error-free customer experience we use a dedicated orchestration layer that ensures all APIs in the ecosystem communicate with each other in the same language simultaneously. This layer automates workflows by coordinating activities in the data pipeline between different data sources” - Sasha Kukareko, CTO at Velmie.

3. Artificial intelligence and machine learning

Artificial intelligence technology will keep shaking the market and help businesses to reduce overhead costs. AI and machine learning offer great potential that has not yet been fully realized across the financial services industry because of several challenges posed by legacy systems and siloed and “dirty” data. 

Banks need to be all-in if they want to reap the considerable customer and business benefits offered by AI, including greater customer personalization, increased productivity, risk and fraud detection, and enhanced customer relationship management. 

AI could reduce bank operating costs by 22% - shaving off almost a quarter of the banking sector’s costs – by 2030, which translates into $1 trillion in current day terms. 

Some of the exciting capabilities made possible by AI and ML include Natural Language Processing (NLP)-based sentiment analysis of customer conversations, identifying cross selling opportunities based on customer behavioral patterns and offering human-like AI advisory informed by ML.

Given the legacy challenges, however, it makes great business sense for traditional banks to partner with fintechs that are well-positioned to aid in the transition to a future-fit AI and ML-enabled business by tapping into these innovative technologies.

Among other mentioned Fintech trends are Personalization, Tokenizationa & Digital currencies, Green technologies and sustainable investing, Low Code Solutions and Metaverse.

The full Fintech market research report can be found in the new Whitepaper by Velmie. It includes survey analyses and comments from market players regarding appealing fintech sectors, emerging technologies, challenges and opportunities of fintech companies and main customer needs in 2023.