2022 is drawing to a close, and 2023 is almost upon us. It’s been an eventful year for Pismo, and we all hope to see similar success and progress in the coming 12 months.
In the meantime, we have put together a selection of emerging fintech trends to keep an eye on next year. Any one of them could take up the headline and make an impact, but which will it be?
From front to back
Changes in the macroeconomic environment have led to many banks assessing their strategies. This will result in an increased focus on efficiency and resiliency, with a particular emphasis on the technologies which can ensure results.
In 2023 we may see a switch from top-line strategies (marketing, customer acquisition, and sales) towards bolstering bottom-line projects. Financial institutions will want to ensure they are prepared to meet the challenges of economic headwinds.
At the same time, they will seek to reduce or eliminate downtime, regulatory issues, or efficiency losses. Cloud-based technology, which many already see as the sector’s future, will play a central role in this transition.
The industry wakes up to embedded
Embedded finance allows non-financial companies access to the broader fintech and banking ecosystem. They gain access to specialised tools using APIs, piggybacking on regulated providers. These tools can build financial products without needing compliance or development costs.
Embedded finance provides users with uninterrupted customer journeys from product selection to sale. The demand for these services is already high and increasing. More than 50% of European business leaders want to launch embedded finance schemes. 67% of UK adults want financial options provided seamlessly.
While some argue that embedded finance spells doom for traditional institutions, 82% of banks earmark it as an essential revenue stream for the future. The market is expected to be worth US$ 138 billion by 2026.
DeFi growth continues apace
El proyecto decentralised finance (DeFi) market has experienced exponential growth in the past few years. The value of the network is measured using what’s known as total locked value (TVL). This is the sum of all digital assets deposited in DeFi protocols.
The global smartphone penetration rate hit 83% in 2022. Proponents of DeFi and stablecoins believe this enables a whole swathe of the global population to borrow, spend, and utilise digital money without the identity checks, documentation, or regulation that traditional banks require.
2023 won’t see the emergence of DeFi as a true alternative to established rails in the industry. Yet as institutions, customers, and corporate clients explore new avenues for revenue growth a greater spotlight could be placed on this exciting edge of the industry.
RtP, and VRPs: a payments (re)evolution
Revolutionary ways to pay emerged in 2022, and 2023 will be a year for these new methodologies to take the spotlight. Request to Pay (RtP) rolled out across the globe this year as banks, customers and regulators realised its efficiency gains. Meanwhile, Variable Recurring Payments (VRPs) looks to be an exciting new way of enabling customers to transact easily.
A VRP enables customers to modify their transactions from their mobile banking apps without going back and forth between payee and payment provider. It provides several advantages in transparency, security, and flexibility.
Request to Pay can be deployed to drastically reduce the leg work a consumer must do to make their every day or essential payments. A bank can become their customers’ payment hub by working with suppliers, offering a more significant experience.
Banking on BNPL
While Buy Now, Pay Later has solidified its place in checkout options across the retail sphere, it has yet to see significant takeup among traditional institutions. Fintechs like Klarna, Afterpay, and Sezzle currently rank first among users’ preferences.
360 million people globally use BNPL when making purchasing decisions. While in 2022 this service is provided by fintechs, banks have a unique opportunity to grasp by developing and deploying their own BNPL services, selectable at checkout.
Technology could be a blocker for banks – which often still process loans manually – llooking to provide BNPL, yet that is where the adoption and deployment of a cloud-native, microservices-based system can come in very handy.
Build or Buy? Neither!
Something we stress at Pismo is that the age-old question of “build or buy?” is just that: outdated. Systems development has moved on, and banks should too, perhaps 2023 will be the year they realise there are other options.
Buying doesn’t allow the financial institution to differentiate itself from the competitors. When the company needs a new feature, it asks the software provider to include this feature in its backlog. The requested feature may not even be a priority for the supplier.
Building is a complex task that requires significant cash and time investment. When pressing the “go” button, there’s also no guarantee the go-live will be smooth and seamless.
2023 will be a year organisations discover there is a third way of providing winning services: using components in a building-block style. Pismo supplies primitive APIs that our clients can orchestrate to develop the financial products their customers need. These APIs do all the basic operations required to implement various financial services.
Developing with APIs has many advantages compared to the other approaches. The financial institution can innovate by creating exclusive products quickly. It doesn’t have to worry about all the complexities below the hood – we take care of them.
