The year 2020 and the succeeding period have been choppy on many fronts. From the outbreak of the pandemic, war threat and crypto market crash to the current speculation of a potential recession, together, the instability on an economic front has massively impacted the financial ecosystem too. Although individuals, businesses and countries at large have been adaptive to this highly dynamic environment, an element of lag persists.
Going forward, businesses will further adapt to this volatility and may design flexible services. The way individuals and businesses interact with one another will play a major role in defining the journey of service.
On a financial front, this means devising services that have a robust security system, innovative technology and smooth customer journey. The coming years are going to be pivotal in the transformation of the financial ecosystem. Here are a few trends to look out for in 2023 that have the potential to transform finance and technology –
- Increase in the number of banks that offer embedded solutions
Embedded finance is on an upward trajectory over the past year and is expected to gain even more traction given the scenario. Several banks are looking to become service providers to non-financial institutions that are looking for ways to enhance customer experience by offering financial services as a part of their larger offerings.
For instance, service providers like Ola and Uber now offer insurance to passengers on their platforms at a very minimal rate. This not only extends their service stack but also ensures a superior CX and reliability. Another relatable example is Whatsapp integrating UPI service on its platform for a quick and hassle-free payment system.
With the introduction of Fintech, businesses can expand their product stack substantially while ensuring an enhanced CX.
- Fintechs to reinvent themselves as data organizations
Several Fintechs may reinvent themselves as data organizations that have integrated financial services like payments and other financial services too on their platform to differentiate themselves in the eyes of potential investors and alliances.
For instance, businesses that calculate credit scores for consumers also let out their information to their potential clients to target the said audience. While their primary business is ascertaining scores, their secondary business line allows them to reinvent themselves.
- Stronger focus on developing tech solutions in other countries
Currently, India stands second to China in the effective adoption of Fintech. However, several developed countries are still struggling to implement Fintech owing to economic, cultural and psychological factors. Countries that are underdeveloped when it comes to financial services are expected to witness increased interest among investors.
For instance, Singapore and India have collaborated to link the United Payments Interface (UPI) and PayNow through the Reserve Bank of India (RBI) and Singapore’s central bank, the Monetary Authority of Singapore (MAS). This will pave way for easier transactions between and within the countries.
It is further expected that more deals are likely to happen in developing economies including Southeast Asia, Africa, the Middle East and Latin America.
- Increased scrutiny by regulators of embedded finance offerings
The regulatory awareness and intervention are expected to increase in the coming 6-12 months as the number of non-regulated entities embedding and delivering finance offerings increases. The regulators will seek to protect the customers by clarifying issues like available recourse and accountability for transactions done by Fintechs.
The Reserve Bank of India (RBI) has already set strict guidelines for digital lenders in the market. The growth in the number of digital lenders was hampering the interest and safety of the end users and therefore, a robust regulatory framework was required.
Even a simple quiver in the financial ecosystem could send trembles across the economy and therefore, it is a vital part of the functioning of every business. Its virtue of having a profound impact on your business makes it a domain worth close tracking!
