Financial service providers must improve customer experience, economic accessibility, and pricing while digitally transforming.
FREMONT, CA: In 2023, the fintech industry will pivot from growth to cost savings. Many companies prioritize development due to low borrowing, inflation, and wage growth. Inflation is changing that. A value reset and reassessment of public fintech and financial services businesses will cause market consolidation. Some of this consolidation will result from achieving scale and sustainable economics in categories with too many players. In contrast, others will be opportunistic players to acquire assets and accelerate competitive positioning in a market environment with greater alignment between price justification and valuation expectations.
As fintech innovation accelerates, regulatory compliance and internal controls will be crucial for long-term growth and sector health. With increased scrutiny and hefty fines for non-compliance, banks will more actively commit to ensuring they and their fintech partners meet the highest compliance and regulation standards. Compliance protects customers, borrowers, and the financial ecosystem. Compliant fintech companies will succeed in 2023 as regulatory scrutiny increases around bank-fintech relationships, crypto, P2P payment platforms, and more.
Fintech companies that emphasize compliance early on and incorporate it into their infrastructure, rather than seeing it as a box to be checked later, will have a clear competitive advantage. Based on their services, customer demographics, and geographies, fintech companies, and sponsor banks must understand the regulations that apply to them. Experts must implement compliance and risk management programs. Fraudsters utilize stolen identities to open and finance bank accounts, generate credit, and commit fraud. A better way to represent identity online is needed as there is digitization.
Entrepreneurs' self-sovereign identity, frictionless biometric integration into customer identification, and novel cryptography applications are intriguing. Financial services will be the first use cases due to banking and payment fraud. Banks sponsoring fintech have caused a wave of fraud and a regulatory crackdown. While there were rules, some broke them. It should finally make fintech take compliance and laws seriously. Fraud is quietly becoming fintech’s most significant issue, but it doesn’t have to be. Digital account onboarding became standard due to pandemic fraud. Better ML, data, and sharing of best practices are helping the sector fight back.
Personalization boosts financial inclusion and new lending models. Many fintechs adapt their solutions to consumer requirements to make the financial sector more relevant and equal. When customers accept to provide their data, lenders can adjust their approach. Personalization will increase fintech performance and consumer results. Technology is personalizing lending programs like never before. Financial services no longer offer generic loan packages. Future borrowers should expect flexible, customized solutions that meet their changing requirements and preferences. Scalability and distinctiveness are coming to financial services.
