Outlook by JurisTech’s Chief Innovation Officer (CINO) – Hosein Abedinpourshotorban

The Fintech industry had an eventful past year – from the crypto market crash to the rise of Web 3.0 into the mainstream. As the industry looks ahead to a new year, significant changes in the market will likely shape how businesses will succeed. Let’s take a look at our Chief Innovation Officer’s top 3 Fintech trends to watch in 2023.

1. Digital Banks

The first on our list of Fintech trends are digital banks. Digital banks have seen an increase in numbers over the past years. Not to be confused with digital banking, the general difference between them is that the latter refers to the digitisation of traditional banks, while the former refers to banks that are fully digital from the start. As traditional banks go through their digital transformation, not all processes are fully digitalised and automated. On the other hand, digital banks have the majority of their processes automated since the start. The way their similarities overlap is how their customers interact with their services – through digital channels. 

It is estimated that by the year 2024, 2.5 billion individuals worldwide will be using digital banking services regularly. This major shift in consumer behaviour is largely credited to the adoption of mobile banking. According to a recent survey, 89% of consumers that use digital banking confirm that they use their mobile phones to carry out banking operations. Interestingly, the number rises to 97% when the focus is on the Millenials. Therefore, the growth of digital banks is due to the changing behaviour of consumers towards a new type of banking.

Hyper-personalisation is one of the key factors in driving digital banks. Currently, banking functions such as depositing cheques, local and global transactions, investing, and revisiting financing options for mortgages or loans, are a few of the many functions that consumers expect to be able to do from their mobile phones. They now expect their banks to provide reliable insights and resources to help them better understand and improve their financial health. As these demands increase, digital banks are jumping in to cater to their needs using advanced technologies to deliver hyper-personalised functions that leverage on data and insights gathered from their customers. Similar to how Netflix or Amazon delivers hyper-personalised experiences for each individual customer. 

Besides, convenience, speed, accuracy, and reliability are also areas of focus in this new era of banking. For example, people working in the gig economy expect their payments to be in their bank accounts by the end of their shifts. Employers are able to meet such demands through the use of a real-time payment network. Additionally, request-for-payment (RFP) is a feature that comes with real-time payment networks. With RFP, everyone can now send and receive payment requests, and the receiver of such requests can safely view, approve, or dismiss the payment requests. When approved, payments are made securely at the touch of a finger.

Digital banks represent a new era of banking that is driven by consumer experience (CX), as they offer convenience, accessibility, and often lower fees. As the trend continues to grow, it is likely that these types of banks will become an increasingly important part of the financial landscape. 

2. Alternative and Embedded Finance

The second on our list of Fintech trends is alternative finance. It refers to any sort of financing options that are managed outside of traditional banking services. It is a developing industry that was spawned in the wake of digital transformation and thrived on the back of the COVID-19 pandemic. This industry exists to fill in the gap where SMEs or individuals have been underserved by incumbent banks. This trend, which includes products such as peer-to-peer lending (P2P) and crowdfunding, has been growing in popularity due to lower cost services, as the cost of operations is less compared to traditional lenders. This is because alternative finance services are driven by speed, flexibility, accessibility, and technology, as opposed to their traditional counterparts. In 2021, the global alternative lending platform market size was valued at USD 2.24 billion and is projected to grow at a compound annual growth rate (CAGR) of 23.6% from 2022 to 2030.

While on the topic of serving the underserved, embedded finance refers to the incorporation of financial services and products into platforms that are used frequently by both consumers and businesses. This integration is carried out by non-financial companies, and aims to create a smooth and effortless experience for users by providing various financial services that can be accessed easily in their daily lives. This seamless user experience can help address issues that prevent people from using financial services, such as having no credit history, having difficulty accessing traditional banking products, and having low trust in banks.

For example, when consumers are purchasing high-ticket items, they might see a message that says ‘pay over 3 months at 0% interest rate’ as part of their check-out experience. This is known as the Buy Now Pay Later (BNPL) option, which saw a massive uptick in popularity amongst Millennials and Gen-Zs. Additionally, embedded finance includes card payments, lending, investments, insurance, and banking. Predictions backed by research estimate that the embedded payment industry will grow past USD 138 billion in 2026, from USD 43 billion in 2021.

3. AI Scoring and Decision-making

The last of our Fintech trends is Artificial Intelligence (AI) scoring and decision-making. AI is gaining wider usage in business software. These platforms use advanced machine learning and algorithms to automate business tasks, allowing companies to save time and energy. In machine learning, scoring and decision-making refer to using an algorithmic model that was developed using past data in order to gain insights that can help solve a business problem, and AI enables the automation function in this process.

Within the Fintech and banking industry, AI is being used for many things such as hyper-personalising the CX and to also spur financial inclusion. FIs are generating heavy volumes of data from their customers, which makes the utilisation of complex AI algorithms a feasible option in credit scoring and decision-making. Instead of relying on traditional credit scoring methods, AI can pull data from alternative data sets and generate a decision based on the newly processed data, which in turn sets up new methods of credit scoring, thus making financial services more accessible to the underserved.

Results from a study revealed that when a country improves its financial inclusion to the 75th percentile, it will increase the growth of the country’s GDP by 2% – 3%. When more people have access to financial services, they can participate in the economy more. AI scoring and decision-making have the potential to give an estimation of 1.7 billion people globally access to financial services. Moreover, the utilisation of AI technology will help banks reduce their operating costs by 22% around 2030, which translates to savings of up to USD 1 trillion.

“The deregulation in the financial industry on top of allowing nonbank players to provide financial services have changed the game. A well-executed user experience will now decide the winners in this new game.” – Hosein

With new technologies on the horizon and new regulatory landscapes, it will be important for companies to stay adaptable and open to changes in Fintech trends. We can expect to see the use of AI to increase, as well as the proliferation of mobile and digital payment options. It will be interesting to see how these Fintech trends play out and how they will impact the way we handle our finances in the coming years.

This article was in contribution by JurisTech’s Chief Innovation Officer (CINO), Hosein Abedinpourshotorban. Hosein has a passion for driving innovation and change. In his role at JurisTech, Hosein is responsible for identifying and evaluating new technologies and business models that can drive growth and give a competitive advantage. Hosein is dedicated to driving JurisTech forward and leading the way in the constantly evolving world of Fintech.

Hosein Abedinpourshotorban – Chief Innovation Officer at JurisTech

If you are interested in finding out more about the digitalisation of the banking processes, we are here to help. You can reach out to us at contact@juristech.net.

About JurisTech

JurisTech (Juris Technologies) is a leading Malaysian-based Fintech company, specialising in enterprise-class software solutions for banks, financial institutions, and telecommunications companies in Malaysia, Southeast Asia, and beyond.