Four major digital banking trends to watch out for in 2023 – FinTech Magazine

What goes up must come down – an adage fintechs know only too well right now, as startups across the sector grapple with funding following breakneck growth. Like any economic crisis, however, the global headwinds bearing down on 2023 will herald in both winners and losers.

Legacy banks, with regard to example, may weather the storm fairly comfortably, buoyed by rising interest rates and a good opportunity to acquire from their younger, savvier fintech cousins. And crypto – on the particular down – is far from out. While electronic currencies are hardly immune from a worldwide recession, recent scandals have provided a turning point regarding greater regulation and the possible legitimisation.

Here’s my take on the shifts that’ll take place in banking this year in what is arguably the toughest environment yet.

Farewell, fintech fairytales

With corporate-backed fintech investments plunging 92% in value in 2022 Q3, amid widespread layoffs , 2023 will continue in order to see a slowdown to fintech’s once-meteoric ascent. The longer the current mood of venture capitalist caution prevails, the particular greater the damage will be. SVB’s latest State of Fintech Report predicts that, with VC-backed valuations declining at all stages, 30% associated with fintech companies with more than US$50m in revenue have less than a year’s worth of leeway left – rising to nearly half (44%) of fintechs along with less than US$10m to their name.

As intense bidding stalls, new more cautious market conditions will certainly determine which fintechs stay in the game. Some associated with the fintechs that thrived on abundant equity in order to finance their growth may find it difficult to continue to trade, while some will be able to survive, possibly securing further investment by adopting a lot more frugal business models. The digital transformation of financial, finance and payments will not slow straight down as benefits are clear to all – but innovators seeking investment will need to provide a much clearer narrative on their own chosen path to sustainable growth plus profitability. Realism will finally grace the world of fintech expense.

Boom time intended for incumbent banks

Having been on the backfoot to get so long, legacy players may have their particular moment in the sun this 12 months. A hat-trick of higher interest rates, much less fintech competition and the likely increase in regulatory scrutiny will possibly mean that will many incumbents will find this year less challenging.

This is especially true as the transition to digital continues with banks announcing further branch closures and staff layoffs reducing front-end costs. This year will provide a real opportunity for incumbent banks plus financial services providers to consolidate their position with customers expecting their banking provider to offer both innovative solutions and financial stability.

One trend that is likely to materialise in 2023 is that of the incumbent banks acquiring innovative fintechs to each accelerate their own digital change and reduce competitors. This year could prove to be a golden yr for corporate M& A and CVC.

Valuations becoming more real

Fintechs are much from a write-off, however. At the tail end of 2022 we saw leading brands such as Klarna and Checkout. com decide in order to access capital via much less generous deal terms than in the particular past. We will certainly see more “down rounds” in 2023. As we said above, these less generous valuations will inevitably result within some firms not being able to secure the survival route past the difficult months ahead.

But some companies will survive and will be stronger for it. One of the particular outcomes associated with the tough economic climate is that all of us will observe fewer fintechs, but those that endure will become much more solid. Just as the dot-com crash of 2000 led to the particular creation of the likes of Amazon and Expedia, it will be likely that will 2023 can lead to the emergence associated with fewer but more strong global fintech players that will end up being a lot more resilient and effective than the current players.

Organisations with access to funds will be able in order to be part of the particular success story of these fintech survivors. Beyond the CVCs mentioned above, Big Tech should also see the opportunity to invest in the best fintechs at an irresistible discount. These investments could offer Big Tech with the opportunity of expanding their offering for their existing users along with something they have struggled to deliver in the past – finance their particular customers actually need.

Crypto’s comeback moment?

One big question at the end of 2022 was whether crypto markets would survive in 2023. The particular recent turmoil, in other words, is the end from the beginning – but far from the beginning of the end. The meltdown of FTX and other related scams has resulted in a lot deeper soul searching on the nature of cryptocurrencies and distributed ledger technology.

Two trends seem to be emerging: current financial services players acknowledge that crypto is not a fad that will disappear and, secondly, governments and regulators are usually realising that they need to set some rules plus guidelines if they want in order to avoid even bigger mishaps in the particular future.

This does not mean that we will see an immediate recovery associated with cryptocurrencies within 2023 yet will see them becoming more “normal” and acceptable by the wider financial establishment. Having awakened banks and regulators to crypto’s potential, we’ll now see a good onslaught of regulatory plus compliance options – with major markets racing in order to launch the first Central Bank Digital Currencies (a contest the Eurozone is usually well positioned to lead). With investor protection in place, consumer confidence will return, prompting the next stage of the crypto evolution.