5 Hottest Trends in Financial Services Industry in 2023

By Khubaib Jamil On Oct 7, 2023

In 2023, the financial services sector will undergo significant changes driven by technology and shifting customer needs. These trends redefine service delivery, reshape interactions, and revolutionize business operations in fintech at scale.

Let’s explore 7 key trends shaping the industry landscape today.

#1 Embedded Finance Integration

Embedded finance is a dominant trend, where companies seamlessly incorporate financial services into their platforms. This enhances client convenience and engagement, blurring the lines between banking and daily activities.

Expect to see more financial products in everyday digital interfaces soon. Those might become available in online shopping, employee scheduling, and inventory management apps.

#2 Buy Now, Pay Later (BNPL) Products On a Rise

“Buy Now, Pay Later” (BNPL) will persist as a checkout option on e-commerce platforms. In means that more non-banking entities will be allowed to offer credit without traditional credit cards. We can already see how services like Shop Pay Installments (Shopify), Affirm, Seezle, and others target previously cash-dependent or underbanked consumers, opening avenues for financial services in their daily lives.

For instance, Shopify’s collaboration with Affirm empowers merchants to offer flexible payment solutions, boosting purchase values and frequencies. This trend expands financial services to a broader consumer base, fostering convenient and accessible financing solutions.

#3 Revolutionizing Power of Decentralized Finance

Decentralized Finance (DeFi) is likely to become a firestarter for a new round of digital transformation in financial services as it redefines most of the pillars of traditional banking. Unlike centralized finance, DeFi enables direct peer-to-peer transactions powered by blockchain and cryptocurrencies. Such technology practically eliminates intermediaries and fees. DeFi platforms already offer services like lending and yield farming, granting users sublime independence in financial management.

DeFi aims to democratize finance by replacing traditional institutions with peer-to-peer networks, offering a wide array of services from everyday banking to intricate contractual relationships.

#4 Empowering Open Banking

In late 2022, the Financial Protection Bureau (CFPB) announced a new open banking rule for the US. The updated rule is to deliver new personal financial data rights. Those will allow consumers to transfer their account histories between banking providers seamlessly, facilitating switches in card carriers or banks.

Open banking offers banking institutions a unique advantage: access to clients they wouldn’t reach otherwise. By creating new ecosystems and transforming their business models, banks gain entry to untapped markets. This approach fosters innovation, enabling banks to provide highly personalized services.

Conversely, clients benefit by securely sharing their financial data with authorized third-party providers. Thanks to collaboration between brick-and-mortar banks and fintech startups, user can seamlessly manage their accounts and payments through open-banking APIs.

#5 Advanced Adoption of RegTech

RegTech, essential in navigating complex compliance requirements, simplifies regulatory response and compliance updates for companies. Deloitte analysts foresee widespread RegTech adoption reshaping the fintech landscape.

As regulatory demands rise, fintech firms turn to RegTech solutions to streamline compliance, manage risks, and introduce new capabilities. This approach leverages existing systems and data to produce regulatory data and reports quickly and cost-effectively, without the need for extensive replacements of legacy systems.

RegTech is particularly effective in products that run

Health checks
Legislation gap analysis
Case management
Transaction reporting and monitoring
Risk data processingю

#6 Empowering Financial Inclusion

In 2021, about 5.9 million American households lacked financial inclusion and didn’t have access to banking services. True financial inclusion means granting every household access to modern financial services like savings, credit, insurance, and money transfers, accompanied by adequate financial literacy education.

These services must be affordable, designed to meet people’s needs, easily accessible, and regulated to protect consumers. Achieving this goal empowers individuals with economic self-determination, offering tools crucial for their financial well-being.

#7 Domination of Digital Wallets

The worldwide adoption of digital wallets and mobile payment products is likely to mitigate the consequences of insufficient financial inclusion in the next few years. The market is witnessing the explosive growth of these services. The number of global users of digital wallet apps is expected to reach 5.2 billion by 2026, driven mostly by their spread in developing nations.

Popular platforms offer secure and convenient transaction methods, making such payment services increasingly favored. Businesses adopt such payments vigorously as well, and companies that integrate digital wallets get a head start for fast growth.

Speaking about industry champions, according to Insider Intelligence, Apple and Amazon may seize up to 40% of the revenue from FDIC-insured banks. Apple’s introduction of the Apple Card may pave the way for additional financial tools, while Amazon’s potential expansion of Amazon Pay in-store could attract merchants and reshape revenue streams, impacting traditional issuers and networks.

How Will These Trends Impact Digital Transformation in Financial Services

Fair enough, financial services are about to meet an industry-wide paradigm shift due to given trends and breakthrough innovations. However, innovations have driven transformational decisions many times before. The question is: are you willing to reimagine and redefine your current business operation ecosystem to meet evolving client demands?

Tech-Azur specializes in digital transformation services that empower fintech firms to tame ever-changing trends. Their expertly crafted business transformation methodology, combined with cutting-edge technology adoption, enable intelligent utilization of fresh trends.

A strategic approach not only fuels sustainable growth but also ensures competitiveness and delivers exceptional client experiences in today’s demanding landscape. Connect with Tech-Azur company to initiate your transformative journey or enhance your existing initiatives.