FinTech trends to watch in 2023

Jun 26, 2023 ·

6 min read

Contents

FinTech trends to watch in 2023 Shiri Schneider, Chief Technology Officer, PayU Global Payments Compared to 2021, last year witnessed a slowdown in growth across various fintech sectors, including insurance technology, banking, and regtech. Despite the slowdown, the sector is still growing, with the global FinTech market expected to reach a value of $556.58 billion by the end of 2030. Real-Time Payments: Revolutionizing Financial Transactions As we move further into 2023, I believe we will witness significant advancements in the payments sector. One trend that is already gaining traction is the adoption of real-time payment systems like Payshap, Blik, Pix and UPI, in emerging markets. Payshap was recently launched in South Africa and enables instant peer-to-peer payments, bill payments, and online purchases, providing convenience in our fast-paced world. Blik offers secure smartphone-based payments through QR codes, simplifying transactions for both online and in-store purchases in Poland. In India, the Unified Payments Interface (UPI) allows users to link their bank accounts and make instant payments with a unique identifier. These real-time payment systems address the growing demand for immediate and secure transactions, supporting digital commerce and financial inclusion. With their ability to eliminate traditional barriers, real-time payments are becoming a significant trend in the payments industry and an enabler for further fintech developments. Ensuring Consumer and Payment Safety As payment methods continue to evolve, added security and fraud prevention measures are necessary. Global e-commerce lost approximately $41 billion in 2022 to fraud, and this is expected to grow to $48 billion in 2023. Therefore, it’s essential that businesses ensure they create a secure online shopping experience for customers. Implementing robust anti-fraud solutions complying with local laws and regulations and utilizing the latest security protocols, such as network tokenization, 3DS, and secure fields, are crucial. By implementing these measures, payment providers reduce the risk of data breaches and identity theft – as well as demonstrate compliance with payment regulations such as Strong Customer Authentication (SCA). More widespread use of biometrics, such as fingerprint and facial recognition adds another layer of security to personal information and financial transactions. Additionally, advancements in data encryption and secure communication protocols have bolstered the protection of sensitive information and made it harder for fraudsters to gain access. That said, fraud is a cat-and-mouse game, and bad actors will begin looking for ways to manipulate and exploit security protocols as soon as they are launched. This is where advanced fraud detection tools powered by AI and machine learning add value, by analyzing transaction patterns, identifying suspicious activity, and preventing fraudulent transactions from being processed. Risk analysis via a scoring system that utilizes the latest advancements in AI allows for more accurate identification of fraudulent transactions, as well as a reduction in false positives. Deploying advanced algorithms, as opposed to a purely rule-based approach, not only helps protect customers from financial losses but also helps merchants avoid chargebacks and the negative impact they can have on profit margins. Smart routing engines are also powerful tools that can contribute to protecting against fraud in payments while delivering higher approval rates and reducing false declines. Smart routing engines dynamically route payment transactions based on various parameters. They utilize real-time data and algorithms to determine the most secure route for a transaction, automatically re-routing a transaction if a suspicious transaction is identified via analysis of transaction history and user behavior. Reporting is another valuable feature that can help combat fraud, as robust reporting systems can highlight anomalies and discrepancies in payments and allow businesses to accurately identify fraudulent activity. Transforming Cross-border Payments Online consumers are increasingly buying from international retailers. In 2022, cross-border e-commerce shipments of physical products accounted for 22% of all e-commerce shipments, underlining the growing demand for cross-border e-commerce in these expanding markets. As businesses strive to engage with a broader customer base on a global scale, they are focusing on the optimization of internal processes and cost reduction. The importance of finessing cross-border payments for international customers by offering local payment methods is highlighted by research which reveals that a significant number of online shoppers would either abandon their purchase or seek alternatives if they were unable to pay using their preferred payment method. 49% of online shoppers in Poland, 55% in the US, and 52% in Colombia fall into this category, showing that this is a truly global trend. Payment Rails Innovation The transition to more agile payment rails will continue to be a significant topic of discussion. While cryptocurrency and blockchain offer advantages as payment rails, only a limited number of nations, financial institutions, and regulators have adopted them. Going forward, regulation will likely play a bigger role in promoting trust in the crypto industry and ensuring uniform compliance oversight across global crypto marketplaces. The Single Euro Payments Area (SEPA) allows customers to make cashless euro payments through direct debit or credit transfers across the European Union and several non-EU countries. Examples like the SEPA demonstrate how payment rails can make cross-border payments seamless and cost-effective. Promoting Payment Transparency Payment transparency is a key trend in the fintech industry, particularly in the Buy Now Pay Later (BNPL) sector. The rising popularity of BNPL, the sector expected for to grow by 21.7% this year, reaching over $527 million this year. Consumers are seeking transparency in fees and terms. Payment providers are taking the lead by providing clear information on costs and empowering consumers to make better informed decisions. They also offer tools to manage payments, preventing missed payments and credit score impacts. This transparency not only benefits consumers but also revolutionises the payment industry by building trust, boosting conversion rates, and enhancing the reputation of the entire fintech ecosystem. Embracing payment transparency is vital for long-term success and growth in the ever evolving fintech landscape. Despite the challenges of inflation and rising costs in 2023, the fintech industry is well-equipped to tackle them. In the years to come, prioritising innovation will be vital to provide consumers with more choices and to ensure businesses continuously improve the online purchasing experience and meet customer expectations.

FinTech trends to watch in 2023
Shiri Schneider, Chief Technology Officer, PayU Global Payments

Compared to 2021, last year witnessed a slowdown in growth across various fintech sectors, including insurance technology, banking, and regtech. Despite the slowdown, the sector is still growing, with the global FinTech market expected to reach a value of $556.58 billion by the end of 2030.

Real-Time Payments: Revolutionizing Financial Transactions

As we move further into 2023, I believe we will witness significant advancements in the payments sector. One trend that is already gaining traction is the adoption of real-time payment systems like Payshap, Blik, Pix and UPI, in emerging markets.

Payshap was recently launched in South Africa and enables instant peer-to-peer payments, bill payments, and online purchases, providing convenience in our fast-paced world. Blik offers secure smartphone-based payments through QR codes, simplifying transactions for both online and in-store purchases in Poland. In India, the Unified Payments Interface (UPI) allows users to link their bank accounts and make instant payments with a unique identifier.

These real-time payment systems address the growing demand for immediate and secure transactions, supporting digital commerce and financial inclusion. With their ability to eliminate traditional barriers, real-time payments are becoming a significant trend in the payments industry and an enabler for further fintech developments.

Ensuring Consumer and Payment Safety

As payment methods continue to evolve, added security and fraud prevention measures are necessary. Global e-commerce lost approximately $41 billion in 2022 to fraud, and this is expected to grow to $48 billion in 2023. Therefore, it’s essential that businesses ensure they create a secure online shopping experience for customers.

Implementing robust anti-fraud solutions complying with local laws and regulations and utilizing the latest security protocols, such as network tokenization, 3DS, and secure fields, are crucial. By implementing these measures, payment providers reduce the risk of data breaches and identity theft – as well as demonstrate compliance with payment regulations such as Strong Customer Authentication (SCA).

More widespread use of biometrics, such as fingerprint and facial recognition adds another layer of security to personal information and financial transactions. Additionally, advancements in data encryption and secure communication protocols have bolstered the protection of sensitive information and made it harder for fraudsters to gain access.

That said, fraud is a cat-and-mouse game, and bad actors will begin looking for ways to manipulate and exploit security protocols as soon as they are launched. This is where advanced fraud detection tools powered by AI and machine learning add value, by analyzing transaction patterns, identifying suspicious activity, and preventing fraudulent transactions from being processed. Risk analysis via a scoring system that utilizes the latest advancements in AI allows for more accurate identification of fraudulent transactions, as well as a reduction in false positives. Deploying advanced algorithms, as opposed to a purely rule-based approach, not only helps protect customers from financial losses but also helps merchants avoid chargebacks and the negative impact they can have on profit margins.

Smart routing engines are also powerful tools that can contribute to protecting against fraud in payments while delivering higher approval rates and reducing false declines. Smart routing engines dynamically route payment transactions based on various parameters. They utilize real-time data and algorithms to determine the most secure route for a transaction, automatically re-routing a transaction if a suspicious transaction is identified via analysis of transaction history and user behavior. Reporting is another valuable feature that can help combat fraud, as robust reporting systems can highlight anomalies and discrepancies in payments and allow businesses to accurately identify fraudulent activity.

Transforming Cross-border Payments

Online consumers are increasingly buying from international retailers. In 2022, cross-border e-commerce shipments of physical products accounted for 22% of all e-commerce shipments, underlining the growing demand for cross-border e-commerce in these expanding markets.

As businesses strive to engage with a broader customer base on a global scale, they are focusing on the optimization of internal processes and cost reduction. The importance of finessing cross-border payments for international customers by offering local payment methods is highlighted by research which reveals that a significant number of online shoppers would either abandon their purchase or seek alternatives if they were unable to pay using their preferred payment method. 49% of online shoppers in Poland, 55% in the US, and 52% in Colombia fall into this category, showing that this is a truly global trend.

Payment Rails Innovation

The transition to more agile payment rails will continue to be a significant topic of discussion. While cryptocurrency and blockchain offer advantages as payment rails, only a limited number of nations, financial institutions, and regulators have adopted them. Going forward, regulation will likely play a bigger role in promoting trust in the crypto industry and ensuring uniform compliance oversight across global crypto marketplaces.

The Single Euro Payments Area (SEPA) allows customers to make cashless euro payments through direct debit or credit transfers across the European Union and several non-EU countries. Examples like the SEPA demonstrate how payment rails can make cross-border payments seamless and cost-effective.

Promoting Payment Transparency

Payment transparency is a key trend in the fintech industry, particularly in the Buy Now Pay Later (BNPL) sector. The rising popularity of BNPL, the sector expected for to grow by 21.7% this year, reaching over $527 million this year.

Consumers are seeking transparency in fees and terms. Payment providers are taking the lead by providing clear information on costs and empowering consumers to make better informed decisions. They also offer tools to manage payments, preventing missed payments and credit score impacts. This transparency not only benefits consumers but also revolutionises the payment industry by building trust, boosting conversion rates, and enhancing the reputation of the entire fintech ecosystem. Embracing payment transparency is vital for long-term success and growth in the ever evolving fintech landscape.

Despite the challenges of inflation and rising costs in 2023, the fintech industry is well-equipped to tackle them. In the years to come, prioritising innovation will be vital to provide consumers with more choices and to ensure businesses continuously improve the online purchasing experience and meet customer expectations.

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