As we embark on a new year, there is much work to be done in the fintech sector, but as it is rapidly growing, I think 2023 is going to be a pivotal year. In addition to improving the effectiveness of how customer service is delivered, we are also seeing an increase in financial inclusion, which in my opinion can only be a good thing.

According to a survey carried out by a world-leading open banking platform, Plaid, in July 2022, inflation has lowered financial confidence, but consumers claim that fintech is assisting them in surviving the economic downturn.

Consumers are using savings tools to achieve both short- and long-term goals, as well as applications for payments and liquidity management to provide stability. Fintech is proving its worth, particularly with the largest group of digital adopters, Gen Zs and Millennials.

The Plaid survey revealed digital acceleration is most prevalent in the younger generations. The figures show Gen Z continued to increase (93% in 2022 vs. 87% in 2021) as did the percentage of Millennials and Gen Xers who reported using digital tools and apps to manage their finances (Millennial: 91% in 2022 vs. 95% in 2021; Gen X: 82% in 2022 vs. 89% in 2021).

AI

By 2023, financial software development AI algorithms will have a bigger say in who gets access to what financial services and how much of it. However, by creating solid systems that safeguard end users, fintech companies must be able to balance the scale that these algorithms provide with outstanding ethics in their application. It has been known for prejudices to be ‘baked’ into algorithms unknowingly by those who created them. Ethics play a huge part in public adoption, as following the incident of the Apple Card algorithm, which gave men higher credit card limits than women, there was much public outcry.

Economic Inclusion

The introduction of innovations like artificial intelligence has allowed fintech companies to deliver financial services at scale, and over the last ten years, 1.2 billion unbanked people have gained access to financial services, according to the World Bank. This achievement was made possible by fintech.

However, 1.7 billion more people remain unbanked, many of whom live in developing and underdeveloped nations, so the path to global financial inclusion through financial software development is still far from complete.

As a result, the African and APAC regions have seen an increase in VC fintech investments. According to experts, Africa's financial services market will experience a "coming of age" that will see annual revenue growth of 10% until 2025.

Similar to how APAC fintech investment increased despite the global economic downturn, reaching $41.8 billion in 2022 H1, more than doubling the $19.2 billion seen in 2021 H1.

2023 will mark a turning point for fintech investments and the expansion of financial inclusion globally.

Contactless Transactions

The fintech industry's largest player is the payments sector, which has made the biggest advancements in recent years. The rise of contactless payment, which is already on and will continue as a major trend in the fintech market in 2023, is the most recent significant change to this innovative sector.

When the pandemic was at its worst, a digital payments company noticed a sharp increase in contactless transactions on its platform, which is when the consumers really adopted the technology enmass.

Cash transactions decreased from 49% to 38% during the same time period. However, over the next year and beyond, this decline in cash will be crucial to fintech and eCommerce.

Venture Capitalists

Next year VCs will come back to the table and do their investing. But there will be a lot fewer companies around to invest in. This should make for an interesting Summer in 2023 of too much money chasing and too little opportunity. I expect this will cause some concern in the VC industry.

Conclusion

The development of financial software and many evolving fintech innovations will have a major impact in 2023.

Numerous areas need to be explored as the industry is still in its early stages of development.

What’s apparent is that consumers have been helped by fintech during the past three years of global challenges. Customers claim that as the system navigates its own future, the way forward will be an industry that provides stability, flexibility, and opportunity.

To achieve the next level in fintech, where people use it for all their financial needs, there must be a move towards increased cooperation across the ecosystem to ensure an open and equitable financial system that is all-inclusive.