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Looking back at 2022, looking forward to 2023

At the end of every year there’s a natural tendency within every industry to assess how far it has come in the past 12 months and where the next 12 might lead. With that in mind, below are some of the key trends we saw in 2022. 

Interest rates
The steep increase in interest rates we’ve seen in 2022 has had a number of different consequences. It has changed the funding environment for the FinTech sector quite profoundly. There's good evidence that fintech valuations have come down as a result of high interest rates. Higher interest rates have also helped the big banks do rather well, increasing their net interest margins. And therefore, they have been posting some very strong results recently.

Global transformation
In terms of the digital transformation of banks, there is a lot of evidence to suggest that this has accelerated in 2022, partially driven by a number of different market events. In the UK there have been conversations around Pay.UK's New Payments Architecture (NPA); the proposal for new legislation aimed at the accelerated adoption of real-time payments in Europe, the forthcoming introduction of FedNow in the US; while at a wider scale the move to the ISO20022 standard is looming on the horizon. All of these should serve as catalysts for banks to review their setup.

Cloud adoption
The move away from on-premise to cloud native technology is helping a lot of banks reduce the cost of their digital transformation, while increasing their agility and boosting security, which is good news for the banks themselves and their customers.

However, digital transformation is also being held back due to a lack of available talent. Despite the downturn, there is still a skill shortage that means highly qualified payments and solution architects, product managers, analysts, engineers and InfoSec practitioners that are required to drive these digital transformation programs are in short supply. Even the larger banks are being held back from accelerating their digital transformation plans because they simply can't find the right people.



2023 and beyond

A platform approach
Payment volumes grew in 2022 and will continue to grow in 2023, even if the economic situation deteriorates. Banks need to have the capacity to process the increased volumes that the customers will bring to them. And they need to retain the efficiency to remain competitive in light of agile FinTech organisations and well-resourced Big Tech corporations entering the market. To this end, more and more banks will look at using platform technology to process account to account payments in 2023 and effectively outsource the whole process.

Back office agility
Banks need to achieve agility in the back office to support the development of new products and services in the front office. This requires them to initiate digital transformation projects because the existing infrastructure most banks have is often not fit for purpose. There's an increasing number of applications that they are using that have reached the end of their shelf life and are running out of support, so this is not an area where any bank can be complacent. Combined with the current skills shortage in this area, some banks may struggle to keep their digital transformation strategies moving along.

Collaboration and data key in APP Fraud prevention
There will be a lot of attention paid to Authorised Push Payment Fraud (APP) in 2023 as banks are increasingly being held responsible for reimbursing customers. Therefore, they'll be doing whatever they can to help keep fraud rates as low as possible. APP fraud will be tackled through a number of different initiatives, but until those initiatives are effective at scale, the problem will become bigger. Where real-time payments go, APP fraud follows and this is something we are seeing in the UK right now where push payment fraud is rampant. In 2023, when real time payment volumes increase in Europe and US, levels of APP fraud will also go up, unfortunately.

There's going to have to be a lot more collaboration between banks in 2023 in order to combat APP fraud. Confirmation of payee schemes, as well as the sharing of datasets to scan transactions for fraudulent behaviour. Artificial intelligence will have to play a role, screening these datasets and looking at behavioural profiles of customer accounts in order for the fight against APP fraud to be effective. 

Innovation in cross border payments
Cross border payments will continue to become more efficient, cheaper and quicker in 2023, and that's a continuation of a trend that we've seen for several years now. Cross border payments used to take five days, now it's two days or less, soon it will be same day until a point where they are settled within minutes or seconds.

With cross-border payments there is a lot more focus on compliance and sanctions, caused partly by the war in Ukraine. Banks will have to continue to invest in compliance technology from an anti-money laundering and sanctions point of view, so they can react more quickly.


At this stage, it should be emphasised that there isn’t one, homogenous payments market; it’s a complex ecosystem with many different interested parties and processes. But in general, payments is not an area where change happens very quickly. Many of the developing trends involve shifts that have been taking place over several years, and will take some time to be fully realised. As a result, 2023 will be another very exciting and challenging year for everyone involved in payments.



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Michael Mueller

Michael Mueller



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12 Jan 2022



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