By the numbers, 2022 was not a great fiscal year for the financial technology industry. We’re deep into the freeze of crypto winter with Bitcoin taking a dive from the beginning of the year and hovering around $17,000 for the last few months, and global funding of fintechs has fallen consistently through the year and is now at the lowest it’s been since 2020. However, interest in and news surrounding fintechs has increased significantly, and they are fast becoming an integral part of our everyday lives. As we set our sights on next year, fintechs are going to be looking for ways to keep up their profiles by increasing their funding and revenue while retaining and better serving their customers, which is not always an easy feat. How, exactly, will they do that? We’ll explore some trending options that fintechs will turn to below.
The Fintechs Who Partner Together Grow Together
2022 saw a mass of traditional financial institutions partnering with fintechs to help bring digital offerings to their banking customers. As a prime example, just this summer Rocket Mortgage partnered with cloud-based digital solutions provider Q2 to bring Rocket’s digital home loan application to smaller banks and credit unions through Q2’s Innovation Studio, giving these FIs a chance to provide a digital service that they could not offer prior. As we roll into next year, partnerships will continue to be a key part of fintechs’ plans, but we will see them teaming up with each other as well. With outside funding down last year and upcoming funding potentials still up in the air considering our current recession, fintechs see the value in teaming up to get the best of each other’s services, grow their customer bases, and combine software capabilities to perfect the customer experience.
Let the Machines Win: Artificial Intelligence and Fraud Protection
Fraud, scams, and cybercrimes were glaring problems for the financial services industry in 2022. The news cycles were filled with stories from Russian hackers taking advantage of the war in Ukraine to Zelle scams taking place in our own pockets. Where people are the problem, artificial intelligence can be the solution for fintechs looking to protect consumers. Customer service chatbots are already a norm in our everyday banking and payment activities, making us comfortable with the presence and wider adoption of AI as it continues to grow. Fintechs find it difficult enough to keep up with the constant technological advances and keeping their services up to date, and using AI to keep their systems and users safe as they work towards a best-in-class product will be vital to their survival and success in 2023. Fintechs have the ability to use AI systems to scan transactions at an enormous scale so they can track and learn patterns and use that data to identify fraud and scams as they are taking place, or even before they happen.
Building Bridges Through Web3 Adoption
While crypto valuations have plummeted during the past year, faith in the blockchain and Web3 economy has not waivered, and fintechs will be able to take advantage of that in 2023. Fintechs have a chance to partner with Web3 organizations to improve their systems and operations in many ways and pass by traditional financial systems altogether. Use of the blockchain can help with fraud protection and prevention in addition to AI, as it is made up of a public, decentralized, and distributed digital ledger where transactions are all recorded, tracked, and verified. Transactions cannot be changed without changing all prior transactions, and all information is publicly accessible, making veiled fraud efforts or attempts to change prior records nearly impossible.
Fintechs and decentralized finance run based off some of the same basic values and principles, including speed of transactions, user convenience and experience, and transparency in fees, pricing, and performance. Similarly, consumers turn to fintechs and defi solutions for analogous reasons, such as not wanting or having the ability to use a regular bank, a need to move their money at speeds that traditional FIs cannot support, and for the user convenience and experience they both pride themselves on. Whether big banks want to accept it or not, the Web3 economy is here to stay, and now fintechs find themselves faced with a unique opportunity in 2023 to get in while the big guns are doubting defi. By implementing aspects of Web3 into their platforms, fintechs can help create the foundation of adoption, building a bridge between the two new financial worlds that will take us far beyond the outdated world of analog banking.
So, What Is Actually Next?
Regardless of what took place in 2022, we are looking ahead to 2023 full of hope and excitement for what is to come in this exciting and fast-paced industry. While we don’t know what exactly will happen next year, we know that we’re ready to see it, share it, and live it.