2022 was one of the most tumultuous years for the tech industry. The fintech sector specifically faced significant changes. From the FTX fallout to sweeping layoffs, unprecedented change impacted the entire fintech landscape and chartered a new path for success. Highwire identified and reviewed the top trends dominating the media discourse. We spoke with key reporters in the fintech and commerce spaces about these trends to shed light on what to look out for in 2023.
Return to the Glory Days? Fintech Goes Back to the Basics
Buzzwords like NFT and SPAC have dominated, but with deep-rooted skepticism around the legitimacy of trendy fintech companies and fintech funding drying up, proof-of-concept will define the success of modern day financial technologies. As regulatory concerns grow for investors, technology that has stood the test of time and, importantly, still caters to the ever-evolving needs of its consumers will come back into the limelight.
According to one reporter from Axios, as we face an economic downturn, companies will likely refocus their budgets away from “uncertain technologies” and put dollars toward building sustainable tech structures. Instead of the metaverse, think more about automation technology that helps create more personalized solutions for consumers. Whether it’s technology that avoids human error in loan underwriting or solutions that gamify personal savings, financial technology will pivot away from what consumers deem unsafe and steer towards improving core competencies and outdated processes.
We learned that the flashiest solution isn’t necessarily the best solution and, in order to thrive in a volatile market, new technologies need to build confidence from consumers and investors alike.
A Successful Solution is an Embedded Solution
With fundraising slowing and M&A picking up, a major fintech trend to watch is the rise of embedded finance. For example, the buy now pay later market is expected to hit $3268.26 billion by 2030 – in 2023, embedded partnerships will accelerate its growth.
As the market saturates, players who focus on how solutions work directly with larger financial institutions, brands and retailers will emerge successful. The reality for fintech startups is that market competition combined with smaller fundraising amounts are pushing the industry as a whole to seek solutions that can either be embedded within other platforms or acquired by larger, more established financial institutions.
The younger generation is increasingly concerned about racking up debt and losing faith in third parties handling their money. Embedded solutions create an opportunity for emergent financial technology players to enter the industry and gain the trust of the new generation by means of already established brands.
Rise of the Gen Z Consumer and Financial Activism
As Gen Z continues to scale up in purchase power, they are reshaping the future of commerce and fintech. The younger generation is increasingly focused on solutions that provide instant and easy access to financing to combat their disillusionment with traditional financial solutions.
Gen Z is looking for a blend between the automation and personalization they have come to expect in many other aspects of their lives. From Siri to TikTok, the immediacy and personalization of AI is something they expect from their financial services providers as well. Financial technologies that incorporate machine learning to approach supporting the younger generation in becoming more financially savvy in the new year will continue to accelerate as demand grows.
Slow and Steady Wins the Race: Cash Flow and Financial Management
Reporters at outlets like Axios and Morning Brew all agreed - financial technology companies will need to focus on cash flow and responsible financing in the new year. Whether through take-privates, strategic acquisitions, scaling back on ‘flashy’ technology, or re-allocating resources, company leaders must think strategically about how to manage costs throughout the year.
While cash flow management has always been critical, it will take on new forms in 2023. To attract investors to supplant cash flow, fintech leaders will be increasingly transparent to achieve success. As one fintech reporter at Axios put it, the honest struggle of fintech companies and willingness to adapt to these struggles by company leaders will define their success in the new year.
The new year brings new challenges for the fintech sector, but is also rife with new opportunities for growth and success. Success across sectors will truly be defined by who is capable of pivoting and adapting to the shifting needs of the end consumer.