5 Fintech Trends Driving Payment Innovation

Posted on January 4, 2023

Who of us isn't scouring the internet looking for the latest trends, top technologies, and the best tools to help us navigate what is likely to be the ups and downs of 2023. 

From embedded finance to APIs, we add our take on the top 5 2023 fintech trends expected to make big waves this year. 

Here's a sneak peek of the five key fintech trends jumping out at the business community and what we can expect to see in 2023.

1. The Boom of APIs

APIs are undoubtedly the future. We are in the midst of a revolution pioneered by APIs and propelled further by innovations such as Open Banking.  Every company will be a software company has been replaced by every company will be a payments company. 

With the staggering amount of new products and consistent innovation - the very infrastructure of financial services has changed.

What to Expect in 2023 - Expect the boom without the bust. Moving forward, adopting an API-first strategy will be increasingly common. And that is putting it mildly. It's not just tech companies; it's every company

An impressive 67% of companies report being heavily invested in API-first development. And if you look at the multibillion-dollar valuations of fintech startups in this area, it's easy to see the market values their importance. 

Using APIs to deliver an insurance boost and unlock new revenue streams. The beauty of embedded finance and APIs. Consider a property management company that can enable residents to customize the details of their insurance plan without ever leaving the company's website or residents portal by integrating an insurance API into its existing rental flow. This results in new revenue for the property management company and for its partner insurance companies.

Three other things to look for in 2023 from APIs:

1. More ubiquitous AI and machine learning (ML) features - 2023 will reveal the increasing power of machine learning and artificial intelligence. Things to watch for: high-end features such as speech recognition, natural language processing and automated business transactions. This will allow the business to make better decisions and deliver an optimal customer experience.

2. Monetizing APIs - This is a relatively new practice. Enterprises are looking to increase revenue by monetizing APIs internally and externally. There are a few ways to do this, and no way stands out as the winner. Businesses must develop a unique service or offer specific value that is hard to find elsewhere if the monetization is to become successful. They also must make the API relevant and available through an API management platform. 

3. Unique APIs - We expect to see smaller, more niche APIs on the market. As APIs become more nimble, businesses are looking to maximize their potential and even combine APIs as they become more mainstream. Especially now, with the goal of monetization, we expect to see more innovation in this space.

2. Embedded Finance - In Everyday Products and Services

Expect the embedded finance, aka EmFi market, to hit $230 billion by 2025. That is 10x what we saw in 2020. 

Embedded finance is all about making our lives easier. Enabled by Application Program Interfaces (APIs), it allows data connectivity between financial institutions and non-financial companies. 

It's fast, it's secure, and it's the future.

APIs and embedded finance have already slowly made their way into many everyday activities. Embedded payment technology provides us with a seamless experience in Uber, Buy Now Pay Later (BNPL), or even hiring our contractors on Fiverr.

2023 Fintech Trends - Embedded Finance Market 2025

What to expect in 2023 -  MORE integration with more apps and websites going to one-click services (anything that cuts out the middleman), even more cooperation between banks and Fintechs and more payment solutions that will support various currencies.

The gig economy use case example provided by FundThrough delivers an excellent glimpse into our future. Imagine a one-stop marketplace shop where you can find, hire, and pay from a single platform.

So, if We Are Already Using Embedded Finance - What's Next? 

Retailers, platforms and B2B corporates will be embedding financial services deeply into the fabric of their offerings to meet their customers' constantly evolving needs.

The eCommerce sector is growing rapidly in emerging markets. Business growth is primed, and customer bases are expanding, creating more significant opportunities for all. 

2023 is the year the North American B2B eCommerce market is expected to hit $1.8 trillion, and embedded finance is about to soar along with it. 

Examples of embedded finance consumers encounter every day include:

▪️ Flexible finance at the point of sale

▪️ Payments embedded into a taxi app

▪️ On-demand car insurance when hiring a car

▪️ Purchasing street parking through apps like Google Maps

▪️ Travel insurance when booking flights

▪️ Health insurance or deductible financing when visiting a doctor

▪️ Mortgages offered inside a home-buying app

Pay attention SaaS providers; 2023 is the year we move toward technology unification.

3. Digital Transformation Hits Its Stride

Digital transformation has been making the yearly predictions lists for almost as long as the concept has been around. And here it is, 2023, making the list again. As number three on our 2023 Fintech trends list, we expect a tenuous hold that won't let up this time. With various technology in play, things move faster than ever before. It's not just the big corporations looking to adopt new technologies and strategies; we see every business, big or small, looking at new ways to operate.

The reality is the value of overhauling legacy tech and revitalizing outdated processes significantly outweighs the costs, cue Southwest Airlines

What to expect in 2023 - Companies will deploy technology to reinvent their business models, create new areas of market growth and address critical operational deficiencies. Whether it is introducing robotic process automation (RPA) to help with payroll processing productivity or integrating payments into an application for a seamless customer experience, it is about using technology to enhance your organization.

4. Sustainability in Everything, Including Payments

Climate change and sustainability became a key priority for many businesses in 2022. With only seven years to meet our country's ambitious climate target of 40-45% emissions reductions by 2030, merchants will look for new avenues to deploy. 

Did you know? By 2030, sustainable business models could create economic opportunities worth $12 trillion a year and nearly 400 million jobs. 

What to expect in 2023  - Expect an even bigger shift to digital payment solutions –a simple way to reduce carbon footprint and remain eco-friendly. Think green lending, carbon trading marketplaces, and a new kind of SaaS (Sustainability-as-a-Service).

From supporting low carbon urban mobility to helping banks develop their sustainability approach, payments networks have an opportunity to play a crucial role in facilitating the transition to net zero.

Ben Kellard, Director of Business Strategy at CISL


Why is there such a focus on sustainability? 

Because the planet and consumers demand it.

Sustainable Investing

76% say they will refuse to buy from companies on the wrong side of issues that conflict with their values.

2.3 billion cheques are the equivalent of about 455,000 trees

Because it is costing merchants a fortune.

Cheques cost organizations anywhere from $15-$25 in hard costs per cheque. In other words, if a business is currently processing a thousand cheques monthly, it could take close to $15,000 off its bottom line.
Whether it's with wallets (digital, hopefully) or through ESG criteria (environmental, social and governance), climate fintech is accelerating capital flows to become greener as customers become more climate-conscious. At its core, this means that senior management (CEOs and CTOs) must include sustainability in their business model and future projections and deliver a strategy with sustainability and other corporate social responsibility measures.

The risks of inaction 

In 2023, look for companies trying to mitigate risk as businesses become aware of the cost of inaction–a recent figure shows an aggregate cost of $5.5 trillion for Canadians if the earth warms by three, four or five degrees.

In short, if merchants don't keep on top of sustainability, they'll likely be a hefty price to pay.

5. Financial Inclusion Becomes Our Next Economy

A topic of great discussion in the past two decades is the rise in inequality and its impact on society. However, we are at a turning point, the groundwork has been laid, and the work is well underway. With fintech initiatives such as Open Banking, real-time payments, and digital payment solutions at play, those considered underbanked or unbanked are one step closer to paying bills, investing and accessing financial services more equitably.

Economic prosperity and environmental sustainability are not mutually exclusive.

Theodora Lau

What to expect in 2023 -  Fintech companies, banks, and governments will continue to work together as a cohesive team to address the challenges of the underbanked and unbanked. In turn, with the inclusion of more people in the financial system, we could see an offset of the effects of global economic turbulence, inflation and recession while contributing to overall economic growth.

Bonus 2023 Fintech Trend: Financial Technology as a Service 

With these five trends driving the Fintech-as-a-Service space, 2023 will be the year business models of the past go out the window. 

What to expect in 2023 - An economic recovery that will ebb and flow, very likely driven by changes in consumer behaviour unlike any other we have yet seen. Expect 2023 to be the year companies capitalize on these trends with VoPay’s revolutionized B2B Payment Technology. We’re here to ensure that our clients have the tools they need to create compelling payment experiences to become industry leaders.

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