Top 3 Consumer Fintech Trends in 2023 and Beyond

Today, consumers can buy everything — from groceries to gas — without ever opening their wallets. In fact, many financial transactions now happen via mobile apps, websites, email, text messages, and other digital communications. Instant online payment systems have become ubiquitous in our daily lives, making cash no longer essential for moving through our days. A recent Pew Research study found that roughly three-in-ten U.S. adults (29%) say they make no purchases using cash during a typical week, up slightly from 24% in 2015. 

The digitization of financial technology (fintech), accelerated by the pandemic, is creating new opportunities and challenges for banking, insurance, and other financial sectors. The new emphasis is on meeting consumers where they are — whether that be when buying a cup of coffee at Starbucks, getting a line of credit at the point of retail purchase, or easily adding flight insurance when purchasing an airline ticket online. Underlying this digitalization is the desire to make financial transactions easier for consumers, a goal reflected in the following three fintech trends shaping the financial services industry in 2023.

Embedded Finance 

Embedded finance is the deployment of technology that allows any brand or merchant to rapidly integrate financial services and products into their offerings or customer experiences. Put simply, embedded finance creates a bridge between consumers, businesses, and financial institutions that allows easy payment through digital transactions. 

For banks and other financial services firms, this trend represents a major opportunity. By forming embedded finance partnerships with companies in other industries (e.g., technology, retail, telecommunications, etc.), financial institutions gain opportunities for adding new revenue streams and expanding their customer base according to a recent white paper by Google Cloud.

For example, a bank linked to a retailer can offer a monthly payment plan to purchasers of a product with a lower interest rate than they’d pay using a credit card. Suddenly, the bank has acquired a new customer and issued a loan in a matter of minutes.

Embedded finance also offers the bonus of data collection. With each transaction, the financial services firm gains insights that support the creation of enhanced customer service experiences and new product innovations.  

From a revenue perspective, experts say the prospects are immense. Across a range of financial services — including payments, lending, and insurance — embedded finance is expected to generate $230 billion in revenue by 2025, a 10x increase from $22.5 billion in 2020, according to Forbes. 

Consumer-Oriented Approach

Another important trend is the push to adopt a more consumer-oriented approach to financial technology. More specifically, consumers (especially digital native Gen-Zers) desire faster and easier access to their banking and other financial services through technology solutions. As a result, a growing fintech trend is the use of application programming interfaces (APIs), which enable consumers to access their banking services on mobile phones and other digital devices. 

The demand for app-level engagement and performance — and the move away from a brick-and-mortar model — was already rising before the pandemic. However, the need for contactless services driven by COVID-19 kicked this trend into high gear as reflected in consumer studies. According to Statista research, the percentage of digital banking users in the United States was about 61% in 2018 and was expected to rise to over 65% by 2022.  

Another study outlined the most popular mobile banking applications. According to respondents in the Ipsos-Forbes Advisor U.S. Weekly Consumer Confidence Survey in February 2022, consumers ranked transferring funds between accounts, depositing e-checks, and viewing statements and account balances as the most valuable digital banking capabilities.

As for areas of concern, consumers’ top issue when mobile banking remains security, according to Industry Insider, a marketing and research firm. Financial institutions have responded with digital services to better safeguard consumer data, such as allowing customers to place holds on credit or debit cards, schedule travel alerts, and file and review card transaction disputes via their mobile phones or other digital devices. 

Thus far, consumer-oriented digital solutions are producing positive effects in the financial services industry, such as improved customer engagement and valuable data insights that can accelerate product innovation. Further, advanced analytics tools that are enabled by artificial intelligence (AI) and machine learning (ML) have reinforced these gains and are quickly becoming table stakes for fueling the future enterprise. 

Accelerating the Move to the Cloud 

The pandemic moved people out of the office and into their homes, resulting in huge increases in hybrid workers. This — coupled with the growing popularity of mobile banking and other digital services — has led many fintech companies to accelerate cloud adoption as a means of modernizing their IT infrastructure to better accommodate digital services. 

Greater cloud use is happening across industries. According to a study by Gartner, cloud shift across key enterprise IT markets will increase to 28% by 2022 (up from 19% in 2018).

Its use is becoming ubiquitous — almost a necessity — as companies struggle to keep up with ever-expanding demand for greater digital bandwidth and data storage. Recent industry research by Flexera shows that most businesses are incorporating cloud computing, whole or in part, into their IT enterprise strategy. 

Some say the banking industry has been slower to adopt cloud computing than other sectors, due to its highly regulated nature and security concerns. However, that is changing, according to a study by consulting firm Accenture, which analyzed cloud adoption globally in the banking industry. Of the 100+ banks surveyed, more than half had moved a substantial portion of their enterprise applications to the cloud, with an average of 20% of workloads migrated. However, migration of core banking systems was lower with only 3% of core workloads moved to the cloud thus far, likely reflecting the careful approach employed by banks in navigating their pathway to the cloud.

For those banks and other financial services companies seeking to accelerate their digital transformation through cloud adoption, consumer-oriented technology, and embedded finance, there’s no need to reinvent the wheel. All major public clouds can become part of an organization’s digitization and modernization efforts, and Maven Wave can help you find the right path forward with one or multiple of these providers to suit your needs. To learn how the cloud can help your business enterprise achieve its fintech goals, contact Maven Wave today.