Fintech Security

banking and payments 2023

Pat Bermingham, CEO, Adflex

While economic struggles will continue to dominate the headlines over the turn of the year, innovation must continue in the payments space. Cash flow is key to survival, so overcoming the late payment challenge has never been more important. Unfortunately, payments to small businesses were made 8.2 days late on average in September 2022 – the highest late payment time in two years.

One of the best ways to overcome late payments is with a method that has long been touted as the ‘future’ of B2B payments, and has seen steadily increasing adoption in recent years. Commercial cards allow businesses to extend days payable outstanding (DPO) to suppliers, thus maximising working capital while minimising the supplier’s days sales outstanding (DSO), also removing the cost of cash collection.

So, what’s next?

In the years to come, we can expect to see an increasingly close relationship between banks, fintechs and back-office system providers. Integrating payments solutions within a back-office system removes unnecessary processes and ensures accounts payable and receivable align with other areas of a business.

The focus in 2023 will be very much on optimising payment options. While companies previously needed to monitor multiple portals and manually track their payments, technologies like straight-through-processing (STP) are gaining traction as a way of automating such processes. Leveraging APIs to enable flexibility means that businesses will have more choice of payment types, terms and processes than ever before.

Another interesting development in payments will be the continued growth of Open Banking in 2023. In its wake are emerging solutions like variable recurring payments (VRPs), which are an evolution of the current direct debit scheme that allow a business to make a series of payments ahead of time to better forecast spend and facilitate more informed decisions.

Pat Bermingham, CEO, Adflex

Pietro Candela, European Head of Business Development, Alipay+

The big innovation trend we’re seeing at the moment is service integration; moving beyond technologies that are fragmented in terms of their payment capabilities and additional services. This is particularly the case for cross-border payments, whereby businesses should be looking to providers that do more than just facilitate this one element.

Cross-border payment acceptance should be the minimum functionality – particularly when looking to tap into the Asian market.

Instead, businesses should be looking to technologies that allow customers to complete a transaction inside an app, instead of on a plastic card or NFC touchpoint, thus allowing users to enjoy an augmented experience before, during and after their payment. Further, it’s possible to get geo-localised promotions in real-time, verify the forex rate of a cross-border payment before the transaction, as well as experience a much more seamless end-to-end journey.

Ultimately, this kind of mobile-first strategy will be crucial in creating seamless, and connected experiences for new markets, with the payment serving as just the first touchpoint.

Pietro Candela, Alipay+

Mike Beckley, CTO and co-founder of Appian

Trend 1 – Business leaders face increasing regulations with continued pressure to innovate.

With recessionary economies, we often see an increased scrutiny on process controls and higher regulatory enforcement from governments. In 2023, expect to face many challenges related to:

  • Transparency and reliability of new financial platforms, like crypto currencies,
  • Visibility into supply chain systems that reduce risk in this globally connected world economy, and
  • Oversight of ESG (environment, social, and governance) policies driven by both governments and investors.

Pressures from regulatory agencies, government bodies, and investors on businesses to embrace and implement environmental, social and governance (ESG) remain high in 2023. Financial services and insurance (FSI) organisations are especially facing an increasingly complex regulatory landscape and more scrutiny over the next three years.

To stay compliant and competitive amid new regulatory pressures, FSI organisations and other businesses operating in highly regulated sectors must ensure end-to-end process control with ESG monitoring and reporting. Powerful technology and solutions like data fabric can help unify data across systems and build enterprise applications. Integrated data leads to better insights, enabling organisations to simplify and accelerate all their critical processes, making compliance monitoring and reporting easier and faster.

However, 81% of European IT leaders in financial services and 73% in the insurance sector in a recent survey, say they are concerned that the transition from the pandemic to economic downturn will see businesses freeze IT budgets and headcounts. This leads to mounting IT backlogs, slowing enterprise digitisation and modernisation efforts. With that, FSI organisations must ensure they are protecting and strengthening their ability to adapt rapidly to change by leveraging a technological edge for competitive advantage. The goal: to avoid innovation stagnation, fall behind competitors, and stay compliant.”

Trend 2 – IT leaders must do more with less with recession impact

The past two years have made it abundantly clear that businesses must continue innovating to navigate times of uncertainty and economic flux. Only those with digital agility will be able to compete and stay relevant in today’s digital marketplace. That is why the demand for automation and low-code development – which makes it so much faster to build, modify, and execute enterprise applications – surged during the pandemic, as organisations scrambled for solutions to help them remain agile.

As a result of being under pressure to cut costs in response to the turbulent economic climate expected in 2023, organisations’ ability to drive business agility could be short-lived. Eight in ten (79%) of UK developers and software engineers say their organisation is already shifting focus away from innovation projects towards cost-cutting initiatives, according to a recent study. So, unless they quickly change course, IT innovation is set to stagnate through the economic downturn, impacting organisations’ ability to grow and compete well beyond the next one to two years.

With demand for digital innovation continuing at a record pace and access to resources becoming more competitive, organisations must streamline their IT stack to focus on time to value, maximise return on investment, and stay competitive in an increasingly recessionary global economy. Process automation on a low-code platform is one solution other organisations have used to design, orchestrate, and optimise critical processes. By leveraging the right technology, business leaders can increase productivity, deliver more profits and savings, thus putting them in a better position to navigate challenges stemming from the looming recession – from supply chain issues and inflation to qualified labour shortages.”

Trend 3 – Technology dependency and IT skills gap remains a challenge for organisations

Last year, IDC predicted the global shortage of full-time developers will increase to a staggering 4 million in 2025. But this trend will significantly accelerate in the coming year due to the cost-of-living crisis, which will inevitably make formal education and paid certification programmes less accessible for many. The IT skills gap will introduce barriers for new talent to enter an industry already experiencing significant skills shortages, with organisations across sectors struggling to find the technology talent they need to innovate and keep a competitive edge.

Given it is likely to be critical in the future of business innovation, low-code development provides a lucrative career path for individuals with no coding background. In addition, it allows organisations to build powerful business applications efficiently and at speed, significantly reducing the need to write code.

As a result, low-code can unlock opportunities for businesses to look for talent with diverse backgrounds outside and within the organisation. According to a recent survey, 75% of UK developers and software engineers saying they are concerned about their businesses freezing IT budgets and headcount.

Exploring opportunities to upskill and reskill existing talent would be particularly important for organisations during the recession when budgets do not allow new hires. Low-code and process automation platforms lead the way in this approach, empowering a broader set of users to participate in digital innovation.

Rani Jabban, managing director, Arab Bank (Switzerland)

The implosion of FTX that we are witnessing towards the end of 2022 is another shock in the crypto world and the reaction to it will define 2023.

FTX – a major player with significant backing from huge mainstream investors, high profile sports sponsorships and leaders who were seen as part of the financial establishment has been described as crypto’s Lehman’s moment. It is very sad to think of the people who have lost money and of the implications for those involved as this plays out.

And yet, the shake outs in the crypto space are ultimately beneficial because they will force the sector to get more professional and serve to bring DeFi and the opportunities it can create for everyone closer to the mainstream. And between the crypto winter and now FTX we have seen two significant catalysts that will hugely accelerate that trend in 2023.

Burnt investors to vote with their feet

Next year, we expect regulators that have been circling the crypto sector to start engaging with purpose and that the good actors in the space will rapidly make moves towards the enhanced transparency that crypto’s tech allows. Because increasingly, we expect crypto investors that have been burnt once too often in the “wild west” to start to vote with their feet and look for a measure of old school reassurance alongside next generation fintech.

What’s more, regulators will demand it. As with many sectors where investors speculate, losses that have been too high have been a fact or life since crypto really became popular in 2011, but this time the damage is many billions at once. It is, of course, a significant event and we anticipate that regulators will not wait to see what another occurrence looks like.

Robust regulation

So, expect to see authorities in the US taking a robust approach. Offshore centres like the Bahamas will feel increasing pressure to follow suit and of course in the EU the implications of the new crypto regulation MiCA (Markets in Crypto Assets) will be felt as this becomes real. In many ways we expect 2023 to be the year crypto gets regulation.

Equally, we expect many players to proactively step up and offer state of the art transparency to address the concerns of the market. What “Proof of Reserve” actually means will become a key conversation in crypto. For example, over the last few days we’ve seen partial audits from exchanges exposing their balance sheets without the liabilities.

Clearly, this won’t cut it when investors are fearful – so expect in 2023 to see much energy expended in the crypto sector on creating, and bringing online, services that generate enhanced transparency with proof and robust audit whilst protecting the discretion of currency holders, with a leading example being “Zero Knowledge proofs” technologies which have made great progress recently.

More suits, less surfing gear

For those in the private banking sector particularly, we expect this to be an interesting year in crypto. As the trend for regulation and transparency gather’s momentum we expect more and more firms in the space to become emboldened and start to engage with crypto to provide their clients with services. In spite of recent events it remains, after all, a significant area of interest for their clients who are increasingly seeking ways to participate in the potential of a decentralised, low-cost universally accessible finance system. But they will want to do it as safely as possible with the reassurance created by expert advice, rock solid custodian services and via organisations that have a long tradition of governance and robust third-party audit.

Crypto got cautious in late 2022 and will seek to get serious in 2023 – at the events and conferences where the crypto community gathers, expect to see more suits and less surf and skater gear.

Rani Jabban, MD, Arab Bank (Switzerland)

Mark Aldred, banking industry expert at Auriga

In 2022, most banks assumed that pandemic behaviour was forever. This accelerated plans to shutter banks and slash ATM networks. As we go into 2023, those pandemic behaviours are being eclipsed by how economies are struggling, and individuals and businesses are all struggling to get by. We are already seeing a return to the use of cash, and we may see a need for local services to local communities and local businesses and local consumers.

So many of those decisions taken in 2022 may need to be revisited. And it’s not just about access to cash, of course, but access to all banking services especially as more people seek advice and help. I think in 2023, we’ll see government and regulators also intervening to slow the pace with which banks are driving people on to their digital channels.

Shared banking hubs

Fitful experimentation about how banks could share branch operations will come to an end in 2023 when we expect to see some serious work on shared banking hubs. But these cannot be ersatz branches that offer little more than a paying-in service or guidance on how to use mobile banking.

White label branches should incorporate digital self-service hubs that provide full access to branded banking services 24/7 using automation and video banking. This new kind of branch will be something that involves not only the legacy banks. Neo-banks are going to take a serious look at the concept as they don’t have the ability to engage physically with their customers, and bring them into a safe space to engage with them.

More effort will need to avoid these new style branches being white elephants. Technology choices will be key. There needs to be a careful use of AI and machine learning to help customers of all generations navigate through new self and assisted service experience more easily and quickly.

ATM pooling

This will increase adoption, and therefore the success of the model. Returning to access to cash, cashback without payment at retailers was launched in some markets like the UK. it’s a reasonably good idea but one that may struggle.

ATM pooling is something else that should proliferate in 2023. For banks under political and public pressure on access to cash, this approach squares the circle well. As examples in Belgium and the Netherlands show, it allows banks to save operating costs while actually opening up ATMs in towns and villages which have never had an ATM before.

Shanker Ramamurthy, BIAN Board Member and Global Managing Partner Banking & Financial Markets, IBM Consulting

The future of banking is the history of banking flipped on its head. Banks which used to compete on the basis of back-office efficiencies today compete on the basis of front-office customer experiences, a shift which we’ll see increase in 2023. The confluence of exponential technologies such as AI and hybrid cloud have dramatically reduced operational costs and unlocked the potential for future platform-based business models.

In 2023, banks must adopt industry standards like the Banking Industry Architecture Network (BIAN) to enable faster and more seamless collaboration with business partners and the ISV eco-system as this trend heightens. Implementing modern reference architecture and supporting data models to ease the movement of information across the banking services landscape, and deploying value office and design authority mechanisms to advance alignment between business and IT for critical initiatives will be key to success. Banks will also benefit from investing in talent transformation initiatives, and truly embracing AI as a catalyst for change.

The winners of 2023 will leverage standards such as BIAN, exponential technologies and extreme automation to get the competing benefits of superior customer experience and efficiency while simultaneously and effectively addressing risk and regulatory exposures.

Hans Tesselaar, Executive Director, BIAN

Over the past few years, banks have faced immense disruption and struggled to transform its organisation with technology. Our research with IBM found that 88% of banking executives are troubled by their bank’s commitments to multiyear projects, interoperability across technology environments and theft of sensitive data. A lack of industry standards is also causing significant problems and hindering the organisation’s ability to bring new services, at the desired speed, to market.

In 2023, banks must focus on adopting a coreless banking model, which enables the delivery of banking services that aren’t longer dependent on legacy systems. This approach will empower banks to select the software vendors required to obtain the best-of-breed for each application area without worrying about interoperability. Furthermore, this model will translate each proprietary message into one standard message model, meaning communication between services is significantly enhanced, ensuring that each solution seamlessly connects and exchanges standardised data. A system that can be reused and utilised from day one, and the ability to be used by other institutions, will mean the opportunities to connect the financial services industry are endless.

Hans Tesselaar, Executive Director, BIAN

Tim Annis, UK Managing Director, Bluechain

Merchants will struggle and be at greater risk of not getting paid in the next 12 months if they do not have an efficient and user-friendly digital payment process for their customers. With two pandemic years behind us, the current economic instability and the increased cost of living, businesses must consider the impact on the everyday person. Almost 8 million people in the UK alone are struggling to pay their bills, and there is an opportunity for businesses to improve the lives of these people with choice and flexibility in how they pay and get paid.

In 2023, we will also see a move away from credit as people look to spend the money they have, rather than the money they don’t have. This will support the growth of Open Banking and account-to-account payments, providing businesses with access to data faster to craft entirely new customer-friendly payment scenarios.

Direct debits are archaic. Secure bill-to-pay processes will help consumers pay in a way that suits them within terms and give businesses visibility of what is coming in and out. Unfortunately, this current cycle of pressure and inflation will not go down for a while, so the industry must help society regain control of its finances during uncertain times.

Tim Annis, UK, MD, Bluechain

Nilesh Vaidya, EVP & Global Industry Head for Retail Banking & Wealth Management for Capgemini

Banks step up to offer greater financial wellness amid COL

Inflation and the COL crisis are expected to worsen at the beginning of 2023, with rising energy bills alone set to cost the UK’s poorest households almost half of their income. In this crisis, customers need critical financial support which banks are scrambling to provide through new programs and initiatives to help consumers regain control over their finances.

Hedging bets amid market volatility

While the COL crisis has hit the pockets of the wider public hardest, HNWIs are also starkly aware of the uncertainty next year may bring amid political and economic instability. To stave off any losses against further drops in the stock market, many investors are rebalancing their portfolios through direct indexing.

Digital IDs to unlock more accessible banking

Amid rising cybersecurity attacks and identify theft, many banks have tried to safeguard their customers resulting in a cumbersome and inefficient process to prove your identity. Digital IDs are becoming the new way to provide a seamless CX while maintaining security

Regulation to flush out greenwashing

Many WM firms have scrambled to meet the rising demand for ESG-aligned products from more socially conscious HNWIs who are sensitive to any sign of greenwashing. Following COP27, regulators will be quick to clamp down on corporate investment greenwashing, with ESG investing soon becoming more commonplace.

Investing beyond crypto

Crypto investment was largely popularised over the last two years, but already the market is shifting to demand wider, more diverse portfolios (such as EFTs, NFTs and Metaverse products). However, a lack of knowledge within these emerging fields is holding many HNWIs back, requiring wealth managers to step up and act as a guide.

Jørgen Christian Juul, CEO, Cardlay

Increased focus on digitalisation and cost optimisation 

International external factors such as the war in Ukraine, and the energy crisis, will lead FinTech’s to focus their attention on cost optimisation and digitalisation as they continue to manage their business during these times.

Partnerships to scale and digitise product positioning with a fast go-to-market plan

The fintech industry will see an industry-wide push for a speedy go-to-market plan with the competition at a high. As well as this, companies hoping to get ahead will realise there is strength in numbers, and seek partnerships with complimentary financial services companies to offer a robust package. In 2022 we partnered with SAP Concur to offer a payment cloud solution that integrates issuers, processors and technology providers to enable end-to-end virtual card creation and reconciliation.

Virtual cards will be used in all forms of payments 

The ease of use for consumers and simplicity to set up for businesses has led to a huge rise in the use of digital wallets. According to IT service management company Marqeta75% of consumers are now embracing digital wallets to pay for their purchases, with 60% of people saying that they’d now feel comfortable leaving the house with just their phone and not their wallet. Virtual card payments are set to become the norm in 2023.

Consolidation of the fintech market 

Research conducted by Fintech Capital has revealed that FinTech investment had slowed over 2022. According to the report, business formation in the fintech sector peaked in 2018, and over the last year, has declined by 80%. This could result in consolidation in the industry, which will ultimately strengthen the offering of larger fintech operations.

Increased focus on banks who are in demand for partnerships to service increasingly demanding portfolios 

As the financial sector has evolved, traditional banks no longer have the resources to keep up with modern banking demands. An influx of banks seeking fintech partnerships is set for the forthcoming years. If traditional banks fail to keep up with the innovation of fintech’s they are bound to fall behind.

Hannah Fitzsimons, CEO of Cashflows

Innovation in the fintech and payments space next year won’t be stalled by recession. Quite the contrary. In fact, with more merchants and shoppers looking to financial and payments technology for additional convenience, support and security amid testing times, demand for new payment products and solutions will increase exponentially. This level of demand necessitates sustained investment in the space to build upon the success of the past year, and with this we will see greater investment from Big Tech.

We’re already starting to see Big Tech companies make significant acquisitions of payment companies, with $1.2 billion invested into 14 fintech’s last year. This is a trend that is set to continue as payments and fintech is touted as the next focus for Big Tech companies looking for a piece of the payments pie. It’s getting increasingly easier for non-banks and Big Tech companies to offer financial services products through embedded finance, with the goal being to lock customers into vast product ecosystems.

Big tech companies will not be completely let loose on the payments industry, as new regulations are being introduced. The UK are establishing a pro-competition regime for digital markets, while the EU are implementing the Digital Markets Act to ensure large online platforms behave in a fair way. Regardless, with considerable influence and capital, we will certainly see further Big Tech movements in the payments space next year. Whether or not this will be a good thing for levels of innovation and competition in the long-term remains to be seen.

Andy Schmidt, Global Industry Lead for Banking at CGI

2022 showed a tremendous amount of promise for a total of fifty-one days with economies recovering, offices opening back up, and a job market that was white hot for top talent. Then, the Ukraine invasion created regional, if not global turmoil, and inflation began to tick up to double-digit levels, causing central banks to raise interest rates, and mortgage rates to more than double in less than twelve months, raising concerns about recession and the hoped-for possibility of a soft landing even as job figures remain positive.

And yet against this historical backdrop, the financial services industry has continued to make great strides, inching ever-closer to real-time payments and full(er) ISO 20022 adoption, along with a strong desire to make better use of data and collaborate across infrastructures.

Looking to the future

Although many of these topics will look familiar from past reviews and predictions, 2023 shows particular promise across the following dimensions:

  • Payment scheme interoperability is an expressed desire – as ISO 20022 adoption gets closer to becoming a reality, the possibility of cross-scheme interoperability, both domestically and cross-border, shifts from being a practical aspiration to being a simple rules discussion. In other words, banks and payment scheme operators are quite emphatic that interoperability is a matter of when, not if – a major improvement over past discussions and a real benefit to commerce on a global scale.
  • Liquidity management is important again – Much of the economic damage done during The Great Recession of 2007-2009 was the result of a lack of effective liquidity management solutions. Now that we are on a path where real-time payments will take on an additional parameter – cross-border, and thus geographic complexity – the need for banks to offer or advise on effective liquidity management solutions, especially for their corporate clients with global reach (or at least global aspirations) is growing.
  • Delivery models are going to change – perhaps drastically – and that’s good – the current economic environment has many banks looking to change the way they consume software. And while gaining access to banking services via a SaaS model has been increasingly important in the past few years, the time has come for banks to consider pushing even further by asking their vendors to provide business process outsourcing (BPO) and other services to gain even greater efficiencies.

The reason for this is that the price of investment in current technology – including the resolution of past technology debt – is becoming a major challenge for banks that are not in the top tier. Therefore, an enhanced SaaS or even a utility model could provide banks with ways to access key services without having to manage infrastructures or staff, freeing them to focus on more strategic issues.

  • Request to Pay will make QR codes a vital payments technology – the QR code has received a lot of negative press in the past few years because many see it as “just another barcode”, adding little to the payments landscape. However, the lowly QR code is very efficient in communicating key information, including payee data, which is why firms like Venmo have been using them to make payments easier to initiate. Request to Pay has many of these same needs, and leveraging this technology in bills, emailed payment requests, mobile applications, and even point of sale (POS) will make it easier for request to pay – one of the key value-added services of any real-time payment scheme – to gain traction worldwide.
  • Data as a shared resource across banks and regulators – the sharing of information can make everyone – banks, corporates, regulators – smarter because it enables them to better see and understand facts, transactions, and trends. This is especially true in the onboarding and financial crime markets where data accuracy and pattern-matching are key tools in providing prospective clients speedy access to the offerings they want, and safeguarding these offerings once they’ve been obtained.

By following the card industry’s model of sharing information that can be used to identify fraud schemes and fraudsters more quickly, banks will be better able to stop crime and money laundering before it has a chance to take hold. Enterprising banks will leverage this information to sell services to their customers based on observed behavioural patterns, one of the key elements of any anti-financial crime offering.

Darren Westlake, CEO and co-founder, Crowdcube

We’ve seen how 2022 brought fresh volatility to a market that was already recovering from the throes of the global pandemic. Yet, despite it all, alternative finance had a strong year in 2022 and 2023 looks like it will continue to grow. What’s more, non-traditional forms of funding are increasing in popularity and accessibility for scale-ups and start-ups of all shapes and sizes.

Founders need to enter 2023 with an open mind and consider every avenue of funding they can – particularly as VC funding might well be harder to come by next year. And now that the Enterprise Investment Scheme has been extended, the tax relief to investors is sure to continue to serve as a powerful draw for many in today’s conditions. Businesses simply cannot afford to ignore the potential of this opportunity.

Rob Fernandes, Chief Product Officer at Deko

Retailers are clamouring for high-quality BNPL and checkout finance solutions to help prevent a decline in consumer spending and drive new customer acquisition

Retail finance gives customers more buying power, thanks to the ability to spread the cost of purchases. Not only does it help consumers buy the products they desire, it also enhances customer loyalty and supports the bottom line.

But while retail finance is essential among successful eCommerce brands, there are several growing consumer and product trends which merchants need to be aware of as we enter 2023.

BNPL rose to prominence during the pandemic as consumers with tighter wallets looked for alternative funding methods. But the current economic outlook is challenging for many merchants both in terms of the short-term impact of the current economic climate, but more longer-term demographic trends we are seeing.

Five key consumer finance trends merchants need to address in 2023

Trend one: Inflation

There is no doubt that the cost-of-living crisis is now directly impacting consumer buying patterns. Brits are tightening their purse strings to pay for the rising prices of items such as food and fuel, leaving them with less disposable income to spend on non-essential items. Businesses are expected to feel the effects of this, from cutting down on TV streaming services to foregoing a favourite coffee at a local café, people are expecting to significantly change their spending patterns when it comes to non-essential items over the next 12 months. According to a recent report by the Direct Marketing Association 51% of consumers are looking at deals and offers, often leading them to change their traditional buying behaviour. For merchants trying to retain a healthy level of consumer demand, especially those offering higher value products, the need to offer a flexible BNPL solution will be even more important as consumers look to spread the cost of more purchases over time.

Trend two: The rise of intentional spending

One of the resulting global trends in consumer buying patterns is the rise of what is being termed intentional spending – the action of making purposeful purchasing decisions that live up to financial goals and personal values. In practice, this means a decline in instant gratification buying, and more longer-term thinking when it comes to researching and planning buying options. Central to this new consumer is to find key non-discretionary lifetime purchases that are both durable and sustainable. One clear example is solar panels – a high-ticket value item with a financial imperative for addressing energy costs, but one which at the outset requires flexible financing options.

Trend three: Diversified lenders

The modern eCommerce market has evolved to offer consumers faster, simpler, and more secure payment methods. However, despite the now seamless nature of transactions on merchants’ apps and websites, there’s no one-size-fits-all solution when it comes to finance and credit options. The key for merchants then is being able to offer finance options which provide the broadest coverage for their customers’ needs, maximising the opportunity for revenue generation and protecting brand loyalty.

The credit market is like any other market. The more universal it is, the more consumers it will welcome. As a result, we believe merchants need to offer truly flexible BNPL credit options that harness a wide range of lenders to better cater to individuals and their circumstances.

Trend four: the rise of Gen Z

A once in a lifetime generational shift is now taking place with the use of credit cards in decline and a migration taking place toward alternative checkout finance-based payment methods. This is most pronounced amongst the millennial and Gen Z age groups.

According to a recent survey less than half of Gen Z consumers have a credit card. This demographic change is stark when you compare it to penetration levels amongst older age groups. 61% of Millennials, 65% of Gen X, and 81% of Baby Boomers are all reported to carry at least one card.

This increased uptake for BNPL is unsurprising and it is coming from younger consumers who are largely rejecting credit cards, and accessing borrowing directly at checkout, where they value its flexibility and alignment with their shopping objectives. Adoption rates among Gen Z are expected to increase from 36.8% in 2021 to 47.4% in 2025, confirming this is a trend to watch.

Trend five: The rise of multi-lending

The final key trend expected throughout 2023 may well be the rise of multi-lending options for BNPL providers. Many pure-play BNPL lenders are pivoting to offer additional financial products or marketplaces to make the most compelling pitch to customers.

Merchants will leave sales hanging if they don’t offer some form of short lending solution to their customers. For the merchant, it means that there are a lot of shoppers that want to use the service but are getting denied credit.

At best, that’s a bad experience for consumers but that actually translates to lost sales. The logical solution to this is to offer a wider variety of BNPL options at the checkout. However, if each solution comes with its own button, the checkout gets pretty crowded and confusing quite quickly. This is why a comprehensive BNPL platform should be considered by all merchants in 2023.

Despite high inflation and concerns about a potential recession, shoppers still significantly spent online on Cyber Monday and Black Friday, thanks in part to buy now, pay later (BNPL) solutions. But as inflationary pressures persist, consumers are responding by looking to make their money go as far as possible and towards the things that matter. As we move into 2023, merchants need to respond accordingly, giving shoppers flexibility and convenience, by offering flexible BNPL and checkout finance options that open up access to a greater number of prospective buyers, across online and in-store channels, and even for higher value, more considered purchases.

Charles Southwood, Regional Vice President, N Europe & MEA at Denodo

Regulation and compliance will continue to dominate the business landscape in 2023, especially within the FS sector. This is because emerging technologies – alongside the ever-evolving concept of online banking – have provided a platform in which the majority of customer interactions now take place in a digital format.

The result of this is a never-ending stream of data and digital information. Of course, if used correctly, this data can help drive customer experience initiatives and shape wider business strategies, giving organisations a competitive edge. However, before FS organisations can utilise data-driven insights, they need to ensure that they can adequately protect and secure that data, whilst also complying with mandatory regulatory requirements and governance laws.

Regulatory compliance in FS is a complex field to navigate. Risk comes in many different forms and, due to their very nature (and the type of data that they hold) FS businesses are usually placed under the heaviest scrutiny when it comes to achieving compliance and data governance, arguably held to a higher standard than those operating in any other industry.

Data virtualisation

As a result, next year FS businesses – and others operating in the space – will heavily invest in new regulation technologies and those that will help them to get a handle on their data. One such technology is data virtualisation. Through a single logical view of all data across an organisation, it boosts visibility and real-time availability of data. This means that governance, security and compliance can be centralised, vastly improving control and removing the need for repeatedly moving and copying the data around the enterprise. The best way to ensure future compliance is to control your data. By providing total visibility, next year data virtualisation will continue to emerge as a key tool helping organisations to regain control and win the war for compliance.

Nick Saponaro, CEO of Divi

Bitcoin will find its bottom

It’s difficult to say how long the crypto winter will last as global economic health will continue to exert a major influence on the timetable for the next breakout. We’re not out of the woods yet. We’ll likely see another dip. Then a slow climb back. The last bear market was over two years long. We’re only a year into this one, and the macroeconomic climate is significantly worse.

Growth will come once we’ve hit bottom. While the dollar remains strong, this won’t happen. For that, there will need to be blood in the streets. There’s blood, but it hasn’t hit Mainstreet yet. Once it does, then we’ll know that we’ve bottomed out.

Recession will kick off the next bull market

A recession in 2023 is inevitable. We are already seeing the warning signs. Treasury yields are hitting new highs while the stock market hits new lows. Production has slowed since the pandemic and will likely continue to grind into an extended period of stagflation. Retail confidence is low and will impact spending as people tighten their belts in preparation for the cost-of-living crisis.

The stock market has already taken a beating and will continue to do so as people convert their investments back to cash to avoid further devaluing their position. However, when the volatility begins to subside, they will redeploy back into commodities.

Everything comes down at once in a recession. Initially, you’ll see commodities in particular dip alongside equities. But they are also the first to bounce back again. Once we’re in the throes of a global downturn, we’ll likely see a variance in the correlation between the S&P, the crypto markets, and other commodities markets.

Bitcoin will regain its store of value narrative

It is not uncommon for stores-of-value to take a hit early in a recession with late-stage rebounds. I wouldn’t be surprised to see commodities like gold and bitcoin rebound before most other assets once the recession has taken hold. Bitcoin behaves like a commodity. Like gold, it’s a store of value that has utility. So, there’s a demand for it no matter what’s happening in the macroeconomic environment, perhaps not in making physical things but as a delivery vehicle for eCommerce and financial services.

Corporate adoption will drive mainstream adoption

Brands will be the real driver of mainstream adoption. Next year we’ll see more pilot programs as corporations continue to test the potential of web3. They will move beyond cash-grab NFTs and look at the proper strategic integration into their ecosystems.

Starbucks Odyssey loyalty scheme is a good example. Loyalty is a use case where crypto/blockchain offers an excellent fit and opportunity for brands to innovate schemes that mutually benefit businesses and users.  Development of the underlying App chains will continue making it easier for businesses to build on. Next year, we’ll see consolidation as weaker market participants fail to gain enough traction to scale while others explode into mainstream relevance.

It’s an exciting time. You’ll see more partnerships between brand and blockchain businesses. They’ll bring the customers, and we’ll bring the technology.

Utility will be a fundamental growth vector

Utility is going to be the defining factor for crypto. Without it, all you have are catalysts on which to speculate. As more use cases become apparent and more people build on the blockchain to leverage that utility, the underlying delivery system for that utility – the coins – will increase in value. As the price improves, so will people’s interest.

Retail interest will be revived

Adoption during the last bull run was driven by two technologies. Defi and NFTs. That said, in over a decade of paying attention to the crypto space, NFTs are the most significant drivers of adoption I’ve ever seen. Why? Because it made crypto so accessible that anyone could understand it and get involved.

We now know that people will want to enter a market when you make it accessible, fun and valuable. Much as we did with the era, we’ll see a return to the boom as we introduce easier onramps and more ways to use crypto. It’s why corporate adoption is so important; because they will bring people to us.

The Metaverse

We are in the experimental phase. Next year, we’ll see more brands trialling Metaverse applications they can show off to consumers. This will be the first step in onboarding the public. The Metaverse as we imagine it, “Ready Player One” style, will start as brand popup installations in commercial and retail landscapes. SAMSUNG already has an impressive flight simulator installation in Spain, and we’ll likely see more like that.

However, we’ll also see the definition of the Metaverse move beyond VR and gaming, which are just two aspects of the greater technology. In many ways, the Metaverse is just another aspect of our own reality that incorporates both augmented and mixed reality. It’s anywhere that technology touches and enhances our experience of reality.


Cashless society and how payments will evolve – Today, 95% of businesses accept payments other than cash and 44% of cash-only businesses plan to add other payment methods in the next five years. Society is moving away from a reliance on cash, but for 2023, it’s still about providing the right mixture of different payment methods for customers.

The future of payments in 2023 and beyond: Single-use card machines that simply process payments are a thing of the past – the future of payments is beyond simply processing payments. It’s about providing value-add tools and technology that enable businesses and partners to solve for more than just one problem, while also ensuring the platform’s resilience and enhanced security.

Paul Marcantonio, executive director UK & Western Europe, ECOMMPAY

An emerging fintech growth space, the metaverse, will bring additional function and fun into the world of payments in 2023. We can expect to see innovations in cryptocurrencies and blockchain applications that will be more appealing to the digitally sophisticated audience of early adopters. But there will also be opportunities to utilise payment methods that have been working outside of the metaverse, such as open banking and BNPL.

Any metapayment method explored needs to technically accessible so that there are clearly defined links to traditional currency. But as long as transactions are instant, not close to real-time the payment options will be viable. Metapayments will bring the concept of the consumer to a whole new level in the next few years. The possibilities are endless.

Rory Yates, SVP Corporate Strategy, Global at EIS

As a tumultuous and eventful 2022 draws to a close, I set out my top 10 predictions for the industry in 2023:

Financial stocks always do better in high interest rate environments and insurers in particular will do well

While consumers will cut back on other expense areas, insurance for home, car, health amongst others is essential and will remain a steady source of income for investors.

2023 is the year of innovation and experimentation in the Insurance industry

Against the backdrop of less competition from faltering Insurtechs due to funding issues, traditional insurers have the opportunity to step in and advance the innovation and experimentation. This will manifest itself in particular around improved customer experiences where the aim is to catch up with the precedents set by consumer finance organisations.

The trifecta hits home

Over the course of 2023 and peaking in 2024, a combination of automation technologies (RPA, ML, low/no code), analytics technologies (AI, predictive analytics) and connected insurance (IoT, usage based) will result in more targeted insurance products and increased loyalty.

ESG will dominate the board agenda

Net Zero goals, investment focus and the rise of data-driven sustainability with intensifying headwinds in risk exposure will put this at the very top of the CEO’s list. There will be complexity to overcome, and the road ahead at this stage is far from clear.

New growth through new business models

Embedded Insurance has an estimated $3.7 trillion dollar market potential, and new approaches to customer engagement and risk removal see similar potential. These new areas will help redefine insurance and its role in people’s lives.

The continued rise of insurtechs and neo carriers

Compounding the issues plaguing incumbents, but also creating greater and greater motivation for incumbents to adopt true ecosystem models and take advantage of this emerging marketplace.

Regulating trust

Increasingly, regulators are tackling the need for insurers to act more fairly, and in doing so they are demanding that in a digital age, customers need to be more informed, clearer on their coverage and be able to make choices with their provider with less barriers. This switch can create a “CX pioneers win” paradigm – especially for those that see this as an opportunity rather than an obligation.

The ecosystem of insurers

With the outperformance of the more “tech-enabled” insurer, we will see core technology adoption finally shift the goalpost of agility, allowing movers to adapt faster, enter new markets and develop new business models to outpace the competition.

The proliferation of distribution

It never ends, and will continue to cause underequipped insurers to either lose market share or adapt high-cost point solutions to access and manage new channels.

Underwriting transformation

Developing a fully-automated or data-driven programme that accelerates the underwriting approval process will be a big focus of 2023. Slow underwriting programs prevent life insurance carriers from having a modern agent/customer experience that is fast and self-service. Many legacy systems limit the ability to turn data into useful information for initial and ongoing (continuous) underwriting making this transformation a challenge.

With the myriad headwinds facing the sector, digital transformation will remain a key focus for ambitious insurers in 2023. Sustainability, fairness, and transparency will continue to drive innovation and growth. Automation will enable employee-centric transformation, freeing human capital to focus on the customer. While continued competition both from within and without the sector, will see insurers move away from compete-on-price strategies to value-driving metrics.

Petru Metzger, Head of Payments at Endava

As consumer cashflow reduces, we will not only see a surge in the use of credit and products like Buy Now, Pay Later (BNPL), but we’ll also see new industries adopting subscription models. Consumers will have the option to spread the cost of products and services for everything from fresh groceries to car subscriptions inclusive of embedded insurance and maintenance services.

However, although BNPL will continue to be popular, it will come under pressure due to fluctuating interest rates. As a result, the B2B sector will see a boost in cash advance and other models to help businesses. Beyond BNPL and subscription models, more businesses will move into the FX and money movement space and embedded models will increase – a development that will require complicated B2B2C and C2B2B models.

Dr Ellison Anne Williams, Enveil

How Privacy Enhancing Technologies (PETs) are set to transform the financial industry in 2023:

Data silos and privacy boundaries continue to cripple financial organisations’ ability to fight criminal activity such as fraud and money laundering. Understanding that secure and private data sharing and collaboration are key enablers, we will increasingly see these entities harness technology-powered solutions to overcoming data silos at scale. Privacy Enhancing Technologies (PETs) are already being applied to a broad range of data usage challenges across industries and that usage will only increase in 2023. The category, which has been garnering attention from both regulators and industry analysts for some time, will prove its staying power by allowing banks to securely collaborate across jurisdictions and organisational boundaries.

Barry Rodrigues, EVP Payments at Finastra

Advancing payments and lending in anticipation of customer needs

Evolving customer expectations are putting pressure on banks to redefine their value propositions, particularly as customers consume financial services as a part of the user journey they are undertaking. The embedding of payments and lending into these journeys is already upon us and will accelerate. Embedding payments and lending functionalities will be a key source of revenues for banks, as they develop API-based technologies to extend and provide these capabilities to players that are reaching consumers through different channels.

New rails are being mandated by regulators around the world, supported by innovations such as the new global standard for financial messaging, ISO 20022. At the same time, customer demands for real-time payments are becoming more prevalent and banks risk losing customers if they do not provide this offering, particularly as the costs to switch banks are decreasing rapidly.

The use cases of real time payments, coupled with broader messaging standards such as ISO 20022, will give rise to a host of new services such as Request to Pay or the ability for businesses to offer incentives for immediate settlement of their receivables. In addition to the speed of payments accelerating, the ability to charge outsized margins for cross border transactions will also be dramatically reduced as new payment alternatives become more prevalent globally.

As payment volumes grow, banks will accelerate their adoption of cloud-based technology to lower their operational costs, as they work to cover the costs of transitioning to new standards. They will also seek to modernise their architecture, allowing them to choose what elements of a tech stack they develop themselves and what they use third parties for, utilising a platform that allows them to seamlessly implement third party apps to drive efficiency. The days of banks building all their own technology may be past us, but they will still want to retain flexibility, which a containerised architecture allows them to have.

CBDCs are moving from ideation to reality. More than 100 countries are now involved in a project, while 10 have launched their own digital currency. CBDCs are underpinned by an exciting technology that can bring specific benefits, for example in making cross-border trade and payments much more efficient and cost effective in comparison to traditional rails. In 2023, more governments will focus on developing these use cases to launch or evolve their offerings.

Wissam Khoury, EVP, Treasury & Capital Markets, Finastra

The pandemic, global conflicts, economic and political uncertainty: in the last few years, we’ve witnessed an increased frequency of extreme events that have impacted financial services and placed more strain on a bank’s balance sheet. Additionally, we are seeing fast-changing regulations and increasing cost pressures, meaning banks have to increase their ability to adapt to new demands while decreasing their total cost of ownership.

As these events continue to impact financial services. In 2023 we expect to see an increased importance of the role of the treasury and banks embracing digital transformation to remain relevant. By phasing out their legacy technology and moving their operations into a cloud environment, banks can adapt quicker to ongoing uncertainty and future-proof their investments through systems and solutions that provide the agility, adoption rate and functionality to meet regulatory deadlines. They can also reduce costs, scale their business and improve functionality with faster upgrades and enhanced services.

Shift in the treasury’s mindset

In 2023, we expect to see a continued shift in the treasury’s mindset from ‘build’ to ‘buy’. Banks are increasingly buying the latest solutions from specialist fintechs instead of developing them in-house, but we expect to see particular growth in the ‘as-a-Service’ subscription model due to its myriad benefits.

By purchasing and deploying fully managed solutions which provide functional and technical enhancements in their core, banks can become a future-ready, integrated platform with increased agility and lower TCO through tech stack modernisation and deployment. There will be increased connectivity with ecosystems which allow banks to implement, via APIs, specialised fintech applications which accelerate the rollout of regulatory requirements.

Wissam Khoury, Finastra

Ran Goldi, VP, Payments: Digital Asset Payments at Fireblocks

Today, cross-border payments are slow, inefficient and costly, with the transfer of money between countries dependent on “an archaic network of corresponding banks”. According to the World Bank, these remittances cost a whopping 6% of the total transfer value, with digital channels accounting for less than 1% of total transaction volume.

A recent confluence of factors will enable blockchain-based payments to happen in 2023, especially in the areas of merchant settlement and cross-border transactions. First of all, major jurisdictions in the world are progressing with their stablecoin regulations. In addition, banks are beginning to adopt digital assets with many looking to create their own stablecoins. The use of stablecoins is also becoming mainstream.

Merchant settlement has already seen traction in the second half of 2022. Regulated payment service providers such as Worldpay and are creating offerings for a new generation of customers as merchants look to streamline business operations. has seen over $1bn in merchant settlement via stablecoin since launching their product with Fireblocks in June.

In the upcoming year, cross-border payment is where we will see the highest adoption in blockchain technology. The majority of businesses in the world need to move funds across borders, whether it’s moving funds within the company or paying vendors. Blockchain and digital asset payments reduce cross-border settlement times by 90% and fees by over 80%, making it one of the most obvious and tangible use cases that will see traction in the new year.

David Pierce, director of non-bank financial institutions, Fitch Ratings

EMEA developed markets finance and leasing companies face less supportive funding markets in 2023, alongside pressure on profitability from cost-base inflation and potential impairments. However, the impact on stronger-rated names is mitigated by their proactive hedging and management of debt maturity profiles in recent years, limiting near-term refinancing risks.

Oliver Yonchev, co-founder and CEO, Flight Story

In the fintech space, we are going to see regulation, consolidation, clarity and AI be areas of focus in 2023.

Regulation. Following the FTX saga and crypto crash of ‘22, we can expect to see companies, including both crypto and DeFi protocols, go through a serious regulatory overhaul. Some more mature DeFi and crypto companies will have already begun this process, but the organisations which are in their infancy or scaling up will be forced to comply or face becoming insolvent. These regulatory processes will extend into a standard of communication and marketing practices for DeFi and crypto assets and services, to protect both business and the market as a whole.

Consolidation. As a result of the macro-environment, we can expect to see a number of companies struggle in the year to come. This will mean there will be an increase in M&A to strengthen the position of larger companies. This will go in-hand with current day Web2 fintech powerhouses looking to expand their Web3 capabilities and product offering – for example, Stripe’s recent move into the crypto space. Businesses such as trading platforms and brokerages will start to diversify their platform capabilities to compete in de-centralised, saturated spaces, by adding value with new features, insights and content which drive community.

With many new terms circulating the fintech space this year, some will begin to embody a negative connotation – ie, Web3 will become a dirty word. Instead of pushing for the tech community to become mainstream, we will see the return of ‘the internet’ and ‘internet applications’ which will demystify and remove barriers which currently surround new digital technologies.

AI will play an increasingly important role in finance. For instance, we will start to see trading intelligence being implemented as a way to support retail investors. We will also spot further personalised and automated solutions in consumer banking products, and will see more context-based customer experiences through personalisation, powered by AI [and machine learning] tech.

Michael Reitblat, CEO, Forter

At the pandemic’s start, retailers were forced to implement multiple digital and physical touchpoints to keep shoppers engaged. During this time, we saw options such as buy online, pickup in store (BOPIS) and buy online, return in store (BORIS), contactless delivery and free delivery gain extreme popularity. Merchants that offered these ‘omnichannel’ experiences flourished, and companies that did not struggled – and even went out of business in some cases.

The long-term efficacy of these omnichannel strategies will play out in 2023. More specifically, retailers that harness AI and [machine learning] insights to understand their customers on a deep level (and on the flip side identify who is not a legitimate customer) will create superior experiences in-store and online. Ultimately, this will lead to stronger customer loyalty and lifetime value, all while stopping fraud from impacting the bottom line.

Seth McGuire, CRO of Galileo Financial Technologies

Just a few years ago, many business leaders couldn’t accurately define embedded payments, let alone say they had plans to add the financial technology to their go-to-market strategy. Now, the embedded finance market is estimated to grow to $7.2 trillion by 2030, which is twice the combined value of the world’s top 30 banks today. Industry growth is driven first by consumers embracing digital payments and businesses who are following fast by adopting related technologies.

Embedded finance – mainstream B2B strategy

To better understand this trend going into 2023, we recently conducted research with Juniper to explore the top business drivers behind the accelerated B2B adoption, what businesses are looking for in a go-to-market partner, and what KPIs embedded finance is influencing the most. We learned that 63% of US businesses are already offering embedded finance solutions to their business customers and most (85%) of these business leaders are familiar with embedded finance – making it clear this financial technology has quickly become a mainstream B2B strategy.

Advantages are being realised through a wide variety of embedded finance use-cases, with payments, employee/employer services/benefits and credit/lending comprising the three most prevalent forms of B2B embedded finance currently offered by survey respondents.

For providers looking to ally with embedded finance enablers, it’s advantageous to choose a single partner that’s able to fill the full range of needs required to support such capabilities, as opposed to arranging multiple partnerships to do so. Relying on multiple partners – 78% of US businesses we surveyed are using two or more partners today – can lead to unnecessary complexity, risk and negative customer experiences.

Improve the customer experience, boost customer stickiness

In 2023, we’ll continue to see more Financial Institutions and fintechs offering digital-first tailored customer journeys for business. Companies — whether large or small — are now more likely to order goods, products or services online as they are to call or place an order with a salesperson.

This shift to digital spending brings new opportunities to improve the B2B customer experience and boost customer stickiness. Part of that opportunity is due to the faster, easier, recurring nature of embedded systems, but the additional data and valuable insights that can be captured and leveraged through these customer interactions will be key to the future of B2B embedded finance.

Seth McGuire, CRO, Galileo Financial Technologies

Charles Haresnape, CEO, Gatehouse Bank

Over the last year, we have seen an increase in demand for our products and services. For example, at the end of 2021 we had over 19,500 savers – a number which now lies at over 26,000.

‘Traditionally, there has been an underlying concern that ethical financial products and services might be sacrificed during periods of economic uncertainty. However, we have recently seen young people reaffirm their commitment to ethical finance options against the backdrop of the cost-of-living crisis, marking a distinct and significant shift in attitudes and behaviours.

Recent research, commissioned by Gatehouse Bank, saw almost two-thirds (65%) of savers aged 18 to 24 state that they would prioritise ethical savings, even if this offered lower financial returns, compared to under a fifth (18%) of those aged 65+ who said the same. This has confirmed that younger generations want clean, sustainable, and ethical options that add value to society and financial institutions are beginning to take note of this.

Next year, to address this growing demand, the market will likely see a growing number of ethical finance products on offer, including savings accounts and home finance products. The banking sector will also continue its vital digitalisation journey by improving back-end and consumer-facing tech tools. The UK boasts some of the most promising tech firms and entrepreneurs, so it will be exciting to see what new tools we will have at our disposal by this time next year.

Richard Rajamogan, Principal, Gate One

Retail banks need to shift to a proactive rather than reactive approach to handling fraudulent behaviour. Reactive has helped. At the time, the fraud refund guarantee pioneered by TSB was clearly the right thing to do by both customers, and the bank’s own brand. However, the reality is it has done little to deter fraudsters, and if anything could be said to have encouraged fraudulent activity. The pandemic exponentially accelerated the shift to online, which in combination with the cost-of-living crisis and wider economic backdrop will only see attempted fraud also increase.

They must now invest, heading off the threat of fraud before it impacts their customers.

Technology and controls, partnerships and customer experience

This investment should be directed across three pillars: technology and controls, partnerships and customer experience.

For technology and controls, AI-powered transaction monitoring platforms are the future, but the investment is significant and potential disruption to operations is even more so.  Banks must choose the right tech provides to ensure their platforms not only automate prevention measures but also provide sufficient quality of insight for banks to create effective predictive prevention strategies.

This relies upon extensive integration of these platforms across key systems e.G., CRM, telephony, transactions, controls, data and analytics, so it is important to work with an integration partner that not only understands systems integration but also understands operating model transformation.

The need for banks to show leadership

For partnerships, in order to deter fraudsters from targeting customers, it should be clear that investigative work into fraudulent transactions does not stop within the bank.  Banks must take a leading role to coordinate and collaborate with key partners such as the police, national crime agency, industry associations such as Stop Scams UK and other service providers fraudsters rely upon such as mobile phone operators.

Supporting with targeting and pursuing criminal activity to the point of prosecution sends a clear message to criminals that everyone in the value chain will respond to fraud in a coordinated and aligned effort will boost prevention.

Then finally, customers who believe their bank is truly looking out for them are more likely to remain a customer.  Much more could be done through effective and proactive engagement of customers to educate them on how to spot, report and avoid scams, yet most of the engagement we get from our banks about fraud is limited to blocked transactions and banners within our banking app asking us if we’re sure we are making a legitimate transaction, or warning us about cryptocurrencies.  Banks should focus more on educational communications on how to minimise your vulnerabilities, offer dedicated support or transaction services to provide customers with advice, as well as feedback on customer behaviour to individualise each customer’s understanding of their vulnerabilities.

Richard Rajamogan, Principal, Gate One

Melba Montague, head of banking and capital markets, Genpact

Despite ongoing economic turmoil, the UK has managed to retain its dominance as Europe’s major financial centre and London, as the Silicon Valley for fintechs. While 2023 looks rocky still, fintechs are known for swift innovation – constantly adapting and reinventing themselves – and will ride this wave.

Access to capital will be a huge hurdle for rapidly evolving fintechs looking to continue their scaling journeys across the UK and beyond. The fintechs that capture their part of the pie will be those that focus on – and demonstrate to investors – one word: resilience.

Staying laser-focused on operational basics to prove their worth, especially as the world watches the collapse of cryptocurrency exchange  FTX and [crypto lender] BlockFi. Investors will expect to see fintechs follow regulatory advice, lower their reputational risks, keep customers well-protected, and utilise innovative technology to accelerate and scale their processes and maintain compliance.

BNPL regulatory challenges in 2023

There is also no doubt that regulatory complexities will increase in 2023. Take BNPL as an example. Its explosive resurgence has made it an attractive alternative to traditional spending this year, although not without its risks.

It will be imperative for fintechs to take the high ground and look for innovative ways to both educate and protect their customers whilst getting ready for regulations recommended by the FCA come into play in 2023. BNPL providers have made growth commitments to investors. They will be expected to keep those promises next year, as well as keep operations stable and their customers safe and secure.  

Andrew Haslip, Head of Content for Wealth Management and Asia Pacific, GlobalData

Analysing the trend in profits and expenses at major international banks with substantial wealth management divisions points to a big increase in technology investment in 2023. Inflation, poor financial markets driven by recessionary fears, and delayed technology spending during the pandemic all argue for a big increase in technology-related spending. Wealth manger tech spend is definitely set to be key.

GlobalData has compiled the group technology spend of major banking groups over the Covid-19 period, and despite higher operating costs due to the pandemic, the actual amount of spending on IT-related costs by the 25 largest wealth managers only rose by 6.9% over 2019–21.

This did amount to more than $50bn in IT-related spend at just these 25 banks, a first for the industry, but it is still a relatively tame increase for a two-year period, considering the same banks averaged 11.5% growth in the two years prior to the pandemic. While the pandemic spurred a big shift towards digital across banking and wealth management, big and expensive IT projects were also very clearly put off in favour of this crisis spending.

2022: ‘annus horribilis’

With 2022 turning into the wealth management industry’s ‘annus horribilis’ amid a major war in Europe, rolling lockdowns in China, double-digit inflation, sharp interest rate rises around the world, cratering financial markets, and the prospect of recession, wealth management profits are diving after reaching all-time highs in 2021. And with many of these issues extending out into 2023, prospects for a quick rebound next year seem fanciful.

Big investments in tech upgrades and increased digitalisation

So, with the growth revenue likely to be poor in 2023 and inflation providing sustained pressure on the cost line, wealth managers will rediscover their zeal for structural improvements in efficiency. And that means big investments in technology upgrades and increased digitalisation. With the low-hanging fruit long since addressed by these leading banking groups, this will, unfortunately, require big spending. But with private bank executives under pressure after 2022’s poor figures, the promise of long-term improvement in cost to serve and efficiency gains will likely win over boards eager to safeguard a division that has shown itself able to generate attractive profits like it did during 2021. Expect to see a return to double-digit IT spending growth.

George Trotter, Analyst, Thematic Research, GlobalData

2023: The year in which wearable tech will change the world

Wearable tech is on the precipice of becoming an absolute must-have in everyone’s life. The concept has existed since the 1960s, when Casio released a watch that doubled as a calculator. It was not until the 2010s that companies started using the Internet of Things (IoT) to bring wearable tech into a new dimension. The release of Apple’s first smartwatch in 2015 broke new ground, creating a wearable tech craze where IoT was used to monitor a person’s activity and allow collaboration between several devices.

Consumer IoT, comprising three distinct markets (automated home, connected car, and wearable tech), will constitute 27% of global IoT revenue in 2022. Wearable tech will be the largest and fastest-growing segment by revenue in 2023, reaching a market size of $126m.

The wearable tech industry might struggle

In the first half of 2023, consumer spending on expensive, non-essential products—such as smartwatches and VR/AR headsets—will remain flat due to the looming threat of global recession, growing unemployment, and depleted disposable incomes. The situation will likely improve in H2 2023, provided the recession and supply chain disruptions stabilize. Customers will also demand more appealing use cases for wearables at affordable prices, such as holographic communication and remote asthma monitoring.

Secondly, there will be problems surrounding data privacy for wearable vendors. Wearable devices generate massive volumes of personal data from users, including Biometrics, location, email passwords, app activity, and even recorded conversations. The increasing use of augmented and virtual reality (AR and VR) devices for the development of the metaverse will only add to the data volume and variety.

The data will be stored in cloud servers, which are already vulnerable to hacking or potential misuse by advertisers and vendors. Thus, actions such as the use of consumers’ personal data for profiting, or the inability to protect user data from being illegally accessed, will increasingly be treated as unethical for any vendor. This will threaten their commercial success, impact investor confidence, and invite regulatory scrutiny. For this reason, investment in data privacy will be absolutely essential for these wearable vendors.

A new wave could be imminent

Wearable tech will play a pivotal role in the development of the metaverse, which is expected to develop massively in the coming years. To experience the true metaverse, virtual goggles are necessary, with this technology being at the center of many companies’ plans—such as Meta with their release of the Meta Quest Pro. It is expected in 2023 that VR-based collaboration and training will become important use cases for emerging enterprise-grade metaverses. Companies are going to be forced to use headsets for task-specific uses such as employee onboarding, virtual events, and collaboration. Investment in headsets and VR will be essential in 2023 as they are a critical enabler of the metaverse, a mega-theme that is going to revolutionise digital media.

Overall, along with most other industries, it will be difficult for wearable tech to increase demand during the economic crunch. Households will be saving money instead of buying these new products. However, the growth of this industry means that there is now a variety of wearable tech products using IoT, ranging from smart jewellery to smart implantables. Many of these offerings can be used to save lives and, with companies such as Neuralink with their nanotechnology and Garmin with their updates on smartwatches improving fitness, it is expected that wearable tech will remain unaffected by this economic downturn.

David Bicknell, Principal Analyst, Thematic Research, GlobalData

Cybersecurity: what 2023 will bring

The close of the year provides an opportunity to look forward with hope to the next. And that is particularly true when it comes to cybersecurity.

2020 and 2021 were rough years in terms of rising cyberattacks because of the remote-working boom amid the COVID-19 pandemic, the developing ransomware and supply chain attacks, and what the Colonial Pipeline attack told us about the risks to critical national infrastructure. 2022 was probably even worse due to the geopolitical and economic fallout from the Russia-Ukraine war.

So, what might 2023 hold? These are some of the cybersecurity conclusions from the Thematic Intelligence Tech, Media and Telecom (TMT) Predictions 2023 report.

Cyber professionals at breaking point

Continuing cyberattacks means that cyber professionals are reaching their breaking points. According to Microsoft Active Directory log data for 2022, there are now 921 password attacks every second—nearly double that of a year ago.

The rising rates of cybercrime, and subsequent media coverage, are putting huge pressure on already hard-pressed cybersecurity teams. The ongoing cybersecurity skills crisis offers little prospect of reducing the immense pressure on those teams, as it is challenging to attract and retain cybersecurity professionals to help keep businesses secure. So, in 2023, it is likely that cyber teams’ mental and physical well-being will continue to be threatened by their workload.

Organisations will prioritise zero-trust capabilities in 2023

Zero-trust means assuming that whatever entity is trying to gain access to an organisation’s IT applications is untrustworthy until its identity and hygiene are verified. The US government has mandated that its agencies must migrate to a zero-trust strategy by the end of 2024. This will involve stronger security measures such as phishing-resistant multi-factor authentication and network traffic encryption.

By the end of 2023, the level of success of implementing zero-trust applications across organisations will become clearer. A key factor will be whether organisations have the necessary cyber recovery and data protection skills.

AI will be the hallmark of a major attack in 2023

The rise in cyberattacks has catalysed the growing adoption of AI-based security technologies for defensive purposes. AI can swiftly analyse millions of datasets and identify various cyber threats. However, AI will also increasingly become a malicious tool to create advanced cyber threats, with hackers launching increasingly sophisticated attacks. AI can be used to create smart malware programs that alter algorithms at such a speed that reacting to them becomes very difficult. Hackers can also manipulate AI systems to behave insecurely when presented with anomalous or malicious inputs.

Organisations will receive stricter advice on the payment of ransoms

Ransomware is a continuous threat, with its exponents becoming ever more ruthless in their methods and launching more devastating attacks. According to the EU Agency for Cybersecurity (ENISA), the ransomware business model is projected to cost more than $10 trillion by 2025, up from $3 trillion in 2015. In the US, North Carolina and Florida have prohibited state and government agencies from complying with or paying ransomware demands. Clarity must emerge from law enforcement, governments, and regulatory organizations in 2023 to tackle a rise in payments to ransomware-driven cyber attackers.

Multi-factor authentication: the vegetable of cybersecurity

Let us go back to those 921 password attacks a second. A recent article pointed out that basic multifactor authentication (MFA) can protect against 98% of attacks, but most companies are not using it. It is a bit like people not eating their vegetables; everyone is aware of the benefits, but a majority of people do not do it.

Microsoft suggests three reasons for its lack of adoption:

  • MFA costs too much. Security team resources are already at a premium, so adding an additional tool to their portfolios can be a tough sell.
  • They think their users will hate MFA. Users want to be productive wherever and whenever they are working without sacrificing their organisation’s security. Conditional access is one modern approach to MFA.
  • MFA is too hard to deploy. But organisations can use conditional access policies to protect cloud implementations, as opposed to relying on a physical server or software.

Ultimately, an enterprise must be able to protect its own operations and users from ongoing cybersecurity threats. And MFA is just one tool in a security team’s kitbag.

Only time will tell see if users’ approach to MFA changes in 2023.

David Bicknell, Principal Analyst, Thematic Research, GlobalData

Kevin Schultz, CEO of Global Processing Services

Payments as a business enabler

Having been in the industry more than 40 years, I continue to be impressed with how payments growth shows no sign of slowing.  The number of non-traditional players who now offer payments as a core offering is really amazing.  To both grow and evolve simultaneously is no small feat, and speaks to the extreme value of payments to consumers around the world.  The success that we at GPS are happy to fuel is based on consumer reliance and reliable services.  Successful firms—be they traditional financial institutions or newcomers—will continue their growth trajectory because they understand these fundamental truths.  Consumer trust is paramount and must be at the centre of everything these firms offer.

Sustainable business growth

Against a backdrop of challenging economic headwinds and high inflation, I think the over-arching focus for 2023 is likely to be sustainable growth, powered by digital payments technology. And any company with a focus on cloud services stands to do well in 2023 too. To move fintech forward, there are a few key issues which spring to mind. These cover the domains of business fundamentals, policymaking and trust.  As an industry, we’ve got to stay focused on solving real-life problems for ordinary people. And we must get back to basics and focus on how much services cost and how they can achieve profitability. Faster, leaner research and development processes are the name of the game there.


2022 saw the era of cheap money come to an end, and that has had and will continue to have implications for all of us in the fintech ecosystem. Thanks to greater scarcity of capital investment and the continued challenging economic landscape, I expect we will see fewer new organisations emerging with bold payments or fintech offerings in 2023. Higher interest rates shorten investor time horizons, so start-ups simply have less runway than they had in the past. Proven entities, on the other hand, become more attractive to investors in this macroeconomic climate.


Payment systems worldwide are under increased pressure to mitigate risks of fraud and to defend against persistent attacks from criminals who continue to grow in sophistication. As businesses continue on their digital transformation journey’s, cyber risk becomes an ever-prevalent concern. It certainly keeps me awake at night, as I am sure it does every senior leader in our industry. Minimising payment fraud is a strategic priority for both GPS and our customers worldwide who put the protection of their cardholders’ accounts first and in 2023, I expect we will see companies investing more in their risk management capabilities.


As always in the payments space, every player must remain keenly aware of the regulatory landscape in all the markets in which they and their customers operate. This climate can produce both growth tailwinds and debilitating headwinds, depending on the issue. In particular, we can expect data privacy, the stability of the crypto market and BNPL to continue to command the attention of legislators. The smartest players will not just track the regulatory landscape, but get ahead of it and shape it too. Companies like Zilch, which take a proactive approach to guidance and compliance, will be rewarded for that behaviour.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

Inflation set to stay sticky

Supersized rate hikes now appear to be in the rear-view mirror, as data filtering through indicates that the rate of price growth is slowing. But although inflation may have reached the peak, that doesn’t necessarily mean it’s a smooth downwards path from here. There is still the potential for plenty of pain ahead, as stubbornly high prices continue to cause severe headaches for the economy. Although a recession will dampen domestic demand, many of the inflationary pressures have been external, and as Russia’s offensive continues in Ukraine and energy prices stay unpredictable, it’s not certain how quickly prices will come down. The Bank of England has forecast that inflation will be around 5% by the end of 2023, but as ever with forecasts, there are no guarantees.

Energy prices set to stay volatile

Uncertainty is coming in waves in energy markets as the choppy tides of supply and demand push up the oil price but keep a lid on big gains. There are expectations that there will be less crude available to buy given the $60 cap on Russia oil which means it can’t be shipped using EU or G7 tankers, insurance or credit lines, unless it’s below that price limit. However, Russia has vowed to circumvent that by leasing tankers elsewhere, and it seems likely that significant flows will be re-routed to friendlier countries.

OPEC+ has adopted a wait and see policy, before introducing any further change to its already lower production targets.  It’s also unclear how the Covid situation in China will play out. Investors have been clinging onto hopes that there will be a further softening of strict pandemic policies. A rapid turnaround for China is unlikely given that the expected surge in infections will be another huge challenge to navigate, and once the economy does re-open, demand for oil and gas is expected to ramp up again. Gas storage facilities in Europe which had filled above 90% are already lowering as the cold snap continues, and the energy security shock may just have been delayed, not averted.

A housing market downturn is likely

There will be some big shifts in the mortgage market next year as lending plummets in the face of the cost-of-living crisis.  Affordability is already being hit by the sharply rising costs of borrowing, making people more hesitant to take that next step on the housing ladder. UK Finance predicts property transactions to fall by more than a fifth over the course of the year.  This will see a return to pre-pandemic levels of borrowing, but with buyers hibernating as the market freezes, house prices are set for a tumble.

There is still the hope that relatively high employment and low housing stock will prevent a prolonged downturn. However, now confidence has taken a knock, buyers aren’t going to be flooding back to the market in a hurry and there is a risk that a deeper dip will be on the cards.

The US housing market is heading into 2023 still in correction territory, and with optimism seeping away, it could spell further repercussions for the economy as a recession sparked by house price falls has historically been shown to be deeper. In China too, a property house of cards has not yet been fully stabilised, despite recent efforts by authorities to prompt banks to be more lax with lending criteria.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown

You’ll pay more tax

The round of tax hikes in the Autumn Statement made for miserable reading, but even before that we were on for higher tax bills, because the freezing of the income tax thresholds means that wage rises will push more people into paying more tax – and push enormous numbers of people into higher tax bands. These kinds of stealth taxes tend to slip under the radar but can have a much bigger impact than a tax hike. The Institute of Fiscal Studies estimates that freezes to personal tax thresholds will cut household income by an average of £1,250 by 2025/26.

On top of that, the Autumn Statement brought bad news for higher earners, as the additional rate threshold was cut from £150,000 to £125,140. For those who run their own business and pay themselves in dividends, and for investors with large portfolios outside an ISA or pension, there’s also the threat of more dividend tax as the allowance halves in April. For those investors there’s also the risk of capital gains tax after the allowance for this is halved in April too. When you add in higher council tax and the frozen inheritance tax bands, we’re being stung for more tax on all sides.”

And your energy bill will rise

Through the volatility of the wholesale energy price, the Energy Price Guarantee will keep a lid on energy prices into 2023. However, annual bills for the average user will still rise to £3,000 from April, and we’ll lose the universal lump sum payments at that point too. It’s a long way short of the horrors we could have expected without the guarantee, and there will also be extra cost of living payments for those on means-tested benefits, pensioners and those receiving specific disability benefits, which should help those who will struggle the most with higher bills. However, for average earners, we know we’ll be getting less help with more expensive bills.”

Mortgage interest rates may fall

Lower expectations for inflation is good news for borrowers, because although interest rates are expected to keep climbing into the start of next year and hit somewhere around 4.5%. assuming there’s nothing unexpected lurking in the months ahead, they’re soon expected to drop back again as the recession takes hold. These lower-than-expected forecasts are already feeding through into lower fixed rate mortgages, and we’re likely to see those come down further.”

Savings rates may drop back too

For savers, the news is less positive, because those lower rate expectations have already seen some of the most competitive fixed rate savings deals pulled, so we’re likely to see these ease off as we head further into 2023. However, the good news is that with inflation forecast to be around 5% by the end of next year and under 2% in 2024, there’s a chance that the best two-year fixes could still beat inflation.

There may be less positive news for jobs

We’ve got used to a buoyant jobs market in the past few years, so more people have had job security and plenty of alternative options. The picture isn’t expected to alter radically overnight, but we have seen unemployment increase slightly and vacancies fall in the latest set of figures, and once recession takes hold, we may well see more uncertainty and insecurity filter through into the jobs market.

Helen Morrissey, senior retirement analyst, Hargreaves Lansdown

We will continue to debate the state pension triple lock

The decision to reinstate the state pension triple lock was greeted with a sigh of relief by pensioners who were banking on getting a bumper 10.1% increase in their state pension from April. The decision to suspend it last year was viewed by many as a first step towards getting rid of it long-term and the mixed messages leading up to the mini-Budget certainly didn’t help matters. Its return was announced during the Autumn Statement, but it remains a divisive policy with many believing it is unfair to younger generations and the spiralling cost of providing the state pension will continue to stoke debate as to the triple lock’s long-term future.”

We could see further rises to state pension ages

The state pension age has risen rapidly in recent years and currently stands at age 66 for men and women – with a shift to age 67 by 2028. The timetable outlines that the shift to age 68 should happen by 2046, though the government has been open in saying it believes it should happen earlier – by 2039. The timetable is subject to a state pension review due to be published early in the New Year, with the author needing to weigh up managing the eye watering costs of providing the state pension against the fact that the rapid increase in longevity is slowing and that many people simply can’t keep working that long. Rumours are already circling that the timetable could be pulled forward even further – perhaps to as soon as 2033 – a move that would cause dismay among many older workers.

Prakash Pattni, MD for financial services digital transformation, IBM

The fintech space has gone through immense changes in recent years, with the emergence of new business models and services in areas of rising demand, from digital assets to mobile banking services. At the same time, new offerings and collaborations between fintech and banks have created new areas of risk, attracting the attention of financial regulators. In 2023, we could see increasing regulatory scrutiny and this is where hybrid cloud capabilities and industry clouds will have an important role to play. Industry-informed and standardised built-in compliance and security controls can make specialised cloud platforms vital to reduce risk throughout the industry, particularly to help facilitate secure and compliant collaboration between fintechs and banks.

In 2022 we also saw an increasing focus from both consumers and financial institutions in tracking energy usage and environmental impact. Measuring progress towards sustainability goals is top of mind for financial services businesses, which need to share this data to meet regulatory requirements and keep stakeholders informed. As a result, there is going to be a larger focus on technology that improves energy efficiency across entire IT operations without sacrificing security or performance.

The rise and rise of ESG

Banks and fintech will look to a hybrid cloud approach to build and run applications on a smaller footprint and help reduce the carbon footprint, allowing them to optimise their progress towards environmental, sustainability and governance goals.

Another trend that is set to accelerate in 2023 is the shift from fintech services focusing mostly on the consumer-facing elements of digital banking, to solving deeper digital transformation challenges in the mid- and back-office systems of financial institutions. As part of this journey, we’ll see banks modernising further by making more strategic decisions about where to deploy their applications and workloads across their hybrid cloud platforms, leveraging mainframes and public clouds more seamlessly to speed up innovation and bolster security.

Colum Lyons, CEO and founder of ID-Pal

To deliver true fraud prevention, identity verification solutions must be secure, seamless and scalable. The challenge of preventing customers from dropping off during onboarding persists in banking and payments. Having an onboarding journey with any friction or that is not secure impacts your business, frustrates genuine customers, and in terms of fraud, can give bad actors the opportunity to take advantage of loopholes.

In the conversation about fraud prevention, databases can dominate. But databases are not the single source of truth to use when trying to tackle fraud.

In the past, the industry could only choose from identity verification solutions that are database-reliant and powered by manual review in the background. Even hybrid approaches of blending manual and digital carries an increased risk that data is not being processed correctly, and ultimately no security over who is exposed to it. There is a greater risk of data theft, data loss or data flight plus the margin for human error increases.

Using digital ID&V solutions that integrate with existing processes, including legacy systems in place, and enhance the user experience by using biometric, document and database checks is the approach the payments industry need to take and to move a database-first mindset.

Like in a sports team, while you are only as good as your strongest player, they still need excellent supporting players to boost their performance.

Everyone understands the risk of fraud and the importance of fraud prevention. What’s needed is education on having a document-led, database-supported approach to strengthen your AML/KYC strategy. The honest truth is that current databases are operating off diluted data that very likely has been exposed or weakened. Organisations should as a rule be matching documents to the document owner, to affirm the results of these databases and connect the data to a real person from a government ID.

Therefore, being database-first in your AML and KYC framework is limiting the potential of your fraud program. And who wouldn’t want to have the strongest defence available when so much is at stake?”


Cash vs Card will continue to be a big topic of conversation as we move towards a cashless society 

  • Concerns that cashless developments will alienate older generations or less tech-savvy members of the public, and
  • A recent move by the Irish bank AIB to go cashless was quickly reversed following public outcry

Digital payments will continue to increase

  • The UK, Germany, and France are currently the three biggest EU markets for cashless payments
  • 1.3 billion contactless transactions made in the UK in 2021, the majority made with debit cards, with only 1 in 6 payments were made in cash

Crypto payments will become more widespread

  • There is a high market demand to transition the offering from online investment to an in-store payment solution
  • In the age group 18-54, a third of people have invested in cryptocurrency
  • 70% of crypto users would make purchases if they could do so instore using wallets such as Apple Pay

John Castro, CEO of Investment Mastery

As cryptocurrencies have started to enjoy wider global acceptance in recent years, businesses and financial institutions have been slower to join the trend. Perhaps wisely, the business community has been more cautious in its approach to adopting cryptocurrencies than previously anticipated when Bitcoin first launched in 2009.

The tide is shifting though. The ever-changing digital marketplace has meant we’re now seeing increasingly more household name brands such as Microsoft, Google and Starbucks embracing payment in Bitcoin for some or all of its services or certainly trialling it. As 2022 draws to a close, over 15000 companies are excepting Bitcoin as payment around the world.

As more businesses take the plunge into the crypto world and off the back of one of the most volatile years in crypto history, what changes can we expect to see over the next year?

2023 crypto predictions

Like the stock markets the crypto market is struggling against a backdrop of high inflation, the soaring cost of living, and a recessionary environment. As such prices have dropped a lot. However, sit up and take note those businesses who are looking to break into cryptocurrencies, 2023 could be a promising year for these three key reasons:

  1. The entering of institutions: What we are seeing now and what we will be seeing more of in 2023 are more and more reputable institutions entering the market. Pension funds are adding cryptos to their assets for the first time, then news broke earlier this year that BlackRock is partnering with Coinbase to deliver crypto to their customers, and Fidelity and Citigroup are joining with their millions of clients. As the market inevitably becomes more regulated, we can expect this trend to continue which is set to encourage overall market growth.
  2. The formation of partnerships: As well as reputable institutions entering the market, 2023 will be bolstered by new partnerships between crypto and big business. We’re seeing Amazon partnering with Ethereum and Solana among other cryptocurrencies and blockchains to host their cloud service. This has made the idea of crypto payment more attractive to business leaders around the world. As more businesses adopt cryptocurrency, we are likely to see a more stable crypto market in 2023.
  3. Bad players leaving the game: Like any market, crypto has had its share of bad players. In 2022 the market lost a lot of value thanks to the likes of Celsius ftx. This has inevitably shaken investors’ faith having a knock-on effect on price. But as these bad payers are knocked out, we predict that much needed trust will be rebuilt throughout the next 12 months. This will help lead to an increase in crypto value and potentially less volatility.

With reputable institutions entering the market, powerful partnerships being formed with big businesses and the removal of those giving crypto a bad name, my prediction for 2023 is that demand for cryptocurrencies and blockchain technology is only going to increase. And with supply staying the same thanks to the very nature of crypto, thanks to the old adage of supply vs demand we can expect the price to inevitably increase.

So, could a Bull market be upon us in 2023? Time will tell but one thing is for sure, cryptocurrencies are here to stay. It’s time for businesses to put their game faces on.

John Castro, Investment Mastery

Miguel Traquina, Chief Information Officer at iProov

As bank branches close, 2023 sees banks forced to address accessibility.

More than 320 UK bank branches are set to have closed by the end of 2022, following a trend of steady closures in the last decade, accelerated since the pandemic. We all know financial services have become increasingly digital in recent years, and the majority of us are happy to bank online more and go into branches less. It also makes sense financially for banks to recoup expensive high street rent and staff costs by closing more branches – but banks cannot forget their responsibility to remain accessible to all.

In a turbulent economic climate, banks are already under pressure to show they are doing more to support their customers through tough times. In 2023, they will be forced to address accessibility and take action to ensure their virtual services are inclusive to all, compensating for further branch closures.

Closing branches potentially puts groups of people at risk of financial exclusion – those living in rural areas, the elderly, those with physical and cognitive impairments, and others. Funds saved from closing bank branches should be reinvested into banks’ online products so they are easy to use and readily available.

Banks that aren’t already doing so will start offering biometric face verification to replace passwords and other clunky online security methods, so that every customer can easily access their accounts and carry out transactions. Thanks to the security that face authentication offers, everything from applying for a credit card to making a large payment can be done remotely rather than requiring an in-person visit.

Face verification is a compelling option from an inclusivity perspective – all that’s needed is a device with a user-facing camera, something nearly all the population has access to, with no costly additional sensors or devices needed.

Biometrics alleviates the stress of remembering complex credentials which, for many, can be a real challenge. This is also why implementing passive authentication is important to ensure maximum accessibility. With passive authentication, the technology does the work while the user just looks at the device. Other solutions require the user to move or read out words, which can result in cognitive overload, frustration and online transactions being abandoned.

As access to funds becomes an even more vital lifeline in the face of a recession, 2023 is the year banks step up to keep access open wherever and whenever their customers need them.

Thomas Coughlin, CEO at Kinesis Money

Gold is the universal constant and, relative to weakening fiat currencies, it will do what it always has done as a stable and enduring store of value; hedge against inflation and currency devaluation. Gold has always been the safe haven asset of choice amongst prudent investors and now gold can be used as currency with utility and accessibility as well as paying yields. As the cost-of-living crisis deepens globally, now is the time to rethink our relationship with gold.

Functionality: gold was phased out because of its impracticality but modern tech has allowed for digital gold which can be spent on everyday transactions

Stability: as people lose faith in fiat, they flock to alternative assets – hence why cryptocurrencies have been so popular. Gold-backed stablecoins provide stability and appeal as an alternative payment method

Inflation-proof: gold is a historical inflation hedge, so as rapidly rising inflation, poorly performing assets and savings, and alarming levels of national debt cause people to lose faith in their country’s currency, gold could take over.

Magnus Larsson, CEO and founder, MAJORITY

2023 will be the death of many specialised neobanks. Looking at the initial wave of neobanks, the majority have become country-specific bank challengers such as Chime in the US, Monzo in the UK, Lunar in the Nordic countries and N26 in Germany.

A second wave of more verticalised neobanks have emerged. This includes Greenlight and Step for kids and teenagers, Current for the LGBTQ+ community, Kinly and Greenwood for African-Americans, SABEResPODER and Fortu for Hispanics and MAJORITY as an immigrant-focused banking subscription with various international resources.

This year, the financing situation has changed drastically. Valuations have dropped significantly, especially in the fintech space, with a general negative sentiment towards fintechs and many of them losing up to 80% of their valuations. We are now seeing many neobanks have had to scale down or close; in the last few weeks we saw Stilt closing shop, and that trend will continue next year.

The question is how will the future emerge? Banking is for sure a massive market and there will likely be a number of winners, but in order to survive, I believe there are a few things that you can’t cheat. You have to have a real customer problem to solve; you need a target group that is big enough to build a large business; you must have a revenue and margin model that works; and you need to have a customer acquisition strategy that isn’t built on spending all your money on Meta and Google.

The winners will be more obvious next year, as investments will mainly go to the companies that can show the above and prove to be relevant through turbulent times.

Magnus Larsson, MAJORITY

Werner Knoblich, chief revenue officer, Mambu

In 2022, we’ve seen a growing interest from Big Tech in finance, with the likes of Apple breaking into the space by introducing Tap to Pay and partnering with PayPal, it won’t be long before others follow suit. In comparison to fintechs, big techs have the reputation, technology and consumer data to help inform their strategy in the market.

However, as we’ve seen many times before, a crisis can lead to opportunity. For example, a fintech with a low valuation presents a great opportunity for legacy players that are looking to expand their digital offering and have the capital to leverage.

This year alone, we’ve seen a sharp rise in the number of mergers and acquisitions in the fintech space and the prime driver for this is increased interest rates and overstretched valuations of high-growth companies. This is likely to continue in 2023 as more opportunities arise and fintechs are seen as more of a friend than a foe.

We’ve seen established banks like JP Morgan acquire new fintechs like Renovite or launch a digital bank as they did with the launch of Chase in the UK. As such, it’s becoming easier for more traditional players to make big moves as there are fewer fintechs in the space and less competition. The advantage of spinoffs is you have more neo-banks who don’t need to ask for banking licences which have become few and far between.

In 2023, I believe fintechs and banks alike will partner more closely to adapt to the changes 2022 has presented. After all, agility in uncertain times is in a fintech’s nature and by design what they’re built to do.

Luke Trayfoot, Chief Revenue Officer, MANGOPAY

In 2023, fintechs need to prioritise providing merchants with sophisticated fraud detection and prevention capabilities to effectively secure the growing marketplace economy. The architecture of marketplaces creates a two-sided fraud risk for any given transaction. This can damage a marketplace’s reputation on both sides of the equation, making buyers less trusting and driving away top sellers.

Operators need compliant and scalable tools that assist in the quick detection and prevention of fraud. In 2021, merchants spent nearly €7bn in 2021 on fraud prevention, which is more than three times the value lost to fraud in that year.

This is evidence that current practices are unsustainable. As margins are squeezed and the economy remains turbulent, fraud and its wider impacts are another pressure to mitigate against next year. Merchants will require support from fintechs to create shopping environments that are compliant with all relevant regulation and align with the needs of today’s consumer.

Jeff Parker, Managing Director International at Marqeta

We have seen significant changes in the fintech space in 2022. As UK inflation continues to rise, consumers are turning to digital technologies and banking alternatives which can offer better rates to make it easier to distribute funds and increase flexibility and financial control.

Marqeta’s recent annual State of Credit research found that credit is increasingly helping consumers cope with the cost-of-living crisis, with well over half of respondents (57%) saying they used credit cards to make ends meet over the last year. As a result, consumers surveyed by Marqeta were continuing to seek more flexible options to traditional credit, and as the world of commerce has evolved to become increasingly digital, they are exploring alternative options to traditional banks.

Further Marqeta research into how consumers are engaging with the Lending 3.0 landscape supported this, finding Buy Now, Pay Later (BNPL) options to now be the most widely known type of non-traditional lending, familiar to 78% of survey respondents. Young people surveyed who are relatively low earners are especially seeing value in using BNPL.

With a possible recession on the horizon suggesting further strain ahead on consumer finances, non-traditional lending may increase in 2023. In a recession, many people will have less disposable income, which means they are more likely to turn to non-traditional lending options to make it through the month. This could lead to more people borrowing on smaller items and then repaying faster than standard non-traditional lending.

I expect that in 2023, convenience and flexibility will be essential for consumers and as individuals become more aware of their budget constraints, they are also more likely to look for more from their credit card provider. With consumer demand for BNPL services still growing, BNPL may become a firmer fixture in the lending landscape. This can serve to widen the access to credit and increase choices for people using credit.

Over the next twelve months, as UK households continue to battle against the rising tide of the cost-of-living crisis and a possible recession, I expect there will be increased consumer demand for and reliance on innovative credit options. Offering flexible credit options, smart budgeting options, and better insight into spending can throw struggling households a lifeline.

Amid a changing macroeconomic landscape, banks and credit card providers have an opportunity to connect more effectively with customers by offering modern and flexible card programs that meet the changing demands on consumers.

Immad Akhund, co-founder/CEO of Mercury

The fintech sector will no longer be a monolith

For too long, all of fintech has been lumped into one box. The current fintech categories that exist will further differentiate and become tech sectors in and of themselves. Insurtech, lending tech, neobanks and other categories are all different and have good business models that do well. I expect they will all continue developing niche technologies that cater to their specific audiences, no longer being bound by the larger industry standards, and will drive new levels of innovation in their respective spaces. Specifically, fintech infrastructure will emerge as its own leading category within fintech more broadly.

The question isn’t whether there will be a recession next year, but rather how bad and who will it affect

For the startups who raised at massive valuations in 2021, there will come a point next summer when they won’t be able to raise in a recessive environment. That means 2023 will likely be worse than 2022 in terms of layoffs, high interest rates and an overall decline in startup funding. I expect Seed and Series A rounds to happen, but big rounds at later stages will be less likely.

It’s just not clear how bad 2023 will be. We’ve had a year of market downturns and stock markets generally bottom out 18 months before recessions end. So, there’s a scenario where 2023 could actually be fairly good in the stock market even if the recession isn’t great. I’m pessimistic about next year, but super bullish on 2024 as the new crop of startups mature and trends like AI develop.

For founders and investors, the wheat will separate from the chaff

The founders I talk to now seem more committed and determined about what they’re building than before. The founders I’m seeing now are true believers. Last year there was no downside to being an entrepreneur – you could quit your job, raise money and have fun. Those days are over. It also means that it’s a great time to be an investor, if you’re serious about it. Investors have the opportunity to fund the rising stars and be critical with their investments, only investing in the founders they believe can get through economic uncertainty and lead the next wave of innovation.

At least one hot product-led growth company will be acquired next year

There were a lot of strong unicorn companies who never would’ve considered an acquisition this year. But the faltering economy and increased difficulty of fundraising or going public will force the process of natural selection among startups – where only the fittest survive and others are forced to fold.

We saw this with Figma but I think that’s just the start, I think there will be a number of hot product-led growth companies like Notion, Airtable, Loom, who wouldn’t have considered selling this year who might in 2023.

Elizabeth (Elle) Kowal, COO, MineralTree

Businesses Embrace Managed Services to Drive Increased Automation in AP

While the pandemic caused significant, ongoing challenges across business operations, nowhere in the back office was its impact felt more acutely than in Accounts Payable (AP). That’s because of AP’s strategic role in paying vendors on time and ensuring strong relationships to ensure access to business-critical resources. And business executives continue to put pressure on financial leaders to pay vendors on time to keep goods and services flowing.

Historically, businesses have addressed operational issues by adding headcount. However, this is not a viable option today given the shortage of solid candidates, rising wages, and prioritisation of customer-facing hires. For those that are able to fill their open roles, many still struggle to solve the inherent inefficiencies and unnecessary costs of manual AP processes.

ePayments play an integral role in AP automation because they deliver significant benefits to both buyers and suppliers by way of operational efficiencies, speed of payment, financial visibility and cash flow control. Yet, adoption creeps along. One of the biggest obstacles cited by finance professionals centres around their perception of the time and effort it takes to set up ePayments, including contacting and enrolling vendors.

Managed services: dividends for both buyers and sellers

Some AP solution providers are addressing this obstacle by adding ‘managed services’ to their offerings and it looks like it will add big dividends for both buyers and sellers. Managed services take on the time-consuming administrative tasks involved in executing payments, onboarding vendors, updating payment information, responding to inquiries, and resolving payment questions. They allow both buyer and supplier finance teams to work more efficiently and focus on finance priorities, while also strengthening supply chain relationships.

As an extension of the finance team, AP solution providers can not only help drive more ePayment spend today, but also expand the benefit as more vendors sign on in the future. The solution provider can also help the finance team maximize savings by optimising the payment mix and encouraging virtual card adoption to increase rebates.

As part of their managed services offerings, AP automation providers can also handle the intake of payment details from vendors, including bank account information for ACH payments. This removes a key administrative burden from AP teams, freeing up time to focus on other priorities. Because these providers often employ rigorous process controls and protocols to safeguard sensitive information, they also help mitigate fraud risks.

AP Automation + managed services

Additionally, managed services providers handle all vendor inquiries, so the AP team doesn’t have to – removing a major time sink from operations. This gives AP teams more time to focus on core functions and identify strategic payment opportunities. At the same time, because managed services providers are focused on vendor services, they can respond promptly to inquiries, helping to increase vendor satisfaction and improve relationships.

Elizabeth Kowal, COO, MineralTree

Lili Metodieva, managing director, Monneo

It was probably long overdue, but after years of causing disruption within other sectors the world of fintech was disrupted itself in 2022.

At the beginning of the year, a downturn in investment capital into the sector was a huge source of concern. Thankfully, as the months have progressed the situation has begun to get a little better. However, I still don’t feel like things are totally back to normal.

Therefore, as we move into the new year, I predict we will see continued uncertainty across the fintech sector. It’s only anecdotal evidence, but very few of the businesses that I speak to seem to be excited for the coming year, which may suggest they are anticipating another tough 12 months. It’s easy to see why, businesses face several challenges right now, all of which seem destined to run into 2023, and possibly beyond.

However, there are certainly things to be excited about. The growth of ecommerce sales in recent times have been nothing short of staggering, and I see no reason why they won’t continue into 2023.

In the last two years, ecommerce sales rose from 15% of total retail sales to 21%. Analysts at Morgan Stanley predict the market has room to grow, expecting the sector to rise from its valuation of $3.3tn today, to over $5.4tn by 2026.

Make no mistake, this is also great news for fintech businesses. In the next few years, as online merchants receive and send more money from acquirers, suppliers, and partners, the need for truly frictionless financial solutions will become increasingly necessary. Thankfully, the fintech community can satisfy this need, with several incredibly relevant solutions already available, which will become more popular in 2023 such as Monneo.

Edoardo Calandro, VP-Senior Credit Officer at Moody’s

Banks will report solid profits in 2023. Rising interest margins will enable continued capital generation on top of already strong capital, while liquidity and funding will remain robust, even as gloomy economic conditions across much of the world cause loan performance to deteriorate. Bank creditworthiness will remain broadly stable.

Banks face a weak and more volatile macroeconomic environment.

We expect economic growth to slow across the globe in 2023. High inflation, geopolitical shifts and financial market volatility are hurting households and businesses and there is a substantial risk of further shocks ahead. Positively, unemployment, a key leading indicator of credit risk for households, will remain below the 20-year average in most G-20 countries.

Loan performance will deteriorate moderately from strong levels.

Loan quality will deteriorate from high levels as Covid measures expire, economic growth weakens, the uncertain outlook undermines confidence, and rising interest rates challenge debt affordability. Loan losses will be kept contained by stricter underwriting standards over the last 10 years, reduced exposure to riskier asset classes and strong loan-loss provisioning. Problem loan formation will likely be greater in highly dollarised emerging markets, while many banks in energy-producing countries will benefit from higher oil prices.

Rising interest rates and solid reserves will shield banks from increasing delinquencies.

Despite difficult operating conditions, banks will report solid profits in 2023. Higher net interest income and strong reserves booked during the pandemic will offset a moderate, inflation-induced increase in operating costs and weakening loan book quality. Banks in North America, the Middle East, some Western European countries and Asia Pacific (excluding China) will benefit most from higher rates.

Capital will remain sound.

Capital ratios will remain broadly stable across regions, as solid profitability allows banks to generate capital internally and as regulatory requirements remain high. Profit retention will outpace rising risk-weighted assets and shareholder distributions.

Funding and liquidity will remain strong.

Deposits will likely remain well above pre-pandemic levels for at least the next 12 to 18 months, and bail-in debt requirements have now been largely met in most advanced economies. This and a strong starting point mean that banks will remain well funded throughout 2023 even while central banks continue to drain liquidity through quantitative tightening.

Delia Pedersoli, COO, MultiPay Global Solutions

Younger consumers like millennials and Gen Z have grown used to paying via non-credit and debit card methods. The rise of [BNPL] is a perfect demonstration with its popularity pushing retailers to adopt it as an option at checkout. Research from Student Beans earlier this year found that nearly half (42%) of 16-24 year olds have used BNPL services in the last 12 months.

As the popularity and familiarity of BNPL booms, consumers are also increasingly open to trying other alternative payment methods. This year we will see increased innovation in this area as payment providers and retailers look to launch new systems that improve the customer experience and boost loyalty. With the cost-of-living crisis set to get worse in 2023, customer loyalty will become a major battleground for retailers and fintechs alike.

New alternative payment methods that are beginning to arrive on the market have the advantage that they reduce the number of businesses involved in the processing of a payment. This has the dual benefit of allowing businesses to get their money sooner (in many cases instantly), while also having significantly lower processing fees. With lower fees, retailers can pass on savings to customers who use these new payment methods, helping them enhance the relationship with shoppers at a time when many are closely watching their spending.

Alexander Weber, chief growth officer, N26

More than ever before the outlook for fintech in 2023 will be dictated by external factors and ongoing economic uncertainty. In this context, the resilience of each company’s business model will be decisive; propositions with diverse revenue streams will be better positioned to absorb external shocks and to thrive.

Banks played a large role in the 2008 Financial Crisis. Since then, and off the back of that, the space and its regulators have evolved substantially. N26, like many other financial technology companies, was born in the aftermath of this crisis to make things better.

Now, there is an opportunity and a requirement for neobanks to make good on this promise. In difficult times, they need to do everything they can to be a true financial partner, empowering consumers to stay on top of their finances and develop a positive relationship with their money.

But even with the overlapping crises we will likely experience in 2023, fintechs will still remain masters of their own destiny. To succeed, they must keep up the pace of innovation in spite of current headwinds. Customers’ needs are constantly evolving, and this is particularly true in times of crisis. So, I expect to see greater personalisation in both product and pricing in 2023 to reflect this.

Technology will continue to play an important role in breaking down barriers by making pricing more transparent, facilitating easier access to financial services, and promoting financial literacy.

Alexander Weber, N26

Laurent Descout, CEO and founder of Neo

FX hedging will become a necessity for tackling market volatility 

2022 saw market volatility increase and a prominent rise in the dollar’s popularity as investors rushed to purchase more of the currency due to the fear of a looming global recession. As the dollar increased in strength, many US companies which trade overseas saw a drop in their earnings. The rise of the dollar has since subdued but currency markets continue to fluctuate.

The importance of locking in rates ahead of buying and selling goods and services is now more critical than ever. Significant losses due to volatility and fluctuations in the value of currencies, in this case, the dollar, should raise the alarm for firms which continue to ignore FX hedging.

Businesses will seek to make cross-border payments more efficient and cost-effective

SMEs are sending and receiving more cross border payments now than before the pandemic. We’ve seen a rapid acceleration of volumes in the last 12 months, and, in part, this reflects a very notable increase in demand for borderless payments across the market.

Businesses face persistent problems when paying suppliers in different countries. The challenge is that working with traditional banks involves limited and incomplete payment information, making it difficult to reconcile payments. The high level of fees applied by banks to those payments also hurts SMEs’ competitiveness. More businesses are buying into a more streamlined, integrated approach that can deliver significant cost savings.

Supply chain disruption will continue into 2023

The Covid-19 pandemic and the current geopolitical situation have only compounded existing issues within supply chains such as lengthy cross border payment cycles. Inventory days are a key factor when looking at supply chain disruption. When the shipment of goods is delayed, the number of inventory days – the time each item or stock is in the warehouse – increases.

The problem is that traditional approaches to cross-border payments are complex, long, and expensive, adding to the number of inventory days. This means seeking a solution to slow payments through technology is essential for treasurers.

Corporate banking will emerge from the shadows of consumer banking

Business-to-business customers are beginning to insist on the same seamless real-time transactions they expect as consumers. The traditional corporate banking model is still prone to inefficiencies and suffers from a lack of investment. Banks’ IT budgets are often channelled into updating their own aged legacy systems that are unable to communicate with each other and third-party systems effectively. What corporates really require is a single interface where they can conduct treasury forecasts as well as all their audits and cash positions in real time, whatever the currency.

These shortcomings – the lack of investment in new platforms and the absence of multicurrency management tools – are why many treasurers are desperate for an alternative option to the traditional corporate banking model.

The payments market will continue to grow

The fintech sector has seen investment slow down this year however the adoption of digital payments is still a prime growth area within the sector. A Visa and MIT Technology Insight report found that in 2022, 37% of global business leaders are venturing into cross-border transactions with the help of fintech’s.

Businesses are now looking for solutions to speed up cross-border payment processes while being cost-effective and transparent. When working with traditional banks, it’s more challenging for businesses to reconcile payments which can delay the shipment of goods.

Treasury’s technology transformation will accelerate further through increased integration

There remains a widespread lack of integration and numerous legacy systems, all of which continue to hinder treasurers. As such, they’re forced to rely on fragmented technology and processes to manage multiple yet interconnected functions across payments and currency risk.

As FX hedging and cross-border payments become more prominent, the desire from treasurers to have all their services in one integrated platform will increase. Integrated systems can provide greater oversight of their treasury in real-time and utilise the insights to drive faster, better decisions.

Tomas Smalakys, CTO at NordLocker

2022 was an intense year for cybersecurity. State-sponsored cyberattacks showcased how real-world events can have serious implications for the online world, whereas businesses in an already difficult economic environment suffered some of the biggest cyberattacks ever seen.

Cybersecurity never stops evolving because digital technologies are increasingly overtaking each part of our lives, in turn increasing the scope cybersecurity tools should cover. This ever-changing nature of the cybersecurity field makes each week, month, and year different from those that have passed, making it extremely important to stay two steps ahead of emerging threats.

7 cybersecurity trends to watch in the upcoming year

  1. Fileless malware will pose serious concerns. Because fileless malware does not require its victim to download any files, it is practically undetectable by most information security tools. This type of malicious software works by exploiting vulnerabilities in already downloaded, well-known, and trusted applications, leaving no trace on the computer’s memory. Fileless malware requires significant skills to develop and carry out, but if it’s successful, it can do immense damage.
  2. Targeting supply chains. The Covid-induced global chip shortage revealed that the most fragile part of the global economy is its interconnectedness. By targeting companies that play critical roles in the activities of other businesses, such as raw materials suppliers or logistics firms, cybercriminals have the ability to grind an entire supply chain to a halt and apply mounting pressure to make victims meet their demands. We already see this trend in 2022, and these types of attacks are only ramping up.
  3. Employees will be the weakest link in corporate cybersecurity. With the human factor being the culprit behind more than 80% of cyberattacks, companies will continue struggling to instil proper cyber hygiene principles in their employee culture, even though the tools they use are becoming increasingly advanced.
  4. Ransomware will become more targeted. Usually, ransomware is spread randomly to numerous targets by phishing or other social engineering methods with the hopes that someone will click the link or provide their credentials. More recently, however, ransomware gangs have been applying a different approach that is more carefully crafted to each individual victim and can do much more damage.
  5. Cloud security will become increasingly important. With companies increasingly moving their data into the cloud instead of storing files locally on their computer, we will see a growing number of cyberattacks that exploit vulnerabilities in current solutions.
  6. The EU threatens encryption laws. In order to curb various online crimes, the European Commission has put forward a proposal to weaken encryption laws across the bloc. If it passes, the new law will require digital platforms to scan every single message or file sent through their services for suspicious content. While the motivation behind the initiative is well-intentioned, it would make the internet much less private and secure.
  7. Reduced cybersecurity spending will expose vulnerabilities. With a looming recession, many companies and individuals are rethinking their budgets, and cybersecurity spending is often among the first to receive a cut. Criminals will exploit this lowered guard, which is very likely to make 2023 one of the costliest and most destructive years for entities affected by cybersecurity incidents

Brett Beranek, General Manager, Security & Biometrics, Nuance

Financial services organisations of all sizes have seen digital interactions and call volumes rise over the last two years. Like all brands, banks must offer great customer experiences to remain competitive. But the nature of their business means security must always be a top priority. Traditionally, adding security meant adding friction to the customer and agent experience, so financial institutions will prioritise investments in technologies that strengthen security and CX simultaneously.

Traditional authentication methods – such as PINs and passwords – are archaic and no longer fit for purpose. Passwords are being sold on the dark web, exploited for fraudulent activity and have even cost unfortunate individuals vast sums of money in terms of recovery if lost or stolen.

In 2023, an increasing number of banks will turn to modern technologies – such as biometrics – to robustly safeguard customers. We’re already seeing banks get immense value—including 92% reductions in fraud losses and 85% increases in customer satisfaction—from biometrics solutions that eliminate authentication effort for customers while making life very tough indeed for fraudsters. Over the next 12 months, I expect to see many more financial services organisations following in their footsteps.

Brian Hanrahan, CEO, Nuapay

In 2023 open banking will reach a tipping point in terms of consumer adoption. Recent research conducted by Nuapay found that 1 in 4 payments decision makers at merchant businesses think Open Banking will become the most popular payment method for customers by 2027.

When asked which payment method presents the most opportunities for their organisation over the next three years, Open Banking was the top choice (36%) among the merchants we spoke to, followed by digital wallets (35%) and Buy Now Pay Later (BNPL) (26%).

Embedded Finance will also continue to gain momentum in 2023. The market is forecast to grow rapidly, with Juniper Research predicting that it will be worth more than $248.4bn by 2032, an astonishing growth from its current value of $54.3bn in 2022.

Embedded finance is forecasted to take off in the coming years. It’s clear to see why due to the various benefits that it provides – particularly when paired with open banking. All the convenience of integrated financial services plus the many, varied advantages of open banking – from cost reduction to improved data analysis opportunities – combine to deliver an unparalleled payments experience.

David Lambert, CEO of Nucleus365

The rise of untapped markets and emerging economies

An incontrovertible key to the rise of e-commerce globally has been payment gateway providers’ facilitation of e-commerce products, services, and purchases in untapped and emerging economies. We expect e-commerce volume and values in emerging economies to grow considerably as technology continues to facilitate merchant supply chains and champion consumer choice.

Advancements in payment technology and infrastructure benefits both merchants and consumers. The proliferation of embedded finance technology combined with digital remittance services will promote e-commerce access globally, increasing cross-border payment volume. Markets in South America, such as Peru and Chile will continue to flourish, as will commercial growth in India and Central Asia. These markets interest gateway providers, merchants, and consumers who all wish to tap into landscapes primed for rising e-commerce activity in the coming years.

A prioritisation toward merchant flexibility

While e-commerce has traditionally focused on supplying consumers with choice, payment flexibility, and security, care for the merchant has often fallen short. Catalysed by merchant demand, the payments sector will have to realign its service offerings to put merchants in control of their financial flows to provide additional visibility, flexibility, and data-driven insights (like Nucleus365 provides).

Aside from merchant demand, a centralised and accessible payments platform can facilitate scale-up by providing detailed information on customer type and geographical specifics – meaning merchants can optimise their businesses accordingly. Additionally, the more merchants understand their finances, the better they can help payment gateways identify, monitor, and prevent risk.

Collaboration between merchants and gateways will be key to sector innovation. The payments space evolving with real-time payment technology, faster and diversified payout methods, and the enablement of cryptocurrency payments are further incoming trends we see for 2023.

Improved fraud prevention protocols

Payment institutions’ accomplishments within security protocol effectiveness will only increase in 2023; reports suggest that, as e-commerce boomed during the pandemic financial crime proliferated. Our sector is experiencing a similar increase now, with experts suggesting this is partially due to cost-of-living increases. Regardless of the reason, it is the responsibility of payment gateway providers to reduce risk as much as possible.

We expect to see further innovation and improvement within risk negation systems, the payments landscape has not yet rested on its laurels, and so an increasingly proactive approach to even better financial crime protection will be a key challenge in 2023.

Alt-fi payments facilitation

Payment gateways can only efficiently serve customers (merchants) if they maintain flexible and adaptive operations. One of these adaptations, which will become rooted in the payment landscape in 2023 and beyond, is the use and facilitation of alternative finance payments.

Alternative finance offers consumers just that; a method of payment-making existing in asset classes outside of, or as an extension of traditional banks. Alt-fi services, such as open banking, will experience increased consumer demand for embedded financial services; benefitting consumers who require speed and efficiency, whereby unbanked populations who struggle with access to traditional banking channels or are reliant on cash-based economies will have access unlike they’ve seen before.

Alt-fi technologies, such as Blockchain, are increasingly investigated and utilised by trad-fi institutions. Taking advantage of the technology benefits for transaction, clearing, and reconciliation use cases, trad-fi institutions will continue to increase in focus, investment and application of alt-fi technology. Strictly alt-fi services, such as Klarna, we imagine will continue to utilise emerging technology to introduce new products with the view of targeting more businesses/corporates.

The horsepower of alternative finance for accelerating payment accessibility and optionality for consumers is yet to be fully realised. However, with increased merchant and consumer demand, payment organisations will continue to support and facilitate the option of alternative finance in 2023 and beyond.

Malcolm deMayo, Vice President of Financial Services at NVIDIA

Better Risk Management

Firms will look for opportunities like accelerated compute to drive efficiencies. The simulation techniques used to value risk in derivatives trading are computationally intensive and typically consume large swaths of datacenter space, power and cooling. What runs all night on traditional compute will run over a lunch break or faster on accelerated compute. A real-time value of sensitivities will enable firms to better manage risk and improve the value they deliver to their investors.

Cloud-First for Financial Services

Banks have a new imperative: get agile fast. Facing increasing competition from non-traditional financial institutions, changing customer expectations rising from their experiences in other industries and saddled with legacy infrastructure, banks and other institutions will embrace a cloud-first AI approach. But as a highly regulated industry that requires operational resiliency, an industry term that means your systems can absorb and survive shocks (like a pandemic), banks will look for open, portable, hardened, hybrid solutions. As a result, banks are obligated to purchase support agreements when available.

Lily Shaw, investor, OMERS Ventures

After a year where use cases and utility were viewed as deeply unsexy, I expect these to be the focus for 2023. We continue to see unmet need within both B2B and cross border payments, which we anticipate will remain growth markets.

For example, we’re starting to see great teams building Orchestration 2.0 within payments, which has the potential to massively improve gross margin profiles through meaningful economies of scale. For instance, companies are moving away from positioning themselves as a tech player, to being the merchant of record and in the flow of funds. The team at Paytrix is a great example of one company pioneering this approach.

Liudas Kanapienis, co-founder and CEO, Ondato

The biggest corrections in fintech space happened in 2022 so I would expect 2023 to be more focused on stability and efficiency increase which might bring opportunities to new startups or existing market players to use them and rise. Also I believe new business models might come up, especially in credit space.

Alternative financing is expected to grow in the coming years due to the “expensive money” on the financial markets and rising interest rates.

Speaking of efficiency, I also believe there will be more AI-powered resources and apps in 2023. AI automation takes over the manual process, thus saving time, meaning that fintechs and traditional banks can save labor expenses and big budgets. As a result, data-driven AI will enhance capital optimisation. This year has shown how manual processes are not easily scalable, as banks around the world discovered when they have been overwhelmed by the unprecedented increase in sanctions imposed on Russia following its invasion of Ukraine.

Yuelin Li, chief product officer, Onfido

Between the tapering of valuations and the increase in interest rates, the last year has indeed been tough for fintechs and the tech business at large. Innovation will continue, but businesses which are heavily dependent on zero or low interest rate financing costs – such as [the BNPL] space – may have a tough year.
On the other end of the spectrum, financial institutions are generally slower movers, and their digital transformations are a multi-decade process.

We expect that many of these companies will seize this point of instability to acquire some high-flying fintechs and their attractive customer profiles, at more attractive prices. Additionally, businesses that benefit from holding balances will likely see more investment opportunities come their way.

Monica Hovsepian, Global Financial Services Lead at OpenText

It’s safe to say that the financial services (FS) sector has experienced astronomical change over the last few years. The rapid and significant development we’ve seen in tech has led to challenger banks, fintech and big techs redefining the industry. These organisations can go further than traditional banks to meet customers’ needs and this is setting new standards when it comes to customer expectations in retail banking.

Over 2023, we can expect to see these standards evolving ever further. In the short term, banks and FS organisations will be attempting to pivot to better meet the needs and address the concerns of their customers. Understandably, the swiftly worsening cost of living crisis is currently a huge priority for many customers.

Communication is key to meet customer expectations

As such, we’ll see the forward-thinking organisations placing customers at the forefront of their activity in the coming months. The banks which go the extra mile to reassure and inform their customers will see the most success in this respect.

For example, in the face of recent rising interest rates, millions of UK homeowners with a mortgage were thrown into panic and confusion. Some banks and lenders were able to rapidly and proactively communicate what these changing rates meant for individual customers.

Others were not so helpful. Especially in the face of great financial and societal uncertainty, those which are able to reassure their customers in a proactive and empathetic manner will come out on top. In order to achieve this, we can expect to see banks continuing to progress their digital transformation initiatives and further integrating the relevant Artificial Intelligence (AI) and Machine Learning (ML) capabilities.

In order for incumbent banks to be successful in their digital transformation journey and achieving optimal customer experiences, they need to address the employee experience as well. Ensuring that employees have the applications, visibility, tools and means to effectively address customer needs will be the critical factor in differentiating banks.

Chris Michael, Huw Davies and Freddi Gyara, co-founders, Ozone API

1) Banks will continue to open up

We’re five years into the UK journey and open banking is rolling out around the world. Open banking will continue to be a big trend for a few years to come before it reaches the stage of being the “hidden plumbing” that exists, powering the world without people talking about it.

In the UK, open banking payments growth is continuing to rocket. The small acorn is showing signs of becoming an oak tree, with over £8bn of open banking payments taken by HMRC alone.

With NatWest leading the way for the big banks in the adoption of variable recurring payments (VRPs), the foundations are now there for open banking to help solve a much broader range of payments, from subscriptions to frictionless e-commerce to business-to-business payments.

Around the world, open banking initiatives are now happening at an ever-faster pace. Latin America and the Middle East are the new hot spots for open banking and, next year, we’ll see a huge focus on this in North America. Canada is moving closer to implementation and the regulators and policymakers in the US could soon follow too. This is already creating a LOT of noise.

2) Embedded finance: you stay there, I’ll come to you!

We’ve talked about embedded finance for years, but the reality has yet to materialise. 2023 is the year that the banks will start to take this seriously.

By embedded finance, we mean financial services that are genuinely and seamlessly embedded in a customer experience, rather than requiring the customer to go to the financial services provider and then return to continue what they were doing. It is about getting the financial service in the right place, at the right time, with the right context.

This could mean, for example, the ability for a company to access an extended credit line instantly, based on their “cash out” and expected “revenues in”, to help them seamlessly manage their cashflow from within an accounting platform.

Or it could be allowing a customer to set up a new account from within a marketplace or enabling a bank to offer a simple ‘buy now pay later’ option within an ecommerce checkout.

This rise of open APIs will allow financial services to be ever more embedded in day-to-day experiences. Financial experiences will be embedded where the customer wants and needs them, which will be good for all players.

3) Fraud will not go away

In recent years, we’ve seen account-to-account payment fraud accelerate. Fraudsters are continually coming up with more devious ways to target the vulnerable and play on people’s fears and insecurities.

With the pandemic, we saw many fraudulent messages designed to get people to part with their money. We’re seeing it with the cost-of-living crisis too, with fraudsters playing on people’s fears about rising utility bills and other costs.

Confirmation of Payee (CoP) has come into effect and is having an impact, but it is by no means the complete solution. More is needed.

In 2023 we’ll see far more financial and payment institutions implement Confirmation of Payee, which will help. The implementation of strong customer authentication and open banking is also helping. But the industry will continue to look for what is next beyond the basic Confirmation of Payee check.

It should involve piecing together more data points from more sources to ensure that the payer has much more certainty about the identity of the payee. Identity-based payments are the future and we’ll see conversations moving beyond CoP to head in this direction.

4) Banks will monetise premium APIs

The future lies in APIs that can be monetised by the banks, which we call premium APIs.

We are now seeing a wide range of new customer-facing propositions which leverage the access which open banking unlocks to help consumers budget, reduce debt, build savings, and perform other tasks which improve their financial outcomes. There is already so much innovation, which is driving both adoption and behavioural change. Financial institutions are also making better credit decisions by using access to account information to gain a more detailed and accurate understanding of a customer’s income and their ability to afford debt repayments.

Banks are now starting to regard open banking and open finance as key strategic channels. Historically, their channels were their branch, the telephone, and the internet. Now, exposing data and services through APIs that others can build on is opening up a whole new business model. Banks no longer have to get customers into their own branches to open products. More and more banks will shift from this mindset of seeing open banking as a compliance project to regarding it as a business model transformation using premium APIs.

5) Open finance will continue to take shape

We are still in the very early days of open banking and have not yet seen the major innovations taking place. If we compare our progress to the dawn of the internet, we’re still not even close to the point where Netscape became the first mainstream browser.

The open API approach will not stop with banks, rather it will be adopted by other industries and entities as markets expand the scope from open banking to open finance. For a customer, it is limiting to be able to see only certain accounts based on an arbitrary scope defined by open banking regulations. They should be able to see their complete financial picture and thus be able to manage money much more effectively.  This ability is unlocked by open finance and open data, which involves the sharing of access to a much wider set of data and services to unlock more and more innovative propositions and use cases across multiple industries.

The move from open banking to open finance to open everything will involve banks and Financial Institutions shifting their mindset and seeing that this is a truly transformative business model.

6) Open banking will evolve new capabilities

Open banking is not just about access to bank account data or payments. There are two fundamental design patterns we have observed when working with regulators in markets around the world. We expect these new capabilities to also be implemented in other territories in the future.

The first is ‘Event Notifications’. As a bank’s ledger changes and transactions or payments are made, third parties should be able to receive updates in real time without having to poll a bank to collect that data. An always-on connection between the third party and the customer’s account delivers real value for all sorts of use cases, with particular relevance for corporates that need real-time synchronisation between accounting, ERP software and bank systems. It’s also much more efficient for both banks and third parties, as it ‘flattens’ the traffic to remove the large peaks we are seeing at certain times of the day with polling.

The second design pattern is called ‘Service Requests’, which involves the provisioning of bank services such as opening a new account, creating a line of credit, adding or changing beneficiaries or users on the account – basically enabling any task that can be completed on an online bank account through APIs.

These patterns move beyond the rather arbitrary limits that were placed around PSD2 by the EU’s Rts. If customers can do something on a bank’s online platform, they should also be able to do it via APIs and enable third parties to initiate or manage that process. There is a really strong incentive for banks to do this. Sama, the Central Bank of Saudi Arabia, has built these design patterns into its open banking standard, and we expect other markets to follow.

7) The evolution of payments will accelerate

The banking industry has quite a few challenges to overcome when it comes to payments and money movement. When moving money across borders, for instance, there’s a huge amount of friction. There are also many scenarios where the lack of identity validation for both payer and payee is causing fraud and money laundering issues.

Two big leaps will take place over the next few years involving money movement and payments.

Firstly, open banking will accelerate the availability of lower-cost instant payments, which are more reliable and come with a lower fraud risk, especially if this extends CoP into true ‘identity-based payments’ as stated above. This could transform both domestic and international payments.

Secondly, there is a massive opportunity to enable the flow of retail data, for example, basket level data on every line item purchased online or in store, alongside open banking-powered payments. This could open up many new business models for automated loyalty and much more powerful data-driven marketing.

Most payment models today have always required a middleman acting as a big switch. Open banking has delivered the foundations to be far more certain around both ends of transactions in a far more frictionless way in terms of how the payment is initiated and the messaging between parties. The potential for a massive transformation of payments, which started in recent years will continue throughout 2023.

Chris Michael, co-founder, Ozone API

Alex Common, Chief Product Officer at Pay360

Why businesses are flocking to subscription-based models during economic uncertainty

As businesses continue to grapple with the uncertainty of the current economic climate, the rate at which they are monetising their offerings through subscription-based models continues to gather momentum – and its little surprise. Over the last 12 months we have seen significant devaluation of companies across multiple sectors.

Big tech companies like Meta, Alphabet, Amazon and Microsoft, haven’t been immune, with Q3 earnings reporting a combined loss of over $350bn in market cap value. In fact, according to the British Chamber of Commerce, 39% of businesses across the UK believe their profitability will reduce over the next 12 months.

During a period of uncertainty, businesses need to look at new ways to maximise revenue.

Monetising subscription-based services have seen significant momentum in the market. Take Mercedes Benz, for example. It recently announced that electric car users can now pay an annual subscription fee of £991 to enable their vehicle to reach 0-60 one second faster. With clear benefits like reliable recurring revenue, increased customer loyalty, and the ability to manage your financial forecast, heading into 2023, we will see a steady shift of businesses looking to further monetise their offerings through subscription-based models.

How integrated payments are charging the way for best-in-class customer experiences

In today’s digital economy, consumer behaviour has taken a significant shift towards the need for seamless shopping experiences across all channels. This level of expectation has subsequently translated to their expectation of service when it comes to payment choices too. The ability to offer customers the full range of payment options, whether in the store or online, has become a crucial aspect of the customer buying journey. For those merchants unable to give consumers their preferred method of payment, there is a danger that they will simply turn to a competitor. In the battle for market share, it is vital that businesses offer best-in-class, frictionless, multi-option payment services across every channel in which they operate. With higher expectations, merchants are increasingly turning to software like integrated payment service technology which enables the merchant to meet the needs of all customers and allow their customers to pay by any means, anywhere.

The need for total inclusion during economic uncertainty

Increased digitalisation, combined with current economic instability, means it is crucial that merchants and payment providers carefully consider how they reach those with limited access to digital payment methods. While the increase of digital payment use is inevitable, the continuation of cash for households will continue to be a significant part of their everyday spending. Therefore, businesses need to consider how they capture the spending habits of those consumers less connected to digital payment means.

Steve Morgan, Global Banking Industry lead, Pegasystems

Straight Through Processing: An Economic Lifeline

In 2023, as the corporate customers are hit by severe price variability and supply chain stresses linked to energy price rises and the aftereffects of the pandemic, banks will need to do as much as they can to build out a service backbone that simplifies servicing of business accounts. The goal must be to minimise unnecessary delays that add further stresses onto the already stressed business operations of their corporate clients.

CBDCs Added to Payments Mix

Recent declarations and experiments by central banks in creating digital currencies may become less hot air and vapourware in 2023 with 15 governments undertaking trials with central bank digital currencies (CBDC). There is a sense of momentum growing as central banks from across the developed and emerging economics seek to coordinate their plans.

A Careful Autonomous Service Tech Revolution

When the first ATM was inserted into a wall, banks appointed themselves the pioneers of self service. Nowadays, self-service banking extends well beyond the hole in the wall machines of the 1960s and is pervasive from mobile apps to websites to assisted self-service devices in new style bank branches. But there is further to go, and in 2023 we will see more evidence of what is known as autonomous service in how banks serve customers across their channels.

Brad Hyett, CEO, phos

In 2022, we’ve seen a growing interest in SoftPos. More retailers and merchants are beginning to understand the cost-saving benefits of serving a customer through a mobile application with Tap to Pay acceptance.

With Apple announcing their move into the space earlier this year, this is really going to drive both the awareness and the normalisation of SoftPos. It’s a contributing factor to merchants’ acceptance of the technology as well as consumer understanding of it. These two aligning factors will only drive more curiosity in 2023.

PayPal and Venmo have also announced their support for Apple’s Tap to Pay functionality as it continues to roll out across new payment platforms and apps. With SoftPoS solutions now readily available for Android and iOS operating systems, merchants and legacy technology providers should be seeking to partner with a SoftPoS orchestrator to take advantage of the new technology and exponentially increase their acceptance points for contactless payments.

By working with a technology partner, businesses can avoid the high costs and time-consuming nature of creating an in-house solution, resulting in faster speed to market and the agility to better respond to customer demand.

Brad Hyett, phos

Alexis Weber, Founder and CIO of PM Alpha

2022 has been an especially challenging investing environment, with the typical 60:40 client portfolio posting some of the worst returns experienced in decades. With inflation at levels not seen since the 1970s, rising rates, Europe in recession and the US likely to follow shortly, I believe there is more uncertainty and volatility in the public markets to come, with the risks I feel being very much to the downside.

My principal concern is inflation: I just don’t think we are ‘done’, especially given how long Western governments have been printing money. We may have seen the peak of input cost-push inflation, but the demand for higher wages during a ‘cost of living crisis’ is not widely contemplated in recent inflation forecasts. This is likely to make recessions globally deeper than anticipated and the dislocations we see in markets today are likely to intensify, before they eventually normalise with wholesale asset repricings.

Re-balancing act

Responding to the challenges will require investors to engage in a ‘(re)-balancing act’, with potential conflict between maintaining a defensive portfolio positioning and making targeted investments in secular trends that will lead a subsequent market recovery past the expected trough.

I think this tumultuous environment will cause investors to rethink portfolio construction and look to medium and long-term opportunities. Private markets is one means of accessing these.

First, private markets are much broader than public markets meaning that the depth of available opportunities are therefore greater. Second, it can be clearly demonstrated that allocating to markets at times of recession and public market private volatility leads to the some of the best investment returns that private markets have to offer. Finally, as committed capital is spent by private markets managers more gradually and is locked up for a period of time, it increases the ability of those managers to exploit market dislocations and select the best potential growth opportunities.

Our (re)balancing act is therefore intended to rotate portfolios towards longer-dated investments driving real CPI-linked yields, as well as exploiting the depth of alternative credit markets during times of volatility, where senior secured asset backed refinancing packages can yield high mid-teen returns.

Four key developments

We are looking to pivot towards longer-dated investments, specifically concentrated on the fundamental secular trends we believe will be driving growth, we have identified four key stand-out secular developments that are crucial in this repositioning:

The Maturing Digital Consumer’

The coming of age of e-commerce and its impact on technology, logistics and infrastructure.

‘The Corporate Technology Revolution’

The barbarians at the gate: how business digitalisation is unleashing disruptive forces.

‘Healthcare Everywhere & for all’

The ageing population & the era of mental wellbeing

‘The Path to Sustainability’

Deglobalisation and the ‘re-localisation’ of energy generation and manufacturing.

See through the volatility – remain focused on the drivers of the macro investment environment like income generation and inflation protection. Hedge short-term volatility and risks to the downside by rebalancing portfolios towards longer dated private market investments focusing on the secular themes anticipated to power the market recovery in late 2023/early 2024. Benefit from the opportunity of the repricing of assets across sectors in the next 24-36 months. This is an optimal entry point for private market investors.

Alexis Weber, founder and CIO, PM Alpha

Nikhil Shah, founder, Polyhedron

The fintech landscape has transformed in recent years with the rise of Baas. We’ve seen innovative collaboration with retail banking players like Starling and Holvi who have opened their API to benefit clients. And yet, this has not taken off for their corporate counterparts.

Why? There are myriad opportunities that could be solved; think about how approaches to payroll, a crucial permanent function, could be progressed into an entirely seamless experience for the modern employee. This could go as far as flexible pay, for example. Looking to 2023, as the appetite for BaaS has grown, so will partnerships between smaller corporate banks and fintechs to provide corporate clients with the products, services and comprehensive insights they expect to drive growth.

Andrew Stevens, Principal, Banking and Financial Services at Quadient

Banks need to shift from reactive to proactive support over the next year

Amid economic uncertainty it has never been more important for banks to offer proactive and practical help and support for their customers. At this time, Quadient has identified three key trends for 2023 that are vital for banks to help consumers overcome increasing economic pressures and maintaining excellent customer communication.

Uncertain economic conditions create worry and stress for consumers, which is only going to intensify over the next year. Banks often ‘talk the talk’ about being ‘on the side’ of customers, but now is the time for them to ‘walk the walk’, as people across the UK look set to struggle with their finances in a way we’ve not seen for decades. Most of them have the right ingredients – digital systems and access to an ever-widening stream of customer data. But now is the time to step up and put it to use, proving just how valuable a role banks can play in helping households navigate a path through the storm that looks set to hit in the next year.

Stepping up support from reactive to proactive

Everyone will be feeling the pinch next year, so it is vital for banks to shift to proactively helping their customers, steering them away from potential threats in advance. At the moment, most high street banks offer support to customers who tell them they are struggling. That’s a great first step, but next year they’ll need to take a more proactive approach – not everybody feels comfortable coming forward, or even realises they are in trouble. Banks need to proactively seek out customers who are likely to struggle and offer advice and help in advance. For example, if they look at monthly outgoings, it’s possible to warn customers that may struggle to pay their bills when the Government adjusts its support package from March onwards. This proactive approach gives the customer time to adjust and prepare, before the problem hits.

When providing advice and assistance, banks need to keep in mind that the recession playbook has changed since the last big non-bank caused crisis in the 1990s – consumers demand a much higher standard of living these days. For instance, while in the 1990s satellite TV packages were considered a luxury, today streaming services are an expectation for a large majority of the country. Advising customers to cut back on this kind of outgoing is no longer such a feasible piece of advice as it was a few decades ago. The banks that help people the most over the next year, educating them on how they can save money in the current climate, will be rewarded with a loyal customer base.

Banks that can segment their customer base will meet their duty of care

In recent months we’ve seen mortgage rates climbing steeply, which has a huge impact on many customers. This type of news has to be delivered in a personalised, considered manner – and with banks likely to have more bad news to impart as a recession takes hold, the way they share it will become increasingly important.

Banks cannot continue communicating how they do now, simply telling customers that prices are increasing or rates are changing. Banks need to dig deeper, and consider the potential impact that these changes may have on individual customers.

This means that banks’ ability to segment their customer base is going to become much more important next year. Previously, they had only really thought about different segments for their own use, but now it’s become crucial for customers. But this doesn’t just mean giving the customer a discount off their payments, it’s about supporting them as they make these payments. Banks can do this by helping customers to understand what’s happening to their finances and why. It’s absolutely vital that banks understand where their customers are right now, and how they can support them.

Those not helping customers will fall foul of tightening regulation

The customer experience bar has been raised in recent years, and consumers’ expectations aren’t going to stop any time soon. Government is now also starting to say that enough is enough; businesses need to put the customer first. This change is beginning with the Consumer Duty, which ensures that organisations are providing customers with the best possible outcomes. This means that for those customers who may be struggling, banks need to be offering products with the best interest rates or more flexible overdrafts. Banks have until July to get their house in order.

Customer data has an absolutely vital role to play in helping banks understand the situation that their customers are in, and the service that suits them best. Next year, we’ll start to see more legislation and regulations that force financial organisations to be truly customer-centric. This adds an extra incentive to do everything within their power to help customers – failing to do so risks the customer base shrinking, or regulatory action.

Gilbert Verdian, CEO & founder of Quant

DLT in 2023: Out of the blocks

Blockchain use cases abounded in 2022, but we’ve only scratched the surface of what this transformative technology can help achieve. What’s coming down the track in 2023 for the interplay between distributed ledger technology (DLT) and the financial services sector?

There will be agreement that the unregulated crypto experiment has failed

With the collapse of FTX, the ‘crypto winter’ and the breaking of Terra UST’s peg – 2022 has been a challenging year for the cryptocurrency sector. Consumers were attracted to this volatile asset class which offered steep returns compared to traditional markets. But the collapse that followed served as a potent reminder of why we have financial regulation in place to protect people.

2023 will call for more stringent rules which will turn into demands. Governments and regulators will realise they can no longer expose consumers to unsupervised exchanges who seemingly had a licence to print money and generate steep losses for those who could least afford it. Furthermore, the size of the cryptocurrency market has grown significantly. It now has the ability to act as a contagion to the rest of the financial system, triggering concerns from regulators who need to act and mitigate risks with appropriate rules.

Recognising the need for regulation is one thing: designing, agreeing to, and implementing it is quite another. We can take an example from the EU who is leading in the space. Its Markets in Crypto-Assets Regulation (MiCA) bill serves as a solid example of a comprehensive regulatory framework.

Additionally, as the crypto world becomes more staid and sensible, layer 2 technologies that were hastily and poorly designed will start to disappear. The more useful and usable networks will be left intact, stronger than ever. The hype will die down, and crypto enthusiasts may well turn their attention to other use cases for blockchain.

They will likely continue to look for assets with low barriers to entry, part of crypto’s appeal. Tokenisation offers improved access to illiquid assets. For example, in cases where start-up funding is limited to a small pool of sophisticated ‘LPs’, tokenisation and the right regulatory framework could enable smaller investors new, promising opportunities.

Moreover, the loss of confidence in unregulated market participants has triggered a flight to safety. Investors want to pursue their returns with experienced, regulated institutions that offer access to crypto assets whilst protecting their users and capital with proper oversight.

Banks and asset managers will scramble to recruit blockchain specialists

We have already seen established firms like State Street, JP Morgan, and HSBC appoint ‘heads for digital assets’ and distributed ledger technology (DLT) specialists as they roll out tokenisation projects. 2023 will see these skills increasingly in-demand as financial services firms realise the value of blockchain in enhancing their operations and adding new revenue to their bottom line.

The challenge lies in finding the right people: only about 1% of developers have the specialist knowledge required to work with digital ledger technologies, given each has unique rules and languages. A developer trained in a specific DLT can cost over £100,000 per annum, yet their skills are not always transferable to other DLTs or re-deployable to non-DLT projects.

But as the world grapples with another recession, financial services businesses will certainly be examining how to save money. If implemented correctly, blockchain could save billions in infrastructure and associated IT costs, despite the upfront hiring and partnership spend.

Rather than paying for service-level agreements, data centres, cloud hosting and other services, financial institutions can, and will, leverage blockchain infrastructure at a fraction of the cost of running the same transactions in-house. Efficiencies aside, tokenisation could improve several areas within asset management– specifically, issuance, exchange and servicing, and simplify processes involving a host of intermediaries. Tokenised private equity products may come to market, allowing capital to be raised via tokenisation, as IPOs and SPACs decelerate.

CBDCs will become politicised, but will ultimately prevail

Nineteen of the G20 nations are now piloting CBDC projects which means governments will rightly need to address public concerns around individual privacy as part of broader education around the potential benefits of CBDCs.

We predict further political grandstanding on this issue, especially in the US, where libertarian and republican senators have already spoken out against the introduction of CBDCs. Their position is in stark contrast to the prevalence of CBDCs in China, where the digital yuan has seen transaction volumes surpass $14bn. However, democratic nations will need to compete as the world changes, and CBDCs become part of international trade, financing and cross-border settlement.

CBDC supporters are quick to remind the opponents that the underlying infrastructure can be structured in a way that limits authoritarian controls, surveillance and protects consumer privacy through public-private collaboration and partnership.

CBDCs could fundamentally change the nature of money, taking it beyond a medium of economic exchange. Currency can become programmable and automated to streamline payment workflows. Real-time digital money can provide central banks with an accurate view of monetary risks, enabling them to proactively adjust fiscal controls and help prevent financial crises like the one in 2007-2009.

However, CBDCs must be properly configured and implemented as critical national infrastructure and protected like existing payment systems and economies. The Bank of England concisely laid out core principles for its CBDC design — it needs to be resilient, inclusive, innovative, and competitive.

2023 will see further focus on building CBDC infrastructure that values consumer protection, privacy, and interoperability. But ongoing politicisation of CBDCs may remain a stumbling block.

The links between chains will be strengthened, improving trust

Cross-chain ‘bridge hacks’ were, sadly, commonplace throughout 2022, with estimated losses running to billions of pounds. Bridges are the way to facilitate the transfer of information and assets from one blockchain to another, and so these hacks threaten public trust in the usefulness of blockchain.
There was a reason for this. Bridges have fewer participants and operators than major networks, offering more vulnerabilities for an attack. In addition, bridges are typically designed with smart contracts to be executed on each chain. This smart contract code is often written by a small number of developers, and many times isn’t thoroughly checked, tested or validated by the maintainers of the blockchain node software or other external experts. As a result, smart contracts may have bugs and vulnerabilities open to exploitation.

There are ways, however, to make bridge transfers safe. Smart contracts should be externally validated. Also, where possible, employing ‘burn and mint’ instead of ‘lock and mint’ workflows and using multiple signature schemes are important technical steps that can help ensure secure bridging.

In 2023, we will see the widespread introduction of some of these cybersecurity principles and safe custody solutions – with regulations catching up.

Instead of an infrastructure overhaul, we will see additional security controls and protections wrapped around existing infrastructure and digital asset implementation. An API-based blockchain gateway bridging solution using these principles can perform much of the functionality needed for tokenisation, interoperability and settlement needed by exchanges.

Gilbert Verdian, CEO & founder of Quant

Kathy Gormley, Principal Solutions Engineer and Roger Walton, Chief Risk Officer at Resistant AI

Kathy Gormley

Recession will lead to an Increase in fraud
As recession looms, fraud will continue to increase. People get desperate and fraudsters get even more creative, resulting in massive increases in both first party fraud and third-party fraud. Likely we will see more money muling something we head a lot about in the pandemic

Machine learning will become the chief way to catch financial criminals
While effectiveness has been high on the agenda there will be an increased focus on efficiency with a refocus on modernisation efforts as a way to increase efficiency. This I expect to drive a more widespread adoption of machine learning.

Keep an eye on EU regulations…
Continued developments in the regulatory landscape with movements in the EU’s AML package and Economic Crime and Corporate Transparency Bill – expect the movement will be slow though.

Roger Walton

The term fintech will become outdated

The explosion in Embedded Finance means that financial transactions and services are now built-in to many offerings from ‘non finance’ companies. Of course, an increase in such super-apps and embedded financial transactions needs to lead to an increase in ’embedded AML’, otherwise there will be a spike in nefarious activity.

DeFi and Blockchain will accelerate the need for ‘ongoing trusted identity’

Decentralised finance and blockchain will become ever more prominent, however this will naturally lead to an increase in fraud and money-laundering using these platforms. As a result, an “ongoing trusted identity” becomes critical.

Behavioural monitoring takes precedence over ‘whac-a-mole’… 

For years, large organisations have responded to threats on a case-by-case basis — essentially whacking each pest as it rears its head above the parapet. Behavioural monitoring, powered by AI and machine learning, will take precedence.

Nelson Wootton, CEO and co-founder and Steve Round, co-founder, SaaScada

Nelson Wootton:

We will see a surge of interest in ‘BNPL for business’ or Merchant Cash Advance

Much as we’ve seen an explosion of Buy Now Pay Later for consumers, as merchants tighten their belts and the economic outlook becomes even more challenging, we foresee great demand for BNPL style models of finance for B2B in 2023 – in particular, retail.

For example, Merchant Cash Advances will enable merchants to receive stock and pay it off over a period of time – as that stock is sold to customers. This helps them to avoid big upfront capital investment, while the lender is repaid as each product is sold.

This model is extremely low risk for the lender, especially for wholesalers of non-perishable products, where the lending agreement can even include the flexibility to move unsold stock to another merchant. Lenders can also check in on the velocity of sales and track daily (or even hourly) against sales projections to help them understand their risk on the loan. For wholesalers or franchise style models, offering merchant cash advances will help to build new revenue streams, while strengthening the relationships with their key retailers by essentially providing them with stock for ‘free’.

Of course, for this model to work, the lender must be able to access real-time data insights into purchases from their customers. This means using a cloud-native core banking engine to connect modern and legacy infrastructure, create real-time event streams, and generate bespoke data sets.

The UK’s fintech darling status will be put to the test in 2023

It’s been a rocky geopolitical year with the global economic slowdown, the war in Ukraine – not to mention Brexit, the pound crash, and having three prime ministers in as many months. Big fintech valuations have shrunk globally, and funding rounds have been few and far between, as UK fintech investment plummeted from $27.8 to just $9.6 billion in the first half of 2022. So, when we look to next year, many will ask if the UK can hold onto its “fintech darling” status.

But to me, any doomsday hypothesising feels like a knee-jerk reaction.

Investment naturally goes in cycles, and investors are always watching closely to see which areas are getting the best returns and recalibrating before they invest more. The UK fintech scene is bursting with a wonderful blend of finance and tech innovators who are up for the challenge, so I do not think that position in the industry will be lost.

In particular, fintechs who can harness data effectively are the ones to watch. The future is all about data – being able to predict and track changing customer needs, identify areas of trapped value, and gain a single customer view; it is these things that will enable them to gain a greater share of wallet, even during recession.

UK fintechs should also keep in mind that while they will continue to see investment, they will need to be more cautious with their spending as funding rounds may be slower, valuations lower, and investments more frugal than before. So being cost-conscious will be an asset.

FS firms will miss the Consumer Duty deadline if they can’t leverage customer data

July 2023 will see the FCA implement a new Consumer Duty, which will require the financial services industry to deliver products and services to meet real customer needs at a fair price. Under the new regulation, FS firms must give people the support and information they need to make informed financial decisions, which is particularly important in the current economic climate. But, many FS firms will likely miss the July deadline because they don’t have a complete picture of their customers and how to serve them best.

To meet the diverse needs of customers, including those in vulnerable circumstances and financial distress, banks must have a comprehensive customer view. But today, many banks and wealth managers may struggle to achieve that level of customer insight because they still operate under a cumbersome product-centric data model, in which relevant information is siloed.

With a cloud-native banking platform, FS firms are armed with granular real time insights into customer spending so that they can understand customer needs, assess their financial health, and make recommendations effectively. Without this level of visibility, firms will not stand up to scrutiny from the FCA, and could even face fines in cases of serious misconduct.

Next year, cloud-native core banking providers will become the holy grail for FS firms needing to comply with Consumer Duty, by helping to re-architect how core banking services are delivered. The granular level data can be used to drive hyper-personalisation, unearth opportunities to grow accounts, accelerate the design of innovative new products, and improve the customer experience.

Steve Round

FS firms will be forced to improve transparency around sustainability commitments

The UK led the way on green finance at COP26 by committing to create the world’s first Net Zero Financial Centre. Now, a year later, the FCA has proposed a UK sustainability disclosure regime. With the rules under review until January 2023 and expected to apply from 2024, FS firms must lay the foundations for sustainability reporting now to comply with future regulations.

Going forward, any organisation delivering banking services must be able to examine the environmental impacts of business operations, as well as the impact of partners. Therefore, FS firms will feel the pressure in 2023 to become more transparent about their commitment to Net Zero targets and sustainability initiatives.

Consumers have also become increasingly focused on sustainability, and want to know how their purchase decisions affect the environment. By collecting customer payments data and tracking environmental impact, FS firms have the potential to launch greener services and help reduce environmental impact for eco-conscious consumers. For example, using transactional data from customers to analyse the carbon footprint of their purchasing decisions – allowing them to make choices about where they spend their money or even choose to carbon offset against purchases. If FS firms fail to launch sustainable products and services next year, there is a serious risk that market share and customers will be lost to more eco aware competitors.

The rising cost of living will drive a new era of financial inclusivity

As the chancellor admitted in the Autumn budget, we are now in recession. More consumers – even those on middle incomes – may find themselves falling into the financially ‘vulnerable’ category, struggling to keep up with soaring mortgage rates, energy bills, and inflation. In 2023, banks will be under pressure to provide more targeted help and support to those that need it to ensure that people don’t fall through the gaps.  Customer insight, driven by comprehensive real time data, will be essential to allowing banks to identify those who are at risk of becoming vulnerable before it happens and help put plans in place to help the customer and avoid bad debt.

There will also be a renewed focus on financial inclusivity – and it’s critical that banks look at credit with fresh eyes. Expect to see banks focusing on designing practical products and services to help those who are struggling financially. Offering advice is one thing, but banks will also be looking to offer personalised and flexible offerings, such as having multiple wallets to help manage different bills and savings.

To support their customers, banks will need to leverage their customer insights and technology to deliver more flexible banking solutions that make it easier for their customers to manage their finances. Or, they risk losing customers to competitors offering more feature rich products.


Saxo’s annual outrageous predictions are a highlight of the forecasting season. The Saxo Outrageous Predictions 2023 are no exception and the full write-up is available here with headline summaries below.

Billionaire coalition creates trillion-dollar Manhattan Project for energy

In 2023, owners of major technology companies and other technophile billionaires will grow impatient with the lack of progress in developing the necessary energy infrastructure that would allow them to both pursue their dreams as well as address the needed energy transition. Teaming up, they create a consortium code-named Third Stone, with the goal of raising over a trillion dollars to invest in energy solutions.

It will become the largest research and development effort since the original Manhattan Project that developed the first atomic bomb. In addition to pure research and development efforts aimed at realising the potential of current and ground-breaking new technologies, the fund will focus extensively on integration as well, or how to combine new generation sources with the power transmission and energy storage infrastructure that delivers baseload, the Achilles’ heel of current alternative energy solutions.

Market impact: the companies that partner with the Third Stone consortium and can help realise its vision soar in value in an otherwise weak investment environment.

French President Macron resigns

The June 2022 legislative elections saw President Emmanuel Macron’s party and his allies lose their outright majority in Parliament. Confronted with a strong opposition from the left-wing alliance NUPES and Marine Le Pen’s far-right National Rally, the government has no other choice but to pass major laws and the 2023 budget by a fast-track decree – triggering the constitution’s Article 49.3. Nevertheless, bypassing lawmakers cannot be a way to govern in a democracy. He therefore understands that he will be a lame duck for the next four years and he will not be able to pass his signature pension reform. Following the example of Charles de Gaulle in 1946 and 1969, Macron unexpectedly decides to resign in early 2023.
Macron’s resignation opens the door of the Élysée Palace to the far-right contestant Le Pen, thus causing a wave of stupefaction throughout France and beyond, and setting up the latest existential challenge to the EU project and its shaky institutional foundations.

Gold rockets to USD 3,000 as central banks fail on inflation mandate

In 2023, gold finally finds its footing after a challenging 2022, in which many investors were left frustrated by its inability to rally even as inflation surged to a 40-year high. 2023 is the year that the market finally discovers that inflation is set to remain ablaze for the foreseeable future. Fed policy tightening and quantitative tightening drives a new snag in US treasury markets that forces new sneaky ‘measures’ to contain treasury market volatility that really amounts to new de facto quantitative easing. And with the arrival of spring, China decides to pivot more fully away from its zero-COVID policy, touting effective treatment and maybe even a new vaccine. Chinese demand unleashed again drives a profound new surge in commodity prices, sending inflation soaring, especially in increasingly weak USD terms as the Fed’s new softening on its stance punishes the greenback. Under-owned gold rips higher on the sea-change reset in forward real interest rate implications of this new backdrop.

In 2023, the hardest of currencies receives a further blast of support from three directions. First, the geopolitical backdrop of an increasing war economy mentality of self-reliance and minimizing holdings of foreign FX reserves, preferring gold. Second, the massive investment in new national security priorities, including energy sources, the energy transition, and supply chains. Third, rising global liquidity as policy makers move to avoid a debacle in debt markets as a mild real growth recession takes hold. Gold slices through the double top near USD 2,075 as if it wasn’t there and hurtles to at least USD 3,000 next year.

Foundation of the EU Armed Forces

Russia’s invasion of Ukraine brought the largest ‘hot war’ to Europe since 1945, and the 2022 US midterm elections saw a strong surge in the right-wing populist Republican representation in Congress, with former president Trump declaring his candidacy for the presidency in 2024. In 2023, it becomes clearer than ever that Europe needs to get the union’s defensive posture in order, being less able to rely on the increasingly fickle US political cycle and facing the risk that the US will entirely withdraw its old commitment to Europe, perhaps after a Ukrainian-Russian armistice. In a dramatic move, all EU members move to establish the EU Armed Forces before 2028, with the aim of establishing a fully manned and deployable land, sea, air and space-based operational forces, to be funded with EUR 10 trillion in spending, backloaded over 20 years. To fund the new EU Armed Forces, EU bonds are issued, to be funded based on keys of each member country’s GDP. This drastically deepens the EU sovereign debt market, driving a strong recovery in the euro on the massive investment boost.

A country agrees to ban all meat production by 2030

To meet the target of net-zero emissions by 2050, one report estimates that meat consumption must be reduced to 24 kg per person per year, compared with the current OECD average of around 70 kg. Countries most likely to consider the food angle on climate change will be those that have legally binding net-zero emissions targets. Sweden has pledged to reach carbon neutrality by 2045, while others like the UK, France and Denmark are aiming for 2050. But a carrot and stick approach rarely works, and in 2023, at least one country looking to front-run others in marking out its lead in the race for most aggressive climate policy, moves to heavily tax meat on a rising scale beginning in 2025. In addition, it plans to ban all domestically produced live animal-sourced meat entirely by 2030, figuring that improved plant-derived artificial meats and even more humane, less-emissions intensive lab-grown meat technologies will have to satisfy appetites to help save the environment and climate.

UK holds UnBrexit referendum

In 2023, Rishi Sunak and Jeremy Hunt manage to take Tory popularity ratings to unheard-of lows as their brutal fiscal programme throws the UK into a crushing recession, with unemployment soaring and, ironically, deficits soaring too as tax revenues dry up. Public demonstrations break out, demanding that Sunak call snap elections because of the lack of a popular mandate. Amidst the economic ruin, polls even in England and Wales indicate second thoughts on the wisdom of Brexit. Sunak finally caves and calls an election, resigning to allow a new Tory profile to take charge of the battered party. Labour leader Keir Starmer, noting the popular support for a second Brexit referendum and the Lib Dems surging in the polls as they clamour for a new referendum, runs on a platform of non-alignment on the Brexit question but supports a second referendum to rejoin the EU along the lines of the David Cameron deal struck before the original 2016 referendum. A Labour government takes power in Q3, promising an UnBrexit referendum for November 1, 2023. The ReJoin vote wins.

Market impact: after a weak performance in early 2022, GBP recovers 10% versus the Euro and 15% versus the CHF on the anticipated boost to the London financial services sector.

Widespread price controls are introduced to cap official inflation

Inflation will remain a challenge to control as long as globalisation continues to run in reverse and long-term energy needs remain unaddressed.

Nearly all wars have brought price controls and rationing, seemingly as inevitable as battle casualties. 2022 has also seen early and haphazard initiatives to manage inflation. Taxes on windfall profits for energy companies are all the rage while governments are failing to use the classic tool of rationing supplies. Instead, they are actively subsidising excess demand by capping heating and electricity prices for consumers. In France, this simply means that utilities go bankrupt and must be nationalised. The bill is passed to the government, then to the currency via inflation, and then we have the likely doomed effort by western officials to cap Russian energy prices from December 5. The intent is to starve Russia of revenue and hopefully cheapen crude oil export prices everywhere, but it will likely do neither.

In a war economy, the government hand will expand mercilessly as long as price pressures threaten stability. The thinking among policymakers is that rising prices somehow suggest market failure and that more intervention is needed to prevent inflation from destabilising the economy and even society. In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the UK and the US.

But the outcome will be the same as it is for nearly every government policy: the law of unintended consequences. Controlling prices without solving the underlying issue will not only generate more inflation, but also risking tearing at the social fabric through declining standards of living due to disincentives to produce, and misallocation of resources and investment. Only market-driven prices can deliver improved productivity and efficiency through investment.

Market impact: please see Outrageous Prediction on gold rocketing to $3,000.

OPEC+ and Chindia walk out of the IMF, agree to trade with new reserve asset

Recognising the ongoing weaponisation of the USD by the US government, non-US allied countries move away from the USD and the IMF to create an international clearing union (ICU) and a new reserve asset, the Bancor (currency code KEY), using Keynes’ original idea from the pre-Bretton Woods days to thumb its nose at the practices of the US in leveraging its power over the international monetary system.

Market impact: Non-aligned central banks vastly cut their USD reserves, US Treasury yields soar and the USD falls 25 percent versus a basket of currencies trading with the new KEY asset.

Japan pegs USDJPY at 200 to sort out its financial system

As 2022 rolls into 2023, the pressure on the JPY and the Japanese financial system mounts again on the global liquidity crisis set in motion by the vicious Fed policy tightening and higher US treasury yields. Initially, the BoJ and Ministry of Finance deal with the situation by slowing and then halting currency intervention after recognising the existential threat to the country’s finances after burning through more than half of central bank reserves. But as USDJPY rises through 160 and 170 and the public outcry against soaring inflation reaches fever pitch, they know that the crisis requires bold new action. With USDJPY soaring beyond 180, the government and central bank swing into motion.

First, they declare a floor on the JPY at 200 in USDJPY, announcing that this will only be a temporary action of unknown duration to allow for a reset of the Japanese financial system. That reset includes the BoJ moving to explicitly monetise all of its debt holdings, erasing them from existence. QE with monetisation is extended to further lower the burden of Japan’s public debt, but with a pre-set taper plan over the next 18 months.

The move puts the public debt on course to fall to 100 percent of GDP at the end of the BoJ operations, less than half its starting point. The BoJ policy rate is then hiked to 1.00 percent and all yield-curve control is lifted, which allows the 10-year rate to jump to 2.00 percent. Banks are recapitalised as needed to avoid insolvency and tax incentives for repatriating the enormous Japanese savings held abroad see trillions of yen returning to Japanese shores, also as Japanese exports continue to boom.

In consequence, Japan’s real GDP drops by 8 percent on reduced purchasing power even as nominal GDP rises 5 percent due to cost-of-living increases, but the reset puts Japan back on a stable path and establishes a tempting crisis-response model for a similar crisis inevitably set to hit Europe and even the US eventually.

Market impact: USDJPY trades to 200 but is well on its way lower by the end of the year.

Tax haven ban kills private equity

In 2016, the EU introduced an EU tax haven blacklist identifying countries or jurisdictions that were deemed ‘non-cooperative’ because they incentivise aggressive tax avoidance and planning. This was in response to the leaked Panama Papers, a trove of millions of documents that revealed tax cheating by wealthy individuals including politicians and sports stars. As the war economy mentality deepens further in 2023, national security perspectives turn increasingly inward to industrial policies and the protection of domestic industries. As defence spending, reshoring and investments in the energy transition are expensive, governments look for all available potential tax revenue sources and find some low-hanging fruits in haven-enabled tax dodgers. It is estimated that tax havens cost governments between $500bn and $600bn annually in lost corporate tax revenue.

In 2023, the OECD launches a full ban on the largest tax havens in the world. In the US, the carried interest taxed as capital gains is also shifted to ordinary income. The EU tax haven ban and US change to the carried interest taxation rule jolts the entire private equity and venture capital industries, shutting down much of the ecosystem and seeing publicly listed private equity firms dealt a 50% valuation haircut.

Steen Jakobsen: Chief Investment Officer, Saxo adds:

“This year’s Outrageous Predictions argue that any belief in a return to the disinflationary pre-pandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine.”

Okan Ozaltin, General Manager, Payment Solutions, Signifyd

Fear of fraud and the need for authentication has been slow and cumbersome for merchants and consumers in the past. While authentication has been greatly improved through SCA and 3DS 2.0, it still causes friction and unnecessary purchase abandonment. The payment ecosystem itself requires a holistic approach in transaction verification and approval from merchant through to payment provider and issuer.

Heading into 2023, taking a layered approach to authentication, that is, balancing friction, risk, and customer experience, will ultimately open up new channels for merchants and support them with growing their customer loyalty and therefore, revenue. Ultimately, what merchants are looking for is to maximise their revenue conversion, protection and cover from fraud and abuse, while also being free to provide a seamless customer experience.

As regulations, expectations, and innovations evolve within the payments ecosystem, PSPs (and other payment providers) will need to rely on strong partners to provide holistic solutions to their merchant bases, ultimately becoming a key ingredient to any tech stack and growing their own network.

Roland Brandli, Strategic Product Manager, SmartStream

In a few short years the payments landscape has undergone a revolution. A cross-border payment that once took days now requires a couple of hours; instant payment volumes grow ceaselessly. A single cross-border payment message can transit multiple payment rails, domestic, regional and cross-border, to reach the final beneficiary. Since the Covid pandemic, and through 2022, our increasingly digital world has continued to change customers’ expectations further: customers have now been use to high speed and good service, and they‘re not afraid to complain publicly, e.g. via social media, if service levels fall short.

Unfortunately, with the current situation, when payment processes do go wrong, the banking industry’s response still largely belongs to the analogue era. Exception management processes are mostly manual, time-consuming and complex exercises: it may take banks days to trace and correct a problematic transaction. Understandably, customers may wonder why, when a payment can be made instantly, fixing a failed one should take so long. sorting out these failures represents an immense cost for the finance sector. Industry estimates suggest that two million transactions fail daily across the globe, with each one costing €40 to fix. Exceptions also expose banks to financial, operational and reputational risk.

Looking ahead, the number payment providers and infrastructures (each with its own rule book and prescribed workflows for tackling exceptions) will continue to increase exponentially, as well as the variety of message formats, which means that the backdrop against which banks investigate exceptions will continue to be highly complex and fragmented.

The need for increased automation

The situation will be compounded further with the pressure building on banks’ to adopt ISO20022 message types in the first quarter of 2023. The complexity of of ISO messages will necessitate the need for increased automation. Banks’ have teams organised by payment provider and infrastructure to handle payment investigations. Unless action is taken now, they will be forced to adopt non-standard ways of doing work, which will lead to inefficient processes. In the year ahead we are expecting to be having many conversations with our customers as we help them overcome these complexities, and through doing so firms will see the true benefits of automation, with improved processing speeds and reduced costs.

Already, a number of firms, predominantly large Tier 1 organisations, have responded by investing in sophisticated CRM systems. In the year ahead, due to the pressing industry need, we are expecting to see Tier 2 and 3 banks fast tracking their digital strategies to standardise their operations and consolidate exception handling with full visibility across the payments lifecycle – a single line of sight across multiple payment rails, to helps to reduce exception turnaround times, costs and risk. In 2023 we can expect to see an increasing amount of focus on the back-office as bank’s seek to boost productivity in an ever-complex payments world.

Andy Lyons, head of banking solutions and partnerships, Solaris

In 2023 we will see more well-known consumer brands entering the financial services market offering white-labelled banking solutions like accounts, cards, and payments – all under the umbrella of ‘embedded finance’. These large consumer businesses will drive forward partnerships with third-party providers like insurers, lenders, and investment managers to capture more of the customer journey.

Rewards as a means of promoting loyalty will become more common, in the form of discounts at other merchants, cashback, or promotional offers surrounding the customers’ favoured product range. Embedded finance via open banking payments will also continue to gain traction and these payments mark a major shift that is extremely useful for consumers, given that this process requires little card or data entry.

But all innovations – especially in financial services – must take place within a regulatory framework. In 2023 I predict regulatory developments regarding SEPA instant payments – the mechanism which will allow anyone with a euro-denominated bank account to make an instant (within ten seconds) transfer. Meanwhile, the licensing process for crypto firms will become more onerous across the UK and Europe.

All this is leading to a world where businesses are more diversified, with a larger slice of each customer’s attention and spend. This will naturally lead to more boisterous competition, and those that aren’t adopting the embedded finance mindset could easily be left behind. In 2023, the global business that get ahead will be ‘not just’ retailers or online vendors – but integrated financial services firms offering customers better efficiency and value-for-money.

Steve Brice, Group Chief Investment Officer, Standard Chartered Wealth Management Chief Investment Office

2022 was a year of great drawdowns, which scarred many investors and left them with unusually few places to seek refuge in the financial markets. The risk of falling prey to recency bias and extrapolating recent trends into the future is very real – but past experiences will tell us this is not usually the case. A fresh perspective based on current market conditions is still likely to best serve investors.

Standard Chartered Wealth Management Chief Investment Office (CIO) released its Outlook 2023 report, outlining its investment strategy and key themes for a continued challenging economic growth backdrop in the year ahead. While slower global growth due to a US economic recession should significantly help to cool inflation, it is likely to remain above levels that central banks are comfortable with. However, it expects growth in China to rebound due to the gradual removal of mobility restrictions and an increased policy focus on growth stabilisation.

The CIO Office team expects currency markets to be another source of opportunities, with the US Dollar likely to turn lower over the next 6-12 months as the Fed offers a catalyst in the form of a pause in the rate hiking cycle. The team is bullish on the EUR and JPY, expecting them to be strong performers on a full year basis, and would use any Q1 weakness to add exposure. Sector picks are another source of opportunistic returns – these are more pro-cyclical given the CIO team’s overweight view on Asia ex-Japan. In China, the communication services and consumer discretionary sectors are expected to benefit from increasingly supportive policies and reduced mobility restrictions, while in India, the financial, industrial and consumer staples sectors should benefit from domestic demand. Sector preferences in the US are more defensive – the healthcare, staples, and energy sectors – while in Europe, the financials and energy sector are preferred.

Tosin Eniolorunda, TeamApt CEO and co-founder

2022 has been a year of global headwinds for nearly every sector, and fintech has been no exception.

For start-ups, these challenges have manifested themselves in the form of a slowdown in VC activity resulting in both depressed valuations and a reduction in VC funding. In the absence of external funding, many founders and fintech leaders have opted to streamline their businesses by reassessing their strategies and cutting costs – sadly, often in the form of job cuts – and in extreme situations it has forced founders to shut down their operations.

Profitability and unit economics now top the investor agenda

Compared to the “growth at all costs” mindset that characterised 2021 and even the first few months of 2022, profitability and unit economics are now top of the priority list for investors across the world. We expect to see this “do more with less” attitude continue well into 2023.

On a more positive note, following the tailwinds of increasing smartphone penetration and adoption of cashless transactions we’ve continued to see great strides made in digitising small and medium sized businesses (SMB) operations, particularly in emerging markets where these enterprises are the lifeblood of the economy.

These businesses have historically been left behind by traditional providers and as a result, we’ve seen a significant number of disruptive, technology-led players emerge in the space. VC money has tended to follow across the SMB digitisation value chain, from payments to business management tools.

What I expect to see in 2023

I think in the next 12 months VC activity will start increasing… we are already seeing signs of that with a number of deals being done.

The only thing that will sustain will be around longer timelines for investing as VCs will be keen on doing deep due diligence. Valuations will continue to be pegged to the fundamentals of a company, such as their unit economics, and there will be a focus on high quality transactions where the business models are proven.

We expect the tailwinds around cashless transactions will continue to drive the adoption and penetration of fintechs which fill a gap or solve pain-points for customers in these areas. In addition, regulators will be keener to take on newer innovations – particularly those that are closely related to crypto, given the recent turmoil in the ecosystem.

Consolidation will start to happen in the fintech space in form of collaboration with banks, but also larger fintechs forming strategic partnerships with smaller ones.

Finally, and perhaps most importantly, fintechs must focus on customer experience to make sure they continue to protect their customers from any fraudulent activities in the months and years ahead.

Jinender Jain, Senior VP and Sales Head of UK and Ireland Tech Mahindra

Financial services have demonstrated their capacity to successfully navigate unprecedented levels of uncertainty over the past two years. Keeping businesses operating as usual under remarkable and unknown circumstances required rapid deployment of digital tools to address virtual sales, improve collaboration, and upgrade networks and enterprise security.  Through a combination of grit, determination, and a willingness to innovate and embrace new technologies, the industry has emerged on the other side of the pandemic stronger than before.

Looking ahead, 2023 promises more regulations and transparency requirements due to geopolitical and economic challenges, including the war in Ukraine, demand for more sustainable practices, rising inflation, continued supply chain disruption, and the possibility of regional or even global recession.

The lessons BFSI leaders have learned since 2020 must be applied to address these challenges and identify opportunities; leveraging smart strategy and execution, focusing on technology, risk, regulation, and purpose. Leaders will harness cloud capabilities for more core and noncore workloads. Combined with legacy decommissioning, this shift will reduce businesses’ operational expenses and allow them to remain agile and responsive to rapidly changing market conditions. The use of automation will also increase, improving business efficiency and enabling the creation of smart processes. This will be crucial to survive a year likely to be characterised by thin margins.

Additionally, emerging technologies including big data, artificial intelligence, machine learning, deep learning, the metaverse, and other complementary technologies such as robotic process automation (RPA) will all be more widely adopted across the financial services and payments industries.

The “new normal” may fully emerge in 2023. We will have the chance to define the future, where profit and purpose are intertwined. In order to move the financial services industry forward, leaders need to be poised and ready.

Sheree Thornsberry, Payments and Financial Services Practice Lead, The ROIG Group

Our research shows us that too many banks are hyper-focused on traditional growth activities, like acquiring more customers, expanding sales channels and product offerings, when they are not ready to successfully execute. As banks and companies start their 2023 planning, this is a trend that we’ll continue to see with banks rushing into the payments space out of fear of ‘losing the race’ to fintechs.

But, it’s critical that banks slow down now so that they can speed up later. What does that mean in practice? When a bank tries to grow prematurely without addressing the right challenges, it can have a material impact on a company’s share price and/or delivering profit results over time as well as a significant impact on customers, employees, and investors/shareholders.

Banks that want to expand or diversify their presence in payments, for example, are often taken by surprise when they realise what they are trying to build does not fit with the structure, or capabilities of their organisation. Getting the strategic direction right really matters when trying to grow a business and getting it wrong can be disastrous, so it’s important that banks spend the time getting to know their companies better, including assessing the pain points that need addressing before trying to add new lines of business.

Sheree Thornsberry, The ROIG Group

Martin McCann, CEO, Trade Ledger

2023 is probably going to be the biggest year of change for those in business and commercial banking for a generation for lots of reasons that are converging. Obviously, there’s the macroeconomic environment; those challenges are well understood. But what’s less well understood is that we haven’t seen any change in technology, data or innovation in commercial banking for a very long time.

Now that’s changing. I think we’re going to see a new generation of technology and data enabled services in the next three years. As such, 2023 will be really important for those that want to deliver technically enabled and digital services in the banking for business space; this is the year that they must pay attention and be ready to make the move.

Brandon Spear, CEO of TreviPay

In 2022, expectations and demand for seamless online experiences became critical. Gleaning insights from B2C customer interactions and preferences, there’s now an exciting level of energy going into solving the challenges in B2B payments.

While four to five years of digital transformation has been compressed into the last two years, most company resources and attention have been on improving the online customer buying journey for the B2C buyer. The industry is finally turning its attention to focus on how money flows in the B2B ecosystem, which means merchants are re-evaluating business models to determine how to best digitise processes for the business buyer. B2B buyers have a different set of expectations and involve more complex processes than B2C payments.

For example, B2C payments tend to be performed by a single stakeholder (a consumer) using a single payment method (a credit card), but any given B2B transaction may involve multiple stakeholders (the purchaser, the budget owner, the procurement group and the A/P team) and numerous payment options (trade credit, purchasing cards and credit cards).

Collaboration is key

The right B2B payment solutions must deftly manage the complicated back-office plumbing that powers digital selling, including seamless omnichannel transactions and instant trade credit decisions. But companies must recognise the space requires collaboration. There tends to be an inherent desire to own an entire customer ecosystem or platform, but this is less likely to be successful for B2B transactions given their complexity and cross-border nuances. Merchants must put their business buyers’ needs at the center and understand who they can collaborate with to solve the problem together. Partnering with a purpose-built B2B invoicing and payments provider will likely be the fastest way to plug-and-play an easy experience for corporate customers.

Brandon Spear, CEO, TreviPay

Alex Reddish, MD, Tribe Payments

2022 saw an expansion in easy-to-access consumer credit services, and it didn’t come without some controversy. But while BNPL schemes are undoubtedly popular today, we may see some contraction in the market as circumstances change.

A shifting macroeconomic climate will lead to a squeeze and responsible lending will be the key to sustainable business beyond 2023. A saturated market plus consumer hesitance over debt means that there will be a new battleground for growth. This is likely to be SME credit.

SMEs have different needs, often looking for short term credit to cover cash flow, and are often underserved as a less “glamorous” target compared to consumer products. SME credit products have already been launched by fintechs, but we are likely to see consumer-facing brands take an interest too in 2023.

Interchange: pressing need to diversify source of fees

Can a fintech business rely on interchange fees for a sizable chunk of its business? There has been some worry in the market that the acquirers, issuers and card schemes that rely on these charges cannot do so forever, and there is a need to diversify to be viable.

After all, regulators reviewing the caps on these charges are likely to move them in one direction—lower—and new types of payments may mean interchange fees are paid less and less often.

However, these fees are, to an extent, inflation proof. As prices increase, so do the fees, remaining at a steady percentage of each purchase. The inflation we’ve seen in 2022 and are likely to see in 2023 means that people are trying to make their money go further, but are not necessarily spending less. So, while some fintechs may see their business take a hit from changing circumstances, interchange fees are likely to remain relatively steady—at least in the short term.

Michael Sindicich, General Manager of TripActions Liquid

We will see a reduction in single-use fintech offerings

As interest rates rise so does the cost of capital. As such, I predict we will see fewer of the many new credit/corporate card startups. Only fintech solutions with multiple products and diversified value will succeed, versus those that just offer high rebates. Companies now seek a solution that can be with them throughout the duration of growth — uprooting a product each time a business has outgrown it is taxing and time-consuming. Businesses are increasingly turning to scalable solutions with a diversified customer portfolio.

We will continue to see increased use of embedded finance solutions

One payment trend that has revolutionised payments in 2022 and will continue in 2023 is the increased use of embedded fintech to make the user experience seamless. Customers now expect a consumer-grade experience when it comes to most —if not all — solutions within a business. And embedded finance does just that by meeting users where they are with a native UI and low-friction experiences. A great example is the automation of expenses; with TripActions Liquid, all users need to do is tap their liquid card and TripActions takes care of the rest.

Collaboration opportunities between fintech and the government will substantially increase

While fintech giants have been streamlining the movement of money for years, unleashing new services like Buy Now, Pay Later (BNPL) and instant reimbursements, the government institutions overseeing fintech regulation are taking note. In the US, we’re seeing technology from these government instantiations emerge to give smaller banks and credit unions a fighting chance in the payments arena.

In the UK, I expect the government to follow suit. Government involvement in the growing fintech space is a massive industry growth and collaboration opportunity. The market is still super-ripe for companies and institutions to compete or partner with each other and the government.

Francesco Simoneschi, co-founder and CEO, TrueLayer

In 2023, it will become easier to pay in crypto, with more businesses supporting it as a payment method. To reflect this, we will see more and better crypto-fiat on ramp solutions making it easier for end customers to transact this way, with Stripe having very recently launched their offer in this space.

AI will continue to drive speed and optimisation in fintech and banking, with greater practical adoption in areas such as chatbots and customer service functions.

I expect to see more open finance use cases coming to market, using the power of Open Banking alongside a wider range of data sources. This will enable new partnerships to flourish, for example in variable recurring payments, which allow consumers to make regular payments for a product, service or bill, but in a much more frictionless and transparent way than was previously possible, using the technology that underpins open banking.

Intersecting with all these trends, embedded finance will mean that it will become easier for a far wider variety of non-financial businesses to offer financial services, and to set up their own offers in areas like BNPL.


Open Banking is happening now – behind the scenes  

Since 2016 the UK has built the strongest platform globally for Open Banking payments. This innovative and bold transformation is already reducing the cost of accepting payments while delivering higher acceptance rates.

In May alone, businesses and consumers made more than five million Open Banking payments according to the Open Banking Implementation Entity (OBIE). This is part of a growing trend that is bringing Open Banking to the fore.

UK at an inflection point

One particular example of Open Banking transforming UK payments is its integration to His Majesty’s Revenue & Customs (HMRC). Since 2021, customers have been able to pay taxes with Open Banking instead of cards or manual bank transfers. The HMRC use case provides a practical framework for other industries and sectors.

The UK faces an inflection point. The “fast-followers” are now preparing to offer Open Banking payments in light of conclusive success cases. Learning from developed bank payment markets such as Sweden, Finland and Norway, we can expect to see rapid adoption of Open Banking and account-to-account solutions to make everyday payments.

As a Swedish-based pioneer in Open Banking payments, Trustly has seen first-hand how quick the uptake can be. Our industry partnerships show the widespread intention of merchants to implement Open Banking within the next 12 months. This spreading enthusiasm will galvanize further adoption and improve understanding and appreciation of this solution.

The Open Banking transformation in the UK has been steadily growing since 2016. The benefits for consumers and merchants alike are clear to see. With all the pieces in place and the conditions now better than ever, we expect to see new milestones reached and previous achievements broken in 2023 and beyond.

Kevin O’Connell, Chief Product Officer, Trust Payments

The need for convenient and simple payment options for consumers will continue to fuel the alternative payments space in 2023. The comeback of QR codes will continue as businesses look to bridge the gap between physical and digital for consumers in a safe and secure way.

It will be interesting to see how CBDCs grow as countries launch their own digital currencies to keep up with consumer’s changing financial needs. The boom of short-term lending and payment plans will slow down as the cost-of-living pushes people to pay with what they have, rather than don’t have.

Michaël Lok Group CIO and co-CEO asset management, Union Bancaire Privée

Investors were buffeted throughout 2022, first by the shock of Russia’s invasion of Ukraine and then by the fastest rate-hiking cycle by the US Federal Reserve in a generation. As we had anticipated 2022 would be a volatile year in both equities and fixed income, our allocations to hedge funds provided some relative shelter from the storm that engulfed markets. Our expectation of US dollar strength during the year also proved justified, though we were surprised by the persistence of the appreciation over the course of 2022.

Looking ahead, the agility that was required to navigate markets in 2022 will remain an asset in 2023 as the global economy treads a fine line between developed economies entering recession and emerging ones seeking to consolidate recoveries. Hedge funds should continue to be a refuge for equity investors in particular, as high interest rates, elevated volatility, and the broadest single-stock dispersion since 2007 provide multiple return drivers in the new year.

This should make up for the muted equity returns we expect for 2023 as recessions bite on both sides of the Atlantic, weighing on earnings expectations. These recessionary headwinds should also slow the pace of rate hikes and inflation in the new year, allowing bond investors to generate moderate returns and create select opportunities in credit. Encouragingly, the 2022 turmoil has served to accelerate the transformation across energy and infrastructure sectors, and to increase the reliability and sustainability of key supply chains around the world. Admittedly, such change does not come without cost, with global food supplies set to be challenged in 2023 and beyond.

Sustainable investment

Just as in energy in 2022, elevated food prices will accelerate investment in the ongoing and future transformation of the segment. While geopolitical conditions are leading this transition in the short term, climate and biodiversity concerns will take over, driving the quest for more sustainable food systems. Beyond this, we see considerable scope to strengthen our focus on investing sustainably as an essential way to secure long-term returns.

Overall, these paradigm shifts will require investors to walk a tightrope between new opportunities and risks associated with the transition of the global economy. As a result, in 2023 we expect to continue to rely on active and dynamic risk management to help us maintain our commitment to both preserving and growing our clients’ wealth.

Stuart Barclay, VP Strategy,

Four trends that have shaped fintech and open banking in 2022

Despite increasing worldwide volatility, the Fintech space has been dominated in 2022 by a few clear emerging trends: open banking is transforming payments worldwide; there is a clear uptake in cross-border, global payments; eCommerce and financial services are embracing open banking’s benefits, and last but not least – the return of the QR code in Europe.

1. Open banking is transforming how the world pays

The incredible pace of growth of open banking payments is largely driven by the preferences and expectations of increasingly sophisticated consumers, who demand faster and friction-free ways to pay, and wider choice in the payment methods that are made available to them. Merchants who fail to keep up bear the consequences – as customer loyalty wilts rapidly when faced with friction in user experience. According to a study by Baymard, 9% of consumers have abandoned their carts due to limited choice in payment methods, and a further 17% of consumers abandoned their carts because checkout processes are ‘too long/complicated’ – both huge issues for eCommerce merchants, who are losing significant revenue because of card abandonment at checkout.

Given their speed and simplicity, open banking payments are a silver bullet for this checkout conundrum, and 2022 has been the year this begins to become evident worldwide.

2. Cross-border payments barriers falling one by one

The need for freer, faster and instant cross-border payments is another driving force behind the unprecedented rate of growth of open banking payments worldwide.

We’ve experienced this first-hand at Volt, as we build the infrastructure for a global gateway for open banking payments. By interconnecting real-time payment schemes from various markets and jurisdictions worldwide (which have developed according to varying technological standards), we enable an instant payment experience across borders.

In the UK for instance, open banking is growing at a rate of one million users every six months, and has reached the landmark figure of 6 million users in 2022. Across the channel, the European Commission has announced plans to mandate the full uptake of instant payments in the EU and EEA, which will fuel a renewed wave of innovation in payments.

Further afield, Brazil totals 214.4 million registered users for its Pix instant payments system, a truly phenomenal rate of adoption when we consider it was only launched two years ago by the Central Bank of Brazil. In India, the Unified Payments Interface (UPI) already processes more than 5.3 billion transactions per month.

Real-time A2A payments systems are developing worldwide, with over 60 countries looking at adopting legislation to this effect. This is especially exciting in emerging markets, which are less hamstrung by their legacy banking systems, and are arguably leapfrogging the ‘card stage’ and directly building online optimised payments.

This tsunami of payments innovation is moving in one certain direction – businesses need to prepare for the global uptake of open payments.

3. Open banking is becoming key for eCommerce and financial services

Open banking payments are now a core element of eCommerce strategies, especially for global merchants, who need to optimise their processes, improve cash flows and ensure a safe, secure but frictionless customer experience.

Given the inflationary pressures merchants must fight, instant access to funds is a huge plus for merchants; and for consumers, who are battling cost of living concerns, control over their finances and the freedom that instant payments bring is a win they are increasingly learning to appreciate.

This is driven by Fintech and open banking innovators, like Volt, creating products and functionalities that now go beyond the core capabilities for Account Information Services and Payment Initiation Services – open banking is a blueprint for how open finance and open data can be transformed to the benefit of consumers.

4. The borders between online and in person payments are blurring

The pandemic has triggered the return of QR code payments in Europe, which enabled online payments to move into the physical world. Consumers are already paying online with curbside pick-up, or alternatively paying in-store with QR codes. In 2023, the line between physical and online payments will become more blurred, shaped by the expectations and lifestyles of today’s hyper-connected consumers.

Alex Mifsud, co-founder and CEO, Weavr

B2B embedded finance will take centre stage in 2023. At a time when businesses are under pressure to do more with less, embedded finance can unlock new efficiencies. B2B SaaS and other B2B digital businesses can take advantage of this need by enhancing their offering through financial service provision.

By using the rich data that such B2B players collect and process for their business customers, they are able to offer relevant financial services such as payment optimisation, efficient collections and lower risk lending at the point of need.

In doing so, B2B SaaS and digital businesses have the opportunity to add significant new revenue streams from their existing customer base – in other words, increasing their revenues without the need to increase their marketing budgets.

According to recent analysis of the fast-moving embedded finance sector from Bain & Co and Bain Capital, revenue opportunities “will more than double from $21bn in 2021 to $51bn in 2026. The transaction value of embedded finance also will surge to $7tn by 2026 and account for 10% of US financial transactions”.

With this in mind, the embedded finance space is set to become increasingly crowded, with many vendors providing point solutions to emerging embedded finance challenges like on-boarding, monitoring and orchestration. However, only a small number of players who put together a well-curated range of financial services and tools, often by combining such ‘point solutions’ will be the ones that succeed.

Banks that have invested in [BaaS] will start to see their first challenges – [such as partnerships going wrong – with this approach to delivering embedded finance.

Finally, established players in the banking and payments landscape, such as the big banking tech vendors, and the card schemes will start to publish their own strategies and roadmaps for embedded finance.

Regulation and compliance [will also pay big role in the fintech industry in 2023]. Regulators will be more demanding of standards in embedded finance and this will force change in the way providers deliver it. Compliance-as-a-Service provision and adoption will increasingly displace the current BaaS model.

In addition, there will be increased M&A activity, partly as a result of the continued tough funding environment and partly because regulatory change will force providers to think about their ability to adapt. We’ll see continued consolidation as the bar gets higher due to stricter regulation and as funding gets tighter.

Alex Mifsud, Weavr

James Hart, Investment Director, Witan Investment Trust

Global Markets Analysis – 2022 Performance and Outlook for 2023 

As we close 2022, global markets remain mixed, passing through waves of optimism and fear. The year has largely been defined by the combined headwinds of inflation and central bank rate hikes, with investors grasping for any signs of them moderating.

After an exceptionally strong 2021, markets globally have receded in 2022 – a sign of an end to the age of excess liquidity thanks to inflationary pressures. There are, however, signs that investors are starting to look beyond the 2022 ‘valley of fear’ into the ‘sunnier uplands of optimism’ and, potentially, a lower inflationary environment in 2023 and beyond.

NASDAQ100: down >30% YTD

The S&P500 clocked a rebound in the last quarter of the year so far (as of 12/12/2022), going in the green in October and November – and investors hope the charm rubs off into the final month of the year. The tech heavy NASDAQ100 meanwhile has had a rather modest few months in comparison – symptomatic of the heavy tech rout this year, with the index down more than 30% YTD.

With record inflation and aggressive interest rate hikes this year, and no concrete signs of any slowdown yet from the Federal Reserve, there are genuine worries of an impending economic downturn in the US in 2023. The inverted yield curve is yet another indicator of the market sentiment as the 10-year treasury bonds are yielding around 3.5% in comparison to 4.3% for 2-year bonds. However, whilst rates are surely set to rise further, the incline should moderate as central banks start to assess whether they have done enough to douse the inflationary fire without extinguishing the growth flame.

While oil markets surged significantly in the first half of 2022 over supply constraints and due to the Russian war in Ukraine, a recession in 2023 and continued supply chain disruptions in China could pull down prices. Despite this, energy shares continue to perform well as companies remain highly profitable even with oil substantially below its peak.

China: key to global economic recovery

China will be a key player for global economic recovery as investors will be keen to see the country’s supply chains up and running. With nearly three years of zero-Covid strategy by the Chinese government damaging both its domestic economy and exports, and considering the unprecedented widespread unrest from its people, China appears finally to be responding by easing restrictions. Investors will be keen to follow the pace at which this may happen.

In the UK, inflation is front and centre in the discussion as it continues to impact everything from consumer confidence, to pay demands and the housing market.

2023 ‘winter of discontent’

It is likely that a winter of discontent lies ahead of us. Halifax has reported this week that UK house prices fell by 2.3% in November as surging interest rates have reduced affordability and will impact levels of disposable income. With the Bank of England’s Monetary Policy Committee set to meet on the 15th of December, investors expect interest rates will rise for the ninth time in a row from a level that, at 3%, remains historically low. Mortgage rates have retreated in recent weeks (from the extreme levels caused by the cardiac-arrest inducing mini-budget) but will not decline markedly until base-rate assumptions plateau and it will take time for consumers to get used to paying a level of interest not seen since before the Global Financial Crisis. Thankfully, many borrowers are, at least for now, on fixed-rate deals.

James Hart, Investment Director of Witan Investment Trust

Eric Newcomer, Chief Technology Officer, WSO2 and Seshika Fernando, Vice President – Banking and Financial Services, WSO2

Eric Newcomer:

Banks are Better Prepared for Today’s Competitive Landscape

Before joining Wso2 in 2020, I spent more than a decade in chief architect roles in major divisions of Credit Suisse and Citi. This was a difficult time, since I started in 2009, right after the crash. Moreover, fintechs and digital businesses had begun delivering banking products and services through smart mobile devices and highly interactive web applications, using modern cloud native technologies and techniques.

Now as we head into 2023, I’m seeing that former colleagues in the financial industry have made significant progress in responding to digital disruptors. Some of the strongest indicators come from an Economist Impact global survey of 300 C-suite banking industry executives. Among respondents, 84% reported that they have, to some extent or more, the necessary technological tools to create new digital products and services. Additionally, 77% of executives surveyed predict that they will serve customers via digital channels, such as online and mobile applications, to a large or great extent over the next two years.

At the same time, if the Economist Impact survey results are correct, the fintech revolution appears to have peaked, or perhaps, as I overheard at Finovate 2022 in London, it has entered a midlife crisis. Fewer bank executives surveyed saw fintechs as competitors, and nearly half of their organisations had already partnered with fintech startups.

In 2023, banks will continue to compete more on digital innovation and continue to invest heavily in cloud migration and modern applications. At the same time, the trust in traditional financial institutions to preserve security, conform to regulations, and offer a full suite of services remains a strong factor in their favor. For this reason, partnerships between banks and fintechs are providing win-win scenarios, and over the coming year, we can expect these deals to grow.

Cloud Migration is Key to Banks Remaining Competitive

Those banks with mature cloud native application strategies will further solidify their competitive advantage in 2023. A majority of banks now recognise the strategic value of migrating to the cloud and developing cloud native applications that make service deployment faster and easier. A joint survey by American Banker and Arizent reveals that those banks already developing and deploying cloud native apps for all possible use cases expect to see a 24% increase in the percentage of applications that are cloud native, growing from 51% to 63.1%.

Meanwhile, the survey found that firms just getting started with cloud native apps project a 230% increase in their percentage of cloud native applications, from 23% to 53% in the same time period. So, there’s a real potential for the remaining banks without a well-developed cloud migration strategy to lose ground against their competition.

An API-first Strategy is a Must for Speeding Banks’ Innovation

Having an API-first strategy should be a top priority among banking application development teams in 2023. APIs are the currency of the cloud-based banking ecosystem, so the sooner banks can produce them quickly and effectively, the sooner they begin to realise the resilience, agility and scale necessary to make the rest of their migration happen. If they haven’t done so already, banks should put a priority on adopting an API-first strategy that will allow them to focus on standardised ways for cloud-based applications to interact with their existing internal systems even before they transition those internal systems to the cloud.

Banks that have adopted API-first strategies will reap the benefits of faster innovation and more strategic partnerships in 2023.

Developing API capabilities early in the cloud migration process makes it easier to develop or adopt new applications across more of the bank’s services.

According to a joint survey by American Banker and Arizent, 48% of financial institutions offer banking as a platform via a third-party application. This includes private-label or co-branded credit cards where the bank (rather than the retail partner) owns the customer relationship. Additionally, 53% of these survey respondents have implemented corporate banking APIs, such as embedded money transfers on accounts payable.

Seshika Fernando, Vice President – Banking and Financial Services, WSO2

APIs Are the Keys to Unlocking Digital Collaboration in Banking

In the past, banks relied on proprietary systems and data to grow their customers and revenue share. Today, they are accelerating their growth by partnering with fintechs to add new services, embedding banking-as-a-service solutions in online retail offerings, and tapping the insights of agencies with big data expertise. APIs now serve as the keys to unlocking these digital collaborations.

However, just as banks have updated their business strategies, they will need to start modernising their APIs and services in 2023 if they haven’t already done so. It’s not enough to put an API in front of a legacy stovepipe application. Consistent consumer experiences require new banking applications with “omni-access” to a digital core where data is clean and readily available with no duplication. This is 80% of the battle. After that, it is easy to add management, security, and version control via APIs.

In the coming year, banks need to further leverage the standards that have been established for open banking and technology, since they facilitate modernisation by providing a lingua franca for APIs and applications. By adhering to these standards, banks can foster digital collaborations that exponentially grow their sales, customers and channels in ways they could never do on their own.

Banks Should Take a Data-Driven Approach to Customers Engagement

Even the most financially healthy banking customers, both retail and business) are feeling the pain of the rapid inflation we have seen this year, which will continue to have reverberations in 2023. So, the need of the hour is ‘empathetic’ banking. It’s a tough ask, particularly as recessionary pressures threaten to push banks to reduce loan access, increase the cost of borrowing, and move toward foreclosures.

Taking a data-driven approach to maintain and earn consumer trust with concrete, targeted actions can help consumers and banks alike navigate the rough seas of 2023. Banks that proactively prepare their consumers for risk will benefit in the long run, because relationships built during tough times are generally the long-lasting ones. And what is enabling banks to cut across siloed legacy systems, and work with new partners to do this better? APIs of course! APIs have been the key driver, helping banks pull data and services out of this mix to enable delivering timelier, and personalised customer experiences.

Stefano Vaccino, CEO and founder of Yapily

What have been the major fintech trends you’ve seen in 2022?

In the years to come, 2022 will likely be remembered as a perfect storm where social, political, and economic issues emerged and collided globally. As a result, businesses and consumers are looking for ways to gain better access, control, and visibility when it comes to their finances.

Fintech has stepped up to the task: our recent financial wellbeing research revealed that nearly nine in 10 consumers and three in four businesses in the UK have turned to financial products and services in the last 12 months to help tackle the cost of living crisis. Many of these tools are powered by open banking, enabling businesses to build more innovative and personalised products for their customers. Going into 2023, we can expect to see even more demand for these types of solutions, driving open banking adoption even further.

What lessons have you learnt from 2022?

The huge injection of fintech investment we saw in 2021 – almost a ‘steroid boost’ – followed by an economic downturn less than 12 months later has created a unique set of challenges. But history tells us that down markets are some of the best times to refocus. Those fintechs that see this change as an opportunity are the ones that will weather the storm successfully. Whilst funding squeezes spell uncertainty for our sector, we must use this period to regroup and spin gold from straw as fintechs have always done.

Another lesson to be taken from 2022 is that the collective mission always comes first. This year, fintech players across the open banking industry – including Yapily – joined forces to successfully launch the Open Finance Association with one goal in mind: furthering open finance in the UK and EU, empowering consumers and businesses to make better use of their financial data and payments. Recognising that the voice of the many is much stronger than the few is key when it comes to effecting real change, a movement we can expect to see not just in fintech but other industries next year too.

What are your fintech predictions for 2023?

Interest rates, mortgages, and savings will be the financial services buzzwords going into 2023 as consumers and businesses look for ways to make their money go further. The winners here will be the banks, which means they’re likely to invest more in innovation and technology through fintech partnerships. Ultimately, banks and financial institutions will want to make sure their customers can continue to access more personalised and digital-first products they have now come to expect from agile players.

Whilst industry attention shifts towards banking, we can also expect open banking to disrupt new verticals. Since its conception, open banking has naturally been embedded in the worlds of banking and payments. But this year, a wider range of verticals including property, insurance and wealth management have started to reap the benefits it has to offer. As we head into 2023, we can expect to see even more innovative and new open banking use cases realised across the ecosystem.

How can we move fintech forward in 2023?

In 2023, we’re going to see consumers and businesses rely more and more on fintech solutions to tackle the impact of today’s economic problems. Whilst there’s no crystal ball for the future of fintech, we can expect to see strong undercurrents around financial wellbeing, industry collaboration, and agility in the face of adversity shape the fintech industry next year.

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