After a challenging start to 2022, which saw a downturn in funding, both industries have responded well, and signs of recovery are becoming clearer to see. However, amidst a worsening global economic outlook, many commentators are questioning whether this rebound can be maintained through 2023 and what the future of fintech and global entrepreneurship will look like.

We wanted to hear from those on the frontline of this issue, and to find out how they saw the next year playing out. That’s why we’ve compiled some insightful predictions from the following industry experts:

• Matt Davies: Chief Marketing Officer of SEON

• Lena Hackelöer: CEO and founder of Brite Payments

• Nick Reid: Head of Strategic Growth, Europe of BankiFi

• Kimberley Waldron: Co-Founder and Managing Director of SkyParlour

From improvements in the field of Open Banking, to the expected rise of Embedded Finance, our panel of experts discuss some of the trends that look set to cause major disruption in the fintech and tech spaces in 2023. Despite wider challenges, the experts we spoke to seemed broadly excited about the year ahead and the opportunities it is likely to present to those working in these sectors.

Matt Davies:

Predictions are never easy, but if you look at the direction of travel in the field of fraud then it’s clear to see where things are heading. As we approach 2023, it feels like we’re entering a new digital era, where the blending of online and offline personalities is more pronounced, and ultimately more complex. This trend is being further accelerated by the rise of new technologies, which have the potential to make online fraud more difficult to spot.

We’re beginning to see how technologies like deep fakes and AI chatbots can make it harder for people to authenticate themselves online. In turn, online fraud is evolving in real-time, which companies and individuals alike must prepare to deal with. As we enter a new year, it’s important that this preparation happens with urgency, especially with an ongoing economic downturn likely to drive more people towards fraud attempts, especially in the growth in sophisticated data and signals being used.  

Thankfully, I do predict this will happen. Ultimately, the ongoing economic downturn is a bit of a two-way street in this regard. In 2021, reports showed that online fraud did not slow down. The Internet Crime Complaints Center received over twice as many complaints in 2021 as compared to the last recession in 2009, with total monetary losses exceeding 7.5 times those of 2009. We should definitely expect to see a repeat, if not a growth in these numbers in 2023.  Yes, it’s driving more people to make online fraud attempts, but it also makes reducing the costs of fraud more essential, with companies now forced to keep a closer eye on costs. Therefore, I think we will see 2023 as a year when businesses redouble efforts in the areas of cybersecurity and online fraud prevention. Additionally, there is also the other side of the coin, where using the same approach of detecting fraud and fincrime, this can be used to help make the customer experience better for legitimate customers by removing checks and allowing companies to identify high value customers that present opportunities for growth.

The good news is that modern online fraud prevention systems offer a way to mitigate the effects of fraud, even against those wielding innovative technologies. In 2023, businesses should look for fraud prevention solutions that leverage digital and social footprint information. That’s because while fraudsters can easily pose as customers; they cannot replicate the digital footprints and history of legitimate people as it’s not economical. 

Similarly, when it comes to high-growth economies in emerging markets, such as those in the APAC and LATAM regions there’s been a longstanding challenge around individuals with minimal, or non-existent credit histories. In the past, this lack of data had undermined the efficacy of certain fraud prevention checks. Once again, solutions that leverage real-time social footprints, which virtually everyone has, can help in this area.

Lena Hackelöer:

I predict that account-to-account (A2A) payments will continue to witness strong growth in 2023, and will intersect with the trend towards embedded finance. The continued digitalisation of everyday services is creating new use cases for embedded finance and demand for these products is maturing. Payments have been at the forefront of the embedded finance revolution, but we expect to see many more financial services emerge within the space in the next year.

On the regulatory front, I expect we’ll see more progress towards PSD3 in 2023, which is positive. It’s a revision to the existing framework regulating electronic payments and the banking ecosystem within the European single market. This is important, as there are major European countries – France, and Spain among them – which still lag behind in terms of the adoption of open banking-based services.

If the recent recommendation from the European Banking Authority around standardised APIs for open banking is part of the revised regulation, it will certainly be welcomed by many third-party providers that deliver open banking-based products and services. Any improvements made to banks’ existing PSD2 APIs will also be well received, given the potential to open up new possibilities for open banking.

Recurring payments is one of the tangible use cases that is emerging as open banking APIs reach maturity. In 2023 the full scope of the opportunity around account-to-account (A2A) recurring payments will become apparent. The subscription economy has become a permanent fixture of everyday life, but there are still aspects of the customer experience, such  as payments, which are let down by financial services.

Open banking-based recurring payments set up on an A2A framework can mitigate the issue of unintentional failed payments caused by changing details or expired cards. As a result, the growing number of businesses with subscription-based offerings can use A2A recurring payments to reduce customer churn and unlock new opportunities. That’s why in the next year, I think we’ll see solutions like this really take off.

Nick Reid:

It’s been another turbulent year for businesses. Just as we looked to be over the worst of the economic impacts of COVID-19, we stumbled upon a new set of economic challenges. Now all businesses, but especially small-to-medium sized enterprises (SMEs) are facing further economic disruption, in the form of soaring inflation, ever-increasing interest rates, and the continuation of heavily disrupted supply chains.

All that means that 2023 will probably not be a time for experimentation, with technology based on unproven banking or payment methods for the SME segment. Businesses are likely to ‘double down’ on what is in their immediate interest. When it comes to financial management, this means adopting established tech solutions that help them get paid as quickly and conveniently as possible, and give them the tools to understand, manage and optimise their cashflow position.

I see SMEs looking to consume these workflows from recognised brands, which they already trust and interact with daily. The incumbent players in the financial services sector are well positioned to provide this. These companies are in a fortunate position to observe endless fintech innovation, while adapting their digital strategies based on what resonates with the target segment.

However, this is no time for these businesses to get complacent. We should expect to see more regulatory changes that affect access to financial services, especially here in Europe, introduced in 2023. Chiefly, it’s widely expected (at the time of writing) that PSD3 legislation will be drafted early in 2023. This will mean future change in the field of Open Banking and Open Finance and could certainly help to lower the barriers to entry within some of these fields, which could help new market entrants to attract customers. 

Kimberley Waldron:

It may seem like stating the obvious given the well-reported investment slow down, but in 2023 I am expecting to see more fintech start-ups that passed series A and B stages of funding in 2022, slow down the pace before entering later rounds. And to slow down on the self-professing! We know many businesses were pushing through early-stage investment rounds faster than they could spend, but this will stop, and runways will need to be more closely managed.

We have seen a correction to the seemingly abundant vigour and eagerness of VCs, which many now acknowledge was necessary for the proper governance of the sector. This has also impacted the public image of the more conscientious fintechs, who want to be seen as more credible and sustainable. Investors are looking for businesses that show genuine product market fit, not that exaggerate about hyper valuations and decacorn statuses.

In 2023, I think we will hear from a more self-aware fintech start up community, which is more focused on what fintech can do for the world around us – climate fintech, green fintech, sustainability, community finance, financial inclusion – rather than getting caught up in the self-perpetuating echo chamber. This means marketing strategies will also have to adapt accordingly.