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Fintech in 2023: Predictions From Enfuce, Dreams, DivideBuy, Xero

Fintech is finding itself at a turning point amid rumblings the industry is ‘losing its lustre’. We’ve seen firms struggle to raise fresh funds, reports of falling valuations, fire sales, staff layoffs and recruitment freezes. Some fintechs have abruptly closed while others have bid their farewells before they’d even had the chance to say hello.

Throughout January on The Fintech Times, we’re sharing industry predictions for 2023 as well as ideas for ‘moving fintech forward’ in the next 12 months.

Today we hear the expectations of leaders at Enfuce, Dreams Technology, DivideBuy and Xero.

Fintech can become a ‘force for good’
Denise Johansson
Denise Johansson, co-founder & co-CEO of Enfuce

With a recession seemingly inevitable across the developed world in the year ahead, there will be less money for the innovative fintech entrepreneurs, says Denise Johansson, co-founder & co-CEO of European cloud-native issuing and processing pioneer Enfuce.

“It will be interesting to see the impact the recession has not just on innovation more broadly, but also what kind of entity can pursue innovation. We anticipate that partnerships will prevail in 2023 as smaller companies band together to weather the storms, shoulder the financial burdens, and innovate at pace.

“Recessions often create opportunities and streamlined ways of doing things, and as fintech already offers more agile and cost-effective financial services solutions, we expect any economic downturn will naturally create more chances for the fintech industry.

“Recession also offers opportunity for systemic change. In our view fintech needs to go beyond functionality and become a force for good. In a crowded marketplace, having a clear purpose that makes a positive impact on peoples’ daily lives is the stand-out attribute that will grab the attention of consumers.

“Fintech shouldn’t be merely about producing solutions to business problems – it needs to be an ongoing powerful current that defines the future landscape for everyone. Whether it’s ESG, aiding financial inclusion or social mobility, fintech has solutions that can make immediate and long-lasting differences for the benefit of wider society, and we know that in the coming year this will be more important than ever.”

The B2B fintech sector ‘will boom as third-party collaborations multiply’
Henrik Rosvall, CEO and co-founder of Dreams
Henrik Rosvall, CEO and co-founder of Dreams

Henrik Rosvall, CEO & co-founder of Dreams Technology, a provider of engagement banking solutions, says that ever since the pandemic began, banks have been forced to speed up their digital transformation
processes.

He says: “While many have found that building their own digital solutions is not only time-consuming but also extremely costly, there have been several regulatory changes in third-party policy that have come into place over recent years, which have enabled a plethora of partnership opportunities between banks and fintechs.

“As we move into 2023, the circumstances brought about by the cost-of-living crisis will put even more pressure on financial institutions to further digitalise their services and meet the evolving needs and wants of consumers. Consequently, the number of banks collaborating with third-party providers will drastically increase, meaning the level of growth and investment within the B2B fintech space will reach new heights.

“Additionally, B2B business models are more shielded from market volatilities than their B2C counterparts, and less vulnerable to rising inflation and interest rates. As the overall decline in spending continues to worsen in 2023, we can expect loan demands to fall and defaults to increase, which will further contribute to making B2B fintechs an attractive proposition, for both financial institutions and the investment community.”

Fintechs will face a time of readjustment
Teresa Byrne
Teresa Byrne, chief commercial officer, DivideBuy

Teresa Byrne, chief commercial officer at DivideBuy, a European POS finance company, believes that with the economic challenges facing much of the world, 2023 will see a shift of focus from growth to profitability for many fintechs.

“Merchants have had a tumultuous couple of years because of the pandemic, but have shown admirable resilience and flexibility, pivoting sales from bricks and mortar, going completely online, and embracing hybrid business models that mesh the best of both worlds.

“But merchants are now facing fast-dwindling profit margins due to inflation and scarcity of products caught up in supply chain logjams. However, we are seeing more merchants looking at ways of owning the customer experience, which they know is a key driver to increase the frequency of purchases, especially in difficult economic trading conditions.

“Discounting and offering alternative ways to pay will inevitably be key trends for merchants in 2023, as will harnessing the value of their payments data. Merchants are really starting to see that value in their applications even now, be it in owning the customer experience or in fine-tuning their customer loyalty schemes. We believe that the value of this data will only increase in the coming year.

“Not all merchants will have the ability, financial or technical, to leverage payments as a capability in-house, but will instead need to seek third parties to help them build bespoke, flexible solutions that empower consumers with more control over their finances – and the ability to adjust when needed.

“So we while we think 2023 will bring ongoing economic turbulence, it will also be a year where responsible lending becomes paramount, enabled by exciting partnerships with the potential to buffer consumers and merchants alike from the shocks through more flexible ways to pay.”

Embedded services will help small businesses evolve
Chris O’Neill, Xero
Chris O’Neill, chief growth officer at Xero

Chris O’Neill, chief growth officer at cloud-based accounting software platform for small businesses Xero, suggests embedded technologies will continue to gain momentum in 2023.

“Embedded finance, the integration of financial services such as lending and payments with non-financial business infrastructures without the need to redirect them to traditional financial institutions, is rapidly gaining ground. Like Apple adding buy now pay later functionality into the iPhone or Xero adding a ‘pay now’ button to invoices with Stripe and GoCardless which seamlessly integrates with our platform.

“In 2023, we can expect digital platforms to roll out new value-add products and services that provide more actionable insights based on customer data and tailored experiences. Embedding financial services also means these services tie into existing data sources to gather the customer information needed, which is where open banking innovation supported by local mandates comes into play.”

“Currently in the US, open banking innovation is market-led. However, with the CFPB pushing for new rules in 2023, alongside industry associations like FDATA, ETA and FDX, we could see a new wave of financial tools and innovation for small businesses.

“Core fintech products that have remained unchanged for two decades will be increasingly designed around customer-led experience and powered by data connectivity and open platforms. For example, open banking APIs are making it possible for banks and financial institutions to gather rich and reliable accounting information based on a business’ health and cash flow, to give lenders confidence they need to provide capital, and small businesses access to funds fast.

“Ultimately these technologies have the potential to help small businesses access a broader range of financial services more easily for faster access to funding and seamless business workflows.”

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