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 IBM, Trovata, Cardlay, Creditspring and Enveil.
BIAN is ‘the future of banking’
The future of banking is the history of banking flipped on its head, says Shanker Ramamurthy, BIAN board member and global managing partner banking & financial markets at IBM Consulting.
“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”
More premium APIs built by banks
Lisa Gutu, VP of business development of bank-connected platform, Trovata, says we are now living in the era of an API economy.
“We predict that banks across Europe will release a wave of corporate APIs during the next year as part of the open finance movement – which is the next step in open banking and involves the sharing of data relating to investments, insurance and many other financial services.
“Banks once regarded PSD2 and open banking as a regulatory burden. However, as a billion-dollar market created by value-added APIs begins to take shape, banks are paying more attention to open banking and premium APIs.
“Several banking groups have already embraced this strategy and released the first API marketplaces with multiple APIs for third parties and own clients, including variable recurring payments (VRPs), commercial payments and reconciliation, FX, loans and mortgage quotes.
“We expect to see more pilots and market maturity of premium APIs, with clear and harmonised frameworks across the banking industry emerging in Europe and the US during the next year. In turn, this will create new opportunities for innovation and better financial products for consumers, businesses and corporates.”
It’s all about partnering in 2023
Jørgen Christian-Juul, CEO of spend management company Cardlay, has put the spotlight on fintech partnerships.
He says: “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.
“Business formation in the fintech sector peaked in 2018, and over the last year, has declined by 80 per cent. This could result in consolidation in the industry, which will ultimately strengthen the offering of larger fintech operations.
“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 fintechs they are bound to fall behind.”
There are still opportunities for fintechs
Fintechs across the sector are going to have to continue to streamline their operations in search for profitability, says Neil Kadagathur, co-founder and CEO of lender Creditspring
“2022 saw the value of major players collapse and mass layoffs from some of the most established names in the space – there’s no reason to think that 2023 will be any different.
“However, the tech redundancies does mean that there is a major depth of talent on the job market so there is an opportunity for ambitious fintechs to attract the core skills they need to accelerate growth.
“Securing funding could be a challenge for many fintechs as the cost of living crisis is even impacting investors. Whereas previously, loss-making businesses could still find themselves ripe for investment solely based on potential, the focus now is on demonstrating a clear and profitable business model, with a realistic and scalable growth plan.”
Privacy enhancing technologies (PETs) will be transformative
Dr Ellison Anne Williams, CEO and founder of privacy enhancing technology company Enveil, discusses the growing importance of PETs.
“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.”