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 2023 predictions from Provenir, THORWallet DEX, Riskified and Roots Automation.
Embracing more data sources
Today’s ecosystem of data sources, infrastructure providers, and data science professionals will be presented an incredible opportunity (and challenge) in 2023 to demonstrate how best to operate in uncertain times, suggests Kathy Stares, executive vice president, North America, at AI-powered decisioning platform Provenir.
“In 2023, the FIs that can leverage additional data sources, and test/deploy new strategies to ensure the business is operating in a healthy manner, will be the ones that can capture new market share during this downturn and reap the benefits of growth when others are pulling back from the market,” she says.
“This is not only true in originations/ acquisitions, but also in portfolio management and collections.”
More stringent regulations
The FTX scandal has left an indelible mark on public perception of the crypto industry and could lead to stricter control, warns Pedro Isaac Lopez, chief growth officer at THORWallet DEX, the gateway to THORChain and a non-custodial DeFi wallet.
“The backlash and negative sentiment will be tough to shake off, however, it is not a fatal blow. There are brilliant people innovating in this space worthy of public trust. It is their duty to prop up the authentic use cases in DeFi and regain that trust.”
“I fear that the backlash will give rise to more stringent regulations applied improperly. A key understanding that any regulator must consider is wherein lain the source of 2022’s greatest failures. As we discovered from the various market meltdowns involving Celsius Network, Voyager Digital, and the latest being FTX, centralised finance (CeFi) is knitted together with red flags.
“To conclude that the distinct DeFi industry should be subject to tighter regulations is misdirected. We must collectively acknowledge that DeFi lending protocols worked as designed, largely without any major concerns of contagion. In stark contrast we find that CeFi lending services were operating like traditional financial institutions without the proper investor protections, either 1:1 or reserve lending, leaving those platforms and their users massively exposed.
“DeFi aims to mitigate that issue with a ‘code as law’ approach, necessitating a consistent and well-thought framework that promotes innovation but punishes bad actors. It is the onus of industry leaders in DeFi to work collaboratively with regulators to distinguish it from CeFi, and ensure that features such as an artificial intelligence ‘kill switch’ proposed under the EU Data Act do not undermine the benefits of blockchain technology.”
Policy abuse set to skyrocket
With the macroeconomic challenges, consumers will be thinking more about every pound they spend and save. Riskified, the e-commerce fraud management platform, anticipates that consumers will continue to look for and find loopholes in retailers’ policies – leading to policy abuse to soar.
Eyal Elazar, policy abuse expert, Riskified, says: “Policy abuse, which occurs when a consumer exploits (intentionally or otherwise) a retailer’s terms and conditions, has gained significant traction over the past few years and will continue to be a top priority for online retailers as we go into 2023.
“Policy abuse, for example, is when customers misuse promotional codes, falsely report a missing item, or return used or worn items. These behaviours impact all areas of a retailer’s business – from legal to customer service to shipping and logistics – and can cost them millions of pounds in lost revenue.
“As we enter 2023, the ongoing economic downturn is forcing consumers to think critically about every pound they spend and every pound they save. We can anticipate, therefore, that consumers are likely to continue finding loopholes in retailers’ policies. If retailers don’t pay attention to these consumers’ behaviours and adapt accordingly to manage them, bottom lines will be severely impacted.”
Automation to help talent crisis
Vacant job roles, loss of intellectual property, ongoing operational disruption, and the cost of recruiting and training new hires all take a financial toll on an organisation, says cognitive process automation platform Roots Automation. Insurers which relied heavily on people to transact work in middle- and back-offices now face a talent-crisis in which 69 per cent of employers report they simply cannot find people to do the work.
Additionally, salary increases are on the rise. Year-to-date increases in salary are four per cent and climbing, up from the historical norm of two per cent. This means companies are both paying more to find employees and more to retain employees than ever before.
Chaz Perera, CEO and co-founder of Roots Automation, says: “While the talent crisis likely won’t resolve itself anytime soon, business leaders are more open than ever to finding cost-efficient ways to keep their people happy and engaged. One way they are doing this is by investing in automation to relieve employees from the tedious parts of their job so they can focus on higher-level, more challenging aspects of their work.
“In addition, leaders increasingly recognise the value of automation end-to-end, particularly with insurance-specific AI models and methods. At Roots Automation, we have heavily invested in building digital coworkers that are deep domain experts that appreciate insurance-specific data, systems, documents, processes, language, and nuances.”