This year is shaping up to be action-packed for the fintech industry, with impactful developments and industry shifts creating unique challenges and opportunities. As Fintech Nexus USA 2023 quickly approaches, we predict the trends we expect to dominate conversations on the show floor.
Embedded finance is an industry gamechanger
As businesses strive to provide better customer service and generate new revenue streams, many are turning away from traditional banking and towards embedded finance. This innovative approach involves integrating financial products or services into non-financial platforms and is rapidly gaining popularity. In fact, the market for embedded finance is expected to reach an impressive $7.2 trillion by 2030. This shift is benefiting many small and medium-sized enterprises that no longer need to rely solely on traditional banks. However, in response, banks are exploring alternative solutions to remain competitive. As embedded finance continues to gain momentum, prompt decision-making is essential for financial institutions looking to capitalise on this trend.
Real-time payments introduce new challenges
With the increasing popularity of real-time payments (RTPs), businesses are facing new challenges related to this payment method. The RTP ecosystem is rapidly expanding due to the shift towards a digital economy and its numerous advantages, such as improved cash flow, efficiency, and convenience. However, like any other payment method, RTPs are not immune to fraud, security risks, and growing regulatory requirements. As a result, businesses must take steps to mitigate these risks and adjust their technology to accommodate RTPs. Additionally, introducing new payment methods often requires a period of customer hesitation and an initial cost of changing technology. As RTPs continue to present challenges, businesses are working to introduce preventive measures to ensure safe and secure transactions.
The Bank-Fintech relationship is evolving
Banks and fintechs are shifting from a siloed and competitive approach to a more symbiotic relationship. By recognising each other's strengths, both parties are discovering ways to complement their services. Fintechs seeking to expand their customer base can benefit significantly from the established infrastructure and credibility of traditional banks. For example, Cross River Bank helps facilitate money movements for Stripe and savings accounts for Affirm. At the same time, banks are looking to fintechs to understand how they can use customer data to create optimised consumer experiences. We anticipate a rise in collaborations as banks and fintechs seek to capitalise on this opportunity.
Future impact of Buy-Now-Pay-Later
As the younger generation increasingly adopts Buy-Now-Pay-Later (BNPL), this payment method will continue to disrupt traditional payment and lending models. With flexible payment options and lower interest, BNPL has the potential to become the credit card of the 21st century. However, it's not without its challenges. While BNPL is still popular despite uncertainty in the current economic landscape, some consumers are wary of taking on more debt, while others continue to use the service. In response to the growing popularity of BNPL, we anticipate that traditional finance providers will start offering their own BNPL services to prevent customer drop-off.
Tackling Synthetic ID fraud
Synthetic fraud is a type of identity theft where a criminal creates a new, false identity by combining real and fake information. This information can be used to open new accounts, apply for loans, or obtain credit in the victim's name. The exponential growth of synthetic ID fraud has compelled businesses to look for tools and resources to prevent and tackle this crime. Due to the low cost and accessibility of obtaining someone's personal data, synthetic ID fraud has become the fastest-growing crime in the US, and it's set to reach $2.42 billion this year. The crime is complex and slow-burning, which makes it difficult to detect, creating numerous opportunities for exploitation and potential loss. As a result, we anticipate new technology and measures will become available to help businesses verify the identity of their customers while educating their employees about synthetic ID fraud.
Are you attending Fintech Nexus? Let’s connect!
Data Zoo enables fintech companies around the world to build modern customer verification experiences. Whether you’re a startup expanding globally or an enterprise verifying millions of global customers, Data Zoo makes it easy to simplify integration, scale global operations and keep customer data safe.
Data Zoo will be at booth 246 at Fintech Nexus USA from 10-11th May 2023, where we will showcase how our modern identity verification solutions help fintechs break free from legacy providers.