As the final countdown to 2023 has begun, the fintech industry is shaking off the old and letting in the new. From scaling embedded finance solutions to increasing the use of account-to-account payments, we explore how the landscape will evolve with the top 10 fintech trends of 2023 in CEE.
Fintech startups are on everybody’s minds these days. Some supporters believe we will see more unicorns with this label in our regional zip code (e.g. we are looking at you, FintechOS).
They take into account that fintech is one of the most promising tech verticals out there. Even if the funding has slowed, the global market is estimated at over €130B, with a 25% growth each year, and new generations, like Gen Zs, are growing, and only using tech to pay.
But skeptics say fintech is a tricky vertical given the competitive market, economic downturn, regulatory landscape, and lack of early adopters, to name but a few of tech startups’ challenges.
One thing is for sure, with the development of AI, ML, and blockchain, finance trends will likely continue to improve and automate services in all the emerging tech ecosystems. Today, we discussed with 7 professionals what 2023 would bring when it comes to fintech solutions.
Below, we will discover technology trends in finance from:
- Alin Breaban, a co-founder of Romanian fintech startup Vestinda, a crypto trading and investment platform in Web3.
- Adrian Cighi, the Romanian co-founder of PAGO, a tech startup that offers access to service providers in one mobile app to pay bills, insurance, or taxes.
- Greek Panagiotis Kriaris, Vienna-based Commercial Director of Unzer, a platform for international payment transactions.
- Alexandra Pollack, the co-founder and CEO of the Romanian Unchain Fintech Festival.
- Doctor Andreas Rung, a UX strategist for fintech players, and CEO of Ergomania, a product design company from Hungary.
- Juan Alonso-Villalobos is a Spanish Board Member at Startup Wise Guys, an Estonian accelerator program for early-stage B2B fintechs.
- Vasilis Zoupas, co-founder of Greek fintech Woli, a banking app targeting kids and teens.
10 fintech trends of 2023 in CEE
#1 Embedded Finance
Embedded finance is the integration of financial services and products into traditional financial companies. This means adding payments to e-commerce platforms, without inviting the user to leave the website; a valuable tool for SMEs that lack the resources and know-how to develop their services.
On an estimated market of over €50B by 2026 in the U.S. alone, it’s no wonder many professionals are talking about it as the next financial frontier. And also why we are looking at FintechOS, which helps financial players build these types of products with no code/low code.
“It simplifies the customer journey, and enables value-added services, such as incentives, discounts, or additional products, whereas it remains invisible in the background. For brands and companies, it provides opportunities for increased loyalty and potential additional revenue streams,” Panagiotis Kriaris comments.
“Embedded finance is the ace in the hole for traditional banks. They still have huge customer bases which will stop migrating to neobanks if they can get similar products and user experience from their current bank,” Adrian Cighi says.
“The ecosystem of embedded finance – the integration of financial tools or services within the offerings of nonfinancial institutions for a seamless, convenient, easy-to-use customer journey – is considerably large and is further expected to grow significantly in the coming years. Buy now pay later (BNPL) is ahead of the curve and is expected to keep its growth momentum, despite recent fluctuations in companies’ valuation of top players,” Alexandra Pollack shares.
“Banking systems are becoming more modular and brands are starting to realize the ability to integrate financial services into their offerings, thus expanding customer relationships,” Vasilis Zoupas tells us.
#2 Fintech trends for SMEs
Even if the key to scaling fast in a downturn are enterprise software solutions, embedded financial services will lead to more and more fintech solutions for small and medium companies. For example, Bulgarian Payhawk rose to the unicorn statue by offering this to their customers at the beginning.
Panagiotis Kriaris believes that 2023 will be all about “The re-invention of small-business financial services. They need easier financial workflows, simple smart analytics, and actionable advice.”
#3 Alternative payment infrastructure
Say “bye-bye, baby” to credit cards or bank transfers with the rise of alternative or personalized payment systems, as Romanian PAGO offers. These represent convenience, speed, and security compared to financial traditional methods. Account-to-account (A2A) transactions could represent 15% of transactions by 2030, for example.
“Open banking facilitating A2A payments, instant rails, and alternative payments continuing to rise are some of the things to look out for,” Panagiotis Kriaris supports the fintech trend of 2023.
“In times when buying power is eroded by inflation and jobs are lost, wealth tech and alternative asset classes, together with personalization and automation in personal finance, can emerge as the new winners,” Alin Breaban joins in.
#4 Functional business models
Adrian Cighi believes in another fintech trend for 2023: “The shift will be towards functional business models, which can become profitable faster, rather than focus primarily on user growth. I think investors will scrutinize the ratio of the cost of user acquisition to customer lifetime value, especially the assumptions behind the value part and how fast that value can be achieved.”
#5 Blockchain-based transfers
“Using conventional methods, the costs and time needed for transfers are high in developed countries but even higher and less efficient in emerging countries. Blockchain technology or the use of stablecoins could make a real difference for millions of people,” reveals Juan Alonso-Villalobos.
Andreas Rung also thinks that Central Bank Digital Currency (CBDC) will be a 2023 fintech trend, but from the user perspective, he adds “CBDCs are becoming popular as governments realize that they should not miss the blockchain party. There are initiatives from different motivations to promote it. Legal, compliance, and technical issues are all discussed to the ultimate detail but nobody cares whether people really need CBDCs.”
While Alexandra Pollack says “Central banks of several countries plan to issue CBDCs – blockchain-based digital versions of the currencies of the respective countries. Next year is expected to bring an acceleration in the implementation of such projects, as customers have gradually made the transition to cashless purchases during the pandemic. Experts believe that CBDCs will provide privacy, transferability, convenience, accessibility, and security.”
#6 Know Your Customer (KYC) guidelines
With cashless solutions growing faster than ever, and more and more financial players evolving on the global market, there also comes a need for innovative regulations. Juan Alonso-Villalobos believes that KYC guidelines, which are regulations to protect financial institutions from corruption, will see major growth next year. Some regulations that will emerge in 2023 will likely involve biometry, and crypto, to name a few.
KYC guidelines outline the steps that businesses should follow to properly verify the identity of their customers. These include verifying personal information, such as name, address, and date of birth, as well as documentation, such as government-issued identification or proof of address.
They also require businesses to assess the risk level of their customers and monitor their financial activities for unusual behavior.
Andreas Rung predicts that 2023 will be the year of micro-investments: “As branches are disappearing, the banks should find a strategy to engage younger generations in investing. They are ready to learn and experiment even in risky fields, but only with small amounts of money to see what will happen.”
He is joined by Juan Alonso-Villalobos: “In the world of insurance, pay-per-use insurances (only pay for the car insurance when you are driving the car), as well as micro-insurance (in some cases embedded insurance) which aim to cover risks in a limited time could be an interesting way to disrupt the traditional market.”
#8 ESG is a key topic in finance too
“Financial education for consumers, finance automation in both businesses and consumers, and ESG can set the ground for the longer horizon perspective,” shares Alin Breaban. While Vasilis Zoupas tells us that “2023 seems like a year when the pressure to think and act sustainably will begin to materialize in actual products and services.”
#9 Personalized tools
Alin Breaban said that “As we’re going through one of the toughest economic periods of the last 50 years, ready-made solutions will be the go-to strategy at a fraction of the costs. Using off-the-shelf modules that fit well and complement their product stack to produce new revenue streams is something any company should tap into.”
“Although generalistic finance applications will always take part of the market, I expect custom-designed solutions that cater to specific audiences’ needs to be much more effective moving forward,” Vasilis Zoupas adds.
Andreas Rung shared that when it comes to design, next year we will see growth on the voice front. “KBC (ed. note. Belgian bank) launched in several countries its Kate assistant. Many banks are following them. As the inclusive design is getting more important more and more banks should reconsider their accessibility strategy and include voice in their offering.”
This means the development of voice recognition technology and natural language processing (NLP) so users can access services through voice commands for seamless processes. “Siri? Alexa? Pay my internet bill and donate to The Recursive” coming next.
#10 AI Technology as a cost-effective alternative
Last, but not least, Alexandra Pollack concludes the list with the top 10 fintech trends for 2023 from CEE professionals: “Artificial intelligence is on the rise across the board and the financial sector is primed to take advantage of all it has to offer. Algorithmic AI decision-making is an efficient alternative to the current high costs of aggregating, analyzing, and using data. Moreover, chatbots are also quickly becoming an invaluable asset for customer support departments.”