By Paridhi Gupta, VP Product, axio
The future is all about democratising innovation-led financial services. An example of this is the RBI’s 2025 Payments Vision, which aims to provide safe, secure, fast, convenient, affordable and accessible e-payments options for every user. While the future for Fintech looks promising, there are certain challenges which the industry must overcome. For instance, there were 9,103 bank fraud cases reported in the financial year 2021-2022, amounting to a loss of about ₹604 billion.
Fintech is hence set to evolve around secure, smooth, and simplified payments. Here’s a look at the top 5 tech trends that will define fintech in 2023.
1. Open Banking
The single most impactful development in the finance sector is open banking. Seamless access and interoperability among diverse financial entities to provide flexible consumer services will revolutionise how customer data is recorded, maintained, and shared among service providers. Technology will serve as an instrument for the account aggregator framework to enable the new-age banking practise. It will help replace elaborate terms and conditions with simplified user approval for data sharing at the granular level. Additionally, plugging the security gaps to curb breaches at these hot spots will drive innovation in the cyber-security domain.
2. Voice as a Biometric
Multi-factorial, knowledge-based authentication will be augmented by voice-based payments approval. SaaS-based solutions for making hands-free commerce available for the customer via digital payment solutions, eliminating OTP and other time-consuming methods, will take centre stage. Freedom from accessing bank details for every transaction will be the primary goal of innovation in AI-based voice recognition. The focus here is multilingual support without dialect limitations, enabling faster checkouts and eliminating the unstated high-speed internet-connection mandate that persists today.
3. Embedded Finance
Embedded Finance is projected to see a ten-fold increase in revenue, reaching $230 billion by 2025 and enabling fintech to unlock deeper customer relationships beyond transactional flows. The popular contextual credit option will jumpstart innovation across the industry, bringing new technologies to scale, which may lead to tech-driven M&As in the banking and fintech industry. While expanding their bundled services, companies will need to maintain transparency with customers and regulators.
4. Cloud Storage Optimisation
Advances in finance interoperability and security are currently paving the way for a revolution in data storage and sharing. This is where storage optimisation becomes indispensable. Expanding into untouched markets, in sync with the core theme of “E-Payments for Everyone, Everywhere, Every Time” in the payments vision 2025, will drive developments in cloud storage optimisation in terms of efficiency, cost, and security. Uninterrupted scaling is needed for an all-inclusive approach. For instance, in India, the Public Credit Registry (PCR), proposed by the RBI will resolve information asymmetry across lenders and redefine the customer data storage landscape.
5. Expansion of UPI on Credit
With the integration of Single-Block-and-Multiple-Debit (SBMD) within the UPI framework, the RBI has opened up a plethora of opportunities for fintech companies to tap into. This new feature allows customers to block a specific amount for a particular merchant, who can then keep debiting this blocked amount till it is exhausted. This makes automated payments quicker and easier. The constant innovation of UPI and its rapid adoption will challenge incumbents in the payments and credit space to stay on their toes as customer convenience will increasingly become the deciding factor in determining volumes.
Concluding Thoughts
The banking universe is converging toward an ecosystem of seamless and interoperable services for both individuals and corporates. Consumer data, transactional interoperability and deep security are the touch points bridging the operational gap between consumers and financial service providers. The economy demands greater financial inclusion, which can be achieved through innovation in technology and expansion in the regulatory framework. The impending openness is bound to make the protection of user data and user funds more challenging. A consolidated effort by fintech, banking, non-banking and government bodies to enhance outreach, and security and facilitate affordable credit can spur economic growth.