Top 5 Transformative Fintech Spaces to Watch in 2023by Johanan Devanesan December 8, 2022
Unlike a lot of the next-generational technology that have thus far failed to live up to their full purported transformational abilities, the disruptive potential of financial technology (fintech) has been more evident in numerous practical use cases. And in 2023, the positive impact of fintech is only set to be felt further.
Unlike some early applications of artificial intelligence and the metaverse, for example, fintech use cases have transformed businesses and economies, have engendered financial inclusion for marginalised communities, and its practical impacts are improving society in the present day, instead of in some idealised future.
But the outlook for fintech is broad and multifaceted. So as we look ahead to 2023, what areas of fintech are likely to make the biggest impact in driving change and innovation for the global economy?
The lending space is one that has been in the spotlight significantly over the past decade, as technology has increasingly put the focus on the customer and the customer experience. Particularly in the aftermath of the pandemic, unease with physical methods such as credit cards has driven more people and businesses online to meet their commerce needs.
As many, including thousands throughout Southeast Asia, became acclimated to digital channels, traditional bank loans are being slowly replaced by digital lending alternatives such as ‘buy now pay later’ (BNPL), peer-to-peer (P2P) financing, apps issuing microloans that auto-deduct repayments on payday, and other creative solutions.
Such digital solutions favour unbanked communities and individuals who could not qualify for a typical bank loan as well — streamlining the adoption process and potentially bringing thousands more to participate in the digital economy. The popularity has been such that even credit cards are becoming digitised — card data can be saved to a mobile device, and transactions can be carried out using a smartphone without the need for a physical card.
With a compound annual growth rate (CAGR) of 13.5%, researchers project that the digital lending market will be worth US$22.4 billion by 2028. Notable lending fintech players to watch in 2023 will include FinAccel, Atome, and Funding Societies
It would be hard to mention fintech developments in 2023 without acknowledging wealth management technology, or wealthtech. With the growth in digitised banking and increasing investments being made online in trading stocks, securities, cryptocurrencies, and other purely digital investment opportunities — investors need to monitor their portfolios and complement their wealth management needs with state-of-the-art tech that offers a wide array of services.
Leveraging extensive market research data, these wealthtech platforms can offer calculated investment options, reviews, financial product comparisons, even market behavioural assessments gathered using AI data science.
Traditional banking, investment firms, and brokerages all saw their operations disrupted during the global lockdown months, so wealth management alternatives have become a mainstay that should only see further growth in 2023. Wealthtech fintech platforms around Asia to keep an eye on will include tarrakki, 8 Securities, StashAway, Endowus, and Tiger Brokers.
Valued at US$54.62 million in 2021, the global wealthtech solution market is pegged to more than triple in size to US$137.44 million by 2028
Digital payments have really taken off in the past three years, and it looks like it is here to stay. As mentioned above, customers were increasingly demanding contactless alternatives, and at the same time, small and large enterprises alike were heavily engaged in digitalising their services. Services would require remuneration, and the streamlined, secured digital payment options began to gain critical mass, even in traditionally cash-only or cash-rich regions.
Quicker, more convenient, and with enticing offers such as lower rates plus a variety of promotional attractions to retain customers in a competitive space, the digital payments sphere is one of the undisputed fintech trends that will grow from strength-to-strength in 2023.
The easy accessibility nowadays coupled with the ever-growing variety of payment options — from smartphone transactions to QR code payments to cross-border payments — means that a larger number of people will be using digital transactions going forward, and many of those will prefer it to the inconvenience of carrying cash.
The growth has been so strong that the estimated size of the global digital payments market is estimated to reach US$19.89 trillion by 2026. Some of the well-funded startups operating in Southeast Asia include Nium, Coda Payments, Xendit, RazorPay, and PayMaya.
Embedded finance is the hot new trend for non-financial institutions looking to offer financial tools and services that were traditionally only offered by incumbents. Increasingly, companies that are not in the traditional finance services industry are wanting to offer more financial products to their customers.
This can be accomplished by means of APIs (application programming interfaces) delivering financial features such as pay later services or multibank payment options, that can be integrated or ’embedded’ into the non-financial institution’s website or platform.
So now, instead of always going directly through a bank or financial services provider, the desired financing options can be made available on the merchant’s or reseller’s page immediately. This streamlines customer experiences on those platforms, removing additional layers to obtain financing, insurance, or investments.
With embedded finance, providers can ensure higher checkout or closure rates, less customer dropouts at the point of purchase, and thus secure better revenues. Asia Pacific’s embedded finance industry is expected to grow by 39.7% annually to reach US$108 billion this year, and should only grow more in 2023, especially with the region being home to notable players like Rapyd, AyoConnect, Yufin, Brankas and Finantier.
Environmental, social, and corporate governance (ESG) is becoming increasingly relevant for the fintech sector in the region, even as sustainable and climate conscious practices become mandates for organisations globally. Measures like carbon-neutral targets and study groups to measure the environmental impact of supply chains are becoming increasingly prevalent — even in Southeast Asia, which has traditionally been slow to take up social causes ahead of monetary ones.
In fact, a recent survey in Singapore found that the awareness has trickled down to the consumer level, with over six in 10 Singaporeans rating ESG issues as critical when making their regular purchasing decisions. Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), even namedropped ESG as a fintech area of concern going forward.
To that end, the MAS has launched its ESG Impact Hub to drive collaboration and co-location between ESG fintech startups and solution providers, financial institutions and other economy stakeholders, with the aim of capitalising on industry interest for sustainability initiatives such as the Point Carbon Zero Programme and KPMG’s ESG Business Foundry.
Moreover, investment amounts into ESG efforts have been on the rise in recent years as ESG-focused fintech solutions have been carving out their own niche within the broader space, to support the drives of more organisations to cement social responsibility as another pillar of their business models. Hence as more firms come onboard, investments in the space will only continue to grow in 2023, and is expected to surpass US$53 trillion by 2025. Some of the promising companies making inroads in this arena are Moment Fintech, ADDX, Climate Impact X, and Stacs.