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Where is fintech headed in 2023?

Few sectors are evolving as rapidly as fintech, where innovation and investment in research and development set leaders apart. However, failure to stay ahead of the curve and be part of new trends can mean the difference between success and failure, so in which direction should companies be heading in 2023?

2022 saw an end to low inflation and Covid-driven online spending that had created successful years for many fintechs and tech businesses, both in terms of their end markets for online consumer-driven businesses and funding valuations. The good news is that periods of an economic slowdown have historically been massive drivers of innovation as the fittest and fastest companies look for new revenue streams and ways of operating to replace obsolete business practices.

Key predictions for Banking and Fintech in 2023

Big banks will embrace Banking as a Service

BaaS is reconfiguring the banking value chain by enabling third-party distributors to offer banking products and services. It’s opening the door to disintermediation and enabling new sources of growth for all parties – whether the bank, the fintech enabler or the third party.

As Banking as a Service (BaaS) nears mainstream adoption, there is a significant opportunity for banks to join the BaaS ecosystem, develop new relationships with fintech firms and create new revenue streams for themselves simultaneously. The business of banking is moving out of the exclusive realm of banks and into a comprehensive ecosystem to bring personalised, customer-centric offerings to market faster. This is what BaaS can achieve if banks are prepared to embrace it. It can enable them to reach more customers, improve their economies of scale, and reduce costs. Accessing the data via BaaS also leads to more personalised services and better customer relationship management and retention.

As BaaS has become more mainstream, it has caught the eyes of regulators. Fintech firms have limited experience with compliance processes, therefore, the BaaS model becomes critical in a highly regulated and competitive market. In these situations, banks have responded by enabling fintechs and neobanks to integrate into their core banking systems and infrastructure, allowing them to offer financial services while lowering operating costs.

BaaS incentivises banks to digitise and modernise their systems to stay relevant in today’s ever-changing financial services industry. Banks are increasingly focusing their efforts on upgrading legacy banking systems. With BaaS, banks have the opportunity to acquire new customers and enhance and diversify their revenue streams.

Ukheshe offers banks and other financial institutions a cloud-based API-first BaaS platform that can be white-labelled - essentially allowing the bank’s customers to provide embedded finance offerings to their own customers under their own brand. Examples include wallet as a service, card as a service, KYC as a service, and more. This breaks down the barriers to providing financial products and services and significantly quickens the go-to-market process.

Banking as a Service products

Benefits of Ukheshe's Eclipse API within BaaS:

For Banks

The Eclipse BaaS solution opens a new world of possibility for banks to provide third parties with access to their core baking systems and functionality which can be integrated into third-party products and applications.

  • Increased sources of revenue: BaaS empowers third parties to offer banking products - such as deposits and loans – without having to undergo rigorous regulatory processes. Because of this, banks can generate new revenue streams beyond their traditional customer base through a combination of setup fees, recurring fees or revenue-sharing agreements.

  • Cost savings: Banks can benefit from the Eclipse BaaS solution in terms of revenue generation and cost reduction. BaaS is an excellent opportunity for banks to reach more customers at a lower cost by teaming up with fintechs and non-financial players.

  • Increased customer insights: more customers mean increased insight into customer preferences and experiences. Eclipse provides exactly that – BaaS that has the customer at the heart of every solution, with less hassle, all through a single platform. Having access to greater customer insights enables banks to understand their customers better and develop products and services tailored to the specific needs of their customers.

The Banking as a Service Model
Source: Cashfree, Edited by: Ukheshe

For Non-Banks and Fintechs

  • BaaS allows fintechs and third parties to leverage the banks’ core infrastructure by integrating directly with a bank's system through APIs. Non-banks and third-party suppliers have limited access to client information and general banking capabilities, and obtaining a banking license is extremely difficult. BaaS allows fintech companies to sidestep banking licensing rules by integrating directly into the banks’ infrastructure. This has a significant effect on the speed to market and product innovation.

  • Increased customer trust: businesses can leverage consumers’ trust in banks to increase their customer base.

  • Greater competition leads to greater innovation: BaaS enables competition in financial services by allowing non-banks to offer core banking services. This means that more players can enter the market, innovation gets a push, customers get access to new products, and it leads to greater financial transparency.

Embedded fintech will outpace embedded finance

Embedded fintech is the integration of fintech products and services into financial institutions’ websites, mobile apps and business processes. Embedded finance is about enabling non-financial companies to provide banking services, while embedded fintech is focused on embedding fintech products and services into the infrastructure of financial institutions (banks).

Banks can protect and grow their banking products, like payments and loans, by finding new distribution opportunities through embedded finance. In addition, banks can create new revenue streams from new products and services already created by fintech partners - a strategy called Embedded Fintech.


Download our latest Embedded Finance Guide here


What should fintechs keep in mind in 2023

  • The financial services sector is highly regulated. Adhering to legislation and compliance codes is essential.

  • Find ways to match consumer demand for efficiency and security in financial transactions.

  • Stay relevant by introducing efficient cross-border payment capability. Businesses and consumers are operating globally in 2023, and companies need a payment platform that allows efficient fund delivery in both directions.

  • Ease B2B payment friction points by streamlining and reducing the costs of payment processes. The current inflexibility and high costs of B2B transactions can be overcome using embedded payments. Businesses that can develop a software system or find a partner to help unlock new ways of making and receiving payments, help manage and use payment data, reduce human error and enhance security will increase efficiency and profitability.

  • Remain transparent. The sector must remain responsible, and its processes must be visible and transparent to gain and retain consumers’ trust.

  • Be agile. Above all, be ready for change at any time. 2023 promises nothing except more uncertainty. Inflation and interest rates keep increasing even as some businesses’ capacity to generate income diminishes due to power supply uncertainty and other economic factors. Consumers are looking for more payment options that are simpler and that offer security and transparency. Nobody in 2023 can afford to be defrauded or to lose money in online transactions

Fintech companies ready to meet these challenges head-on, enhancing customer experience and expectations on their online purchase journey, will be the ones not just reading 2023 trend predictions but setting 2024s.


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