Fintech Ins and Outs for 2023
By Nicole Casperson
Fintech is here to stay, despite some headlines’ doom and gloom predictions. We have entered a period of maturity in the industry, and there is a great hunger for what it will bring.
The fintech revolution has only just begun, and we have yet to see how big our industry will get. Fintech is no longer a trend but an integral part of the financial industry and society.
We’ve seen banks and other financial institutions investing in fintech to provide better services and products while diverse founders are addressing the system’s shortcomings and creating their own solutions.
To kick off 2023 on an aspirational note, I’m opting out of predictions to explain the top trending aspirations for fintech instead while noting the negative energy left behind in 2022.
Time to manifest and embody the change we wish to see in the industry in 2023 and beyond.
#1: Trust & Transparency
2023 is a defining year for fintech as profitability and cash become primary focuses. Solutions with practical impacts on people’s lives are sought after, allowing the industry to become a greater force for good.
In a tighter economy, smaller boutique funds are gaining trust and investments due to their accountability, transparency, agility, and focused strategies.
Trust between customers and fintech companies is essential for success, and transparency is key to upholding ethical operations, allowing users to trust in security and have faith in their interactions. This practice encourages accountability and reinforces trust in the system, benefiting both users and companies.
Mary Ellen Iskenderian, President of Women’s World Banking, has heard thousands of women say, ‘that bank isn’t for me‘ due to a lack of trust. To build trust, you need to lead with empathy.
For example, Shivani Siroya, founder of Tala, interviewed over 3,500 individuals in nine different countries to walk in their shoes before building a culture of trust within her team. In addition, word of mouth has become Tala’s largest source of acquisition, demonstrating the power of trust in a fintech company.
Lastly, it is essential that fintech companies identify, measure, and become proponents of regulation to create a world of radical trust.
Thanks to Senofer Mendoza, founder and General Partner of Mendoza Ventures, for inspiring this take.
🙅🏽♀️ Negative energy to leave behind: Fraud and Ambiguity.
#2: Women-Funded & Founded
Venture capitalists have spawned the most influential fintechs in the world that market their products to women and people of color. So when we look at general partners at funds, founders, and leadership teams at fintech companies, they need to reflect the communities they claim to serve.
The mission to innovate the financial system and make it accessible to all is a driving force behind many people entering fintech, myself included. In reality, women make up 30% of the fintech workforce, yet they only receive 2% of venture capital.
Even the well-intended leaders in the industry need to have a diverse network, knowledge, or access to be influential allies in creating institutional change. Plus, estimates indicate venture capital opportunity costs from withholding investment to diverse founders may be as high as $4 trillion.
We must continue to advocate for the underrepresented and strive to combat the institutional barriers that prevent them from having equitable opportunities. When we are spotlighting narratives of women & people of color who are building, working, and investing in fintech, it can and will shape the future of our industry.
Here are a few articles for actions to get started whether you’re a founder, investor, or ally:
🙅🏽♀️ Negative energy to leave behind: Patronizing fintech bros.
#3: Financial Education & Community
The notion of ROI is quickly evolving to be known as Return on Influence, as it’s becoming increasingly evident that users are demanding fintech leaders help influence their financial education journeys. For example, Plaid’s fintech report found that 79%of fintech users crave more financial knowledge.
And the topics they’re most interested in learning more about are:
- Building an emergency fund
- Checking/improving credit score
- Starting a savings habit
Fintech companies are also discovering the benefits of social capital in building and engaging communities. Fintech can entice a sense of belonging and connection with users, which can be powerful motivators that drive us as humans.
Additionally, businesses and organizations derive tangible and intangible benefits from being part of a community; the tangible benefits include content, events, marketing, and technology, while the intangible benefits include a feeling of belonging, ideas and knowledge exchange, and the opportunity to network with like-minded people. Fintech companies can leverage the community to connect with their increasingly diverse consumers and build a sense of identity and purpose.
🙅🏽♀️ Negative energy to leave behind: Get rich quick schemes.
#4: Embedded Finance
With the right mix of behavioral and embedded finance, there’s a significant opportunity for fintech to turn access to financial tools into meaningful wealth building.
In 2023, fintech innovation is touching industries outside of traditional finance to make financial decisions easier throughout our everyday lives.
One example is dating apps. Dating companies have become technological. They’ve figured out how to match people using tech, but then there’s money involved:
- How is money triangulated with any consumer product today?
- How does the company help the consumer execute their money better?
- How does a dating company take two people who just met and want to go to dinner and help figure out how to split that bill comfortably?
- How does a dating company take a successful match and help them budget their move-in together, or how do they want to invest?
Companies are coming up with ways to execute this – which can all happen simply because of the fintech revolution that has been going on.
That’s because the technology side of fintech is the driving force to make any traditional or outdated system work better for everyone. Plus, it gives another revenue stream for those types of companies.
🙅🏽♀️ Negative energy to leave behind: Fintech for fintech’s sake.
#5: Alternative Assets
As the investment landscape becomes increasingly diversified, fintech plays an increasingly important role in connecting investors with alternative asset investments.
Fintech is providing the tools, such as digital wallets and payment systems, automated investment advice, and smart contracts, needed to make these investments more accessible and secure.
Alternative asset investments, such as real estate and private equity, are gaining traction as investors improve their financial literacy and aim to diversify their portfolios.
Additionally, regulators are stepping in to ensure the benefits of alternative assets are shared and implementing measures such as enhanced transparency, improved disclosure, and improved liquidity.
As this happens and the demand for alternative asset investments grows, fintech will continue to be the primary vehicle for facilitating these investments.
🙅🏽♀️ Negative energy to leave behind: Crypto pump and dump.
#6: Long-term B2B fintech
In 2023, it is expected that most new fintech companies will be business-to-business, or B2B. This shift can be linked to the success of iconic companies such as CreditKarma, Betterment, and Chime, which all have a consumer focus and have been popular in the last decade, as noted by Rex Salisbury in his predictions article.
Those involved in the industry, such as repeat founders and experienced employees of these companies, have seen the current system’s shortcomings and are keen to improve it.
While there are many opportunities in the consumer market, it’s so crazy oversaturated even established players like Goldman Sachs are scaling back their consumer offerings. This shift indicates that the industry is maturing, and entrepreneurs are looking to create long-term solutions to financial problems rather than just providing consumer-focused services.
🙅🏽♀️ Negative energy to leave behind: Short-term consumer-only mindsets.
#7: Salary increases & Healthy Work Boundaries
Fintech led in tech layoffs this year, and for the employees that got to stick around, they got a pay cut if they didn’t get a salary increase this year.
I’m tapping Rex again for this trend because I agree: 2023 is an excellent year for pre-seed and seed-stage companies when it comes to hiring top talent, but they better be ready to give talent the salaries they deserve.
When inflation hit and the Fed increased rates, the free money days ended, and layoffs and hiring freezes plagued most companies. However, this is a blessing in disguise for pre-seed and seed-stage companies as there are fewer opportunities for candidates, and these companies are now better placed to poach from more established later-stage companies.
Fintech also sees an influx of traditional finance or tech employees wanting to join the fast-paced fintech startups.
To maintain this interest, it’s on leaders to ensure that they’re embracing healthy work boundaries and not hustle culture for the sake of it.
Focus on reducing stress levels, preventing burnout, and fostering a more productive and positive work environment. Innovation doesn’t have to come at the expense of your team’s well-being.
🙅🏽♀️ Negative energy to leave behind: Layoffs & Hustle Culture.
#8: 50%+ Female User Base
As the leader of Apex Fintech Solutions, which powers nearly 70% of the fintech marketplace, Jenny Just sees a lot, and that the platform “has over 20 million clients, 29.5% are women,” she shared. “It’s okay, but not where it should be. Of our crypto clients, they’re 7%.“
Fintech is here to stay, but we need equal participation from half of the world’s population to know just how big and influential it can be. Fintech needs to lead people’s hearts and minds regarding their finances.
This lack of female users is likely because women tend to be more meticulous and wait until they have all the correct information before taking any risks. Men, on the other hand, are more likely to take risks without fully understanding the situation.
Therefore, it is up to us to ensure that women are adequately educated about the potential of fintech and inspired to get involved in creating a more diverse and inclusive financial landscape.
🙅🏽♀️ Negative energy to leave behind: Majority male user base.