Fintech 2023: The year of digital transformation

The fintech sector has experienced rapid growth in recent years, with the adoption of digital financial services increasing globally. As we look towards 2023, it’s clear that this trend will continue, with several key trends set to redefine the fintech space.

Digital payments to see further adoption
With a worldwide transactional value of $8,488bn in 2022, digital payments will continue to be the most significant fintech segment in 2023. With UAE as one of the leaders in the fintech space, rapidly establishing a solid base for the industry, the digital payments sector saw a transaction value of $26.28bn just in the region. This trend is set to continue, with the number of users in this segment projected to reach 7.90 million by 2027.

The growth of digital payments can be attributed to the level of convenience and security and the increasing prevalence of mobile and online shopping.

Furthermore, with the rise of e-commerce and the shift towards contactless payment methods due to the Covid-19 pandemic, digital payments will likely continue to be a key driver of growth in the fintech sector.

The prevalence of alternative financing post Covid-19
Another trend in the fintech sector is the rise of alternative financing. This relatively new sector saw an average transaction value per user of $42.03k in 2022.

The increasing demand for unconventional funding sources, such as peer-to-peer (P2P) lending and crowdfunding platforms, was evident post-Covid-19 due to the disruption we saw in traditional lending services. Because of this, we saw a trend in the sector towards a more flexible and personalised approach to lending and borrowing, allowing individuals and small businesses to access financing that might not have been available to them through pre-existing channels.

The adoption of blockchain technology has also helped facilitate the growth of this space massively, with the ability to automate P2P loans through smart contracts, requiring no trust in third parties.

With the growth of the side-hustle culture and more people focused on creating their businesses through individual endeavors, alternative financing will likely see rapid growth in the following year.

The next wave of mobile banking
In addition to digital payments and alternative financing, the neobanking space is expected to show strong growth in 2023. This segment, which includes online-only banks and mobile-first banking apps, is expected to see revenue growth of 40.8 per cent in the coming year in the UAE alone.

The popularity of neobanks can be attributed to their convenience, ease of use, and focus on providing customers with a seamless and personalised banking experience.

In addition, the ability to offer users services like checking and savings accounts, loans, investment products, etc., all through the convenience of a phone app, is not to be underestimated in a time where everything around is focused on moving entirely into the digital space.

The potential of Stablecoins to transform financial services
Stablecoins have already significantly impacted the fintech sector this year, enabling faster, cheaper and more secure financial transactions and providing a stable store of value. The market cap saw a peak of nearly $190B right before the collapse of TerraUSD.

In 2023 stablecoins are expected to play an increasingly important role in the fintech sector, and the way financial services are delivered. They have the potential to revolutionise the way financial transactions are conducted, particularly in the area of cross-border payments.

However, the mass adoption of stablecoins will depend on several factors, including their stability, security, and regulatory environment. For stablecoins to achieve widespread adoption, they must be widely accepted by merchants and consumers, backed by reputable and reliable assets, and operate within a clear and consistent regulatory environment.

According to Harvard Business Review, stablecoins could even facilitate how governments run cash transfer programs like sending stimulus money. If these factors are addressed, stablecoins could achieve mass adoption in 2023 and become a widely used form of digital currency.

Measuring exact growth is difficult, but development is inevitable
While it’s difficult to predict the exact growth level the fintech space will see in 2023, there is no question of a slowdown.

With the trends we’re seeing today, it’s clear that the space is experiencing a strong trajectory toward exponential growth. Countries like the UAE have already spearheaded significant development in the fintech sector, acting as an indicator and a hub for the fintech space.

With the recent commitment to actively develop and adopt blockchain technology, there is a constant drive to innovate and lead the space.

Considering the pace at which the sector is flourishing here, with niches like alternative financing and neobanking already playing significant parts in the region, these trends will likely continue to lead the development of the fintech space.

Read: DIFC-based fintech firms net $559m in funding during Jan-Sep 2022