The fintech industry is evolving rapidly. The space is expected to be valued at nearly $700 billion by 2030, a sevenfold increase from 2020. From mobile payments to online lending to in-app gamification, fintech has opened new avenues for consumers and businesses to access financial services. As we move through 2023, the fintech industry’s most significant milestones center on retail banks and credit unions and how technology can help them best serve their customers.
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Investment in digital channels
In 2023, brick-and-mortar financial institutions (FIs) are further transitioning from legacy systems to digital-first operations, and digital-first banking will be the primary way people conduct business. Sophisticated technologies will make way for virtual banking experiences that don’t require users to go to a physical branch. Even with this digital push, however, physical locations remain to serve the 28% of customers who still prefer to meet their servicing needs at branches.
Investments in digital channels will also include an increase in partnerships between fintechs and retail banks. Though fintechs were once seen as competitors, retail banks are now embracing them because of the benefits and services they can provide to consumers and the growth they can drive for the FI.
Partnering with a fintech is a more cost-effective and a faster way for banks to go digital compared to creating a proprietary digital channel in-house. Fintech partnerships allow banks to provide their customers with sought-after, innovative financial tools while still maintaining people’s trust in traditional FIs.
More personalized content for consumers
As we look at the landscape of personal finance, we can see data will play a huge part going forward. At both the consumer and B2B levels, personalization through data analytics will be a competitive differentiator for the smartest FIs. Fintech partnerships will also play a role in this personalization, as some will present new data analytics opportunities that will strengthen the consumer-FI relationship.
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Customers want personalization. In today’s highly competitive environment, it’s a must, not only to satisfy customers but also to benefit FIs. For example, FIs that applied predictive insights from machine-learning (ML) models to inform personalized marketing campaigns generated 5-15% higher revenue and launched their campaigns two to four times faster, according to research from McKinsey.
As data collection and analysis methods continue to change and improve, insights from data will enable FIs to look beyond just the credit score and traditional underwriting models and instead generate more sophisticated, accurate predictions about consumers and their associated risks. More data means more personalization, and personalization drives engagement and revenue.
Playing an active role in consumer financial wellness
2023 will be the year FIs help their customers reach their financial goals. Consumers will focus on ensuring their credit score increases, enabling them to pay less for their existing debt and save more. In fact, 63% of Americans have savings goals for the year, and banks can help consumers reach those goals through financial literacy training and the gamification of online tools.
A gamified app engages consumers more than traditional banking methods. FIs can create rewards programs that offer points, badges or other incentives for using certain banking services, such as mobile banking, bill pay or online banking. For instance, users can set goals and receive regular notifications on progress like, “You set a goal for 20% utilization by this time, and you’re on track!” It will be like a Fitbit for credit — people can track their financial health and earn points they can redeem later with their FI.
The main industry trends we will see in fintech all have one thing in common: customer/member centricity. This results from rising consumer demands and a highly competitive space that will continue to evolve throughout the year. FIs that leverage technology to better serve their customers will foster stronger relationships with those customers and drive growth and revenue.
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