Digital Finance trends 2023
Nope, digital finance is not only about the rise of Open Finance. In this article, we look into 5 key topics we see as potentially (finally?) disrupting the financial services industry in 2023. Here are our top 5 digital finance trends for the next 12 months and beyond.
#1 AI to make finance smarter?
We’ve read it many times over the last years: customers want to be offered user-friendly and customized services that suit their specific needs. This clearly also applies to the financial services they use, whether it is to monitor their budget on a daily basis or to make the easiest and most profitable investments. In this respect, data and therefore automation have become crucial in developing such applications and relationships.
Lately, the emergence and trend around OpenAI’s ChatGPT* has shown great promises for all companies, including the financial services industry. Chatbots have proved to be efficient in certain cases, but ChatGPT’s potential seems unlimited and could improve the relation between man and machine, benefiting end-customers.
More generally, artificial intelligence applied to the financial services industry could improve various aspects and key challenges, such as fraud detection, risk management and customer service. For instance, AI can be used to analyze financial transactions and flag any suspicious activity, which can help financial institutions better protect their customers from fraud. Additionally, AI can be used in predictive analytics to help financial institutions make better-informed business decisions and manage risk more effectively.
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#2 Big Data (analytics) finally takes over/pays off
Is 2023 the year when “Big Data” finally becomes a widely adopted concept and not just a bad word anymore? Nowadays, data enables financial institutions to gain valuable insights, make more informed business decisions, better market their products, and much more.
When it comes to risk management, financial institutions can leverage it to analyze large amounts of financial and non-financial data to better understand and manage risk. This can include identifying potential fraud, detecting money laundering, and assessing credit risk for loans and mortgages. Big data can be used to analyze past financial performance and market trends to make predictions about future performance, which will help financial institutions make better-informed investment decisions and identify new business opportunities.
Finally, on the topic of ESG (Environmental, Social & Governance), financial institutions will undoubtedly have a look at Big Data to support them in their (required) sustainability reporting. It could also be used to identify companies to invest in because there are making a positive impact on society and the environment. Finally, Big Data applied to ESG means efficiently assessing the risks associated with a company’s environmental and social impact, such as identifying potential reputational risks, assessing the impact of climate change on a company’s operations, and identifying supply chain risks.
#3 API platforms in the era of collaboration
APIs rhyme with collaboration: they enable the creation of applications that access the features or data of an operating system, application, or other service. In this respect, companies and leading financial institutions have launched their own marketplaces or developer portals that facilitate such exchanges and this type of collaboration. These platforms can also smoothen the commercial relationships between consumers and providers, in a secure environment.
In today’s fast-paced and competitive environment, financial institutions cannot do everything on their own and need to rely on trusted players to save costs, increase automation and efficiency, notably.
Therefore, to keep exchanging and consuming services, some took the decision to develop their own API platform, while others are leveraging white label marketplaces, with customizable features that would suit their needs.
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#4 Blockchain bounces back
In 2023, it is very likely to see a raise of blockchain application to digital finance: first, it can facilitate faster and more efficient cross-border payments by enabling the transfer of funds directly between two parties without the need for intermediaries. This could reduce the costs and time required for international transactions. As it aims at tracking the ownership and movement of assets (such as securities, commodities, or real estate), Blockchain definitely increases transparency and reduces the risk of fraud or errors.
Still revolving around transparency and security, another key topic for the year is identity verification where Blockchain can be used to verify the identity of individuals or organizations in a secure and decentralized manner. Blockchain could be useful for applications such as onboarding new customers or verifying the authenticity of documents
#5 The advent of Digital Currencies?
Central bank digital currencies (CBDCs, which are digital versions of a country’s fiat currency that are issued and backed by the central bank of that country) are, once again, viewed as a trendy digital finance topic as well as the future of the world’s economy.
In the connected world we live in, Digital Currencies have the potential to increase financial inclusion by providing a digital alternative to cash that is accessible to those who may not have access to traditional financial services. Moreover, they have the potential to make it easier for people to make and receive payments, but also to access additional financial services, no matter where consumers are located or what device they are using.
Also, it can surely play a key role in addressing some of the main challenges posed by cryptocurrencies and other digital assets: the lack of regulation (for now, knowing that the MiCA Regulation will be voted in 2023) and the potential for money laundering and other illicit activities, notably. If they were to issue and support digital currencies, central banks could provide a more secure and regulated alternative to these assets, which could increase trust and confidence in the digital economy.