Trends Shaping the Fintech Space – Finovate Europe 2023

Euromonitor International participated in the European edition of the Finovate conference series, held in London in March 2023. The conference attracted over 1,000 attendees from financial institutions, technology firms, platform providers, regulators and investors – all to understand the underlying forces of financial technology (fintech) and make contact with key stakeholders.

Turbulent year for the world economy and SVB’s fall – what will 2023 bring?

The global economic environment, with rising interest rates increasingly constraining economic activity, has inevitably affected the financial sector over the past year. A recent critical development of the banking industry was the collapse of US-based Silicon Valley Bank (SVB) on March 10, 2023. The downfall of the bank, which had a large innovator startup customer base, raises many questions regarding the outlook for the industry and whether we are entering another banking crisis.

On the first day of the conference, the session of Chris Skinner, CEO of The Finanser, took up the question of “what caused the death of SVB?” According to his expert opinion, the collapse of the bank was due to a lack of accounting for an increase in interest rates, and not implementing the Basel III framework for risk management. He also highlighted that in Europe Credit Suisse’s annual report had revealed some serious financial problems. Since then, the Swiss bank was rescued and acquired by UBS for CHF 3 billion just over a week after SVB’s collapse.

As for the outlook, the industry consensus is that while the fintech industry has benefited from the pandemic’s disruption in recent years, 2023 and 2024 are likely to be more challenging as the global economy faces more headwinds.

Embedded payments and non-financial institutions to revolutionize the way we pay

The future development of the payment industry was one of the main focus areas of Finovate Europe. Trends discussed included embedded payments, and digital wallets in particular.

63% of connected consumers used digital wallets to make online or in-store purchases in 2022

^{Source: Euromonitor International’s Voice of the Consumer: Digital Survey 2022}

A panel discussion on digital wallets highlighted the differences in the state of developing and developed markets. The former has huge growth opportunities for the payment type as e-wallets close gaps in financial inclusion. While in developed markets, the growth potential of e-wallets is more limited but still exists. Targeting niche customer groups, such as children, can give providers an opportunity for expansion.

Another takeaway is that non-financial institutions, including telecommunications giants, have a growing role in the payments segment, and are expected to take further market share in the future.

The Buy Now Pay Later (BNPL) market, which according to Euromonitor International’s data was worth USD 156 billion in the total of 47 surveyed markets globally in 2022, remained in the spotlight at Finovate. Industry experts shared their views on what’s next for the payment option.

The buy now pay later (BNPL) market was worth USD 156 billion in 47 surveyed markets globally in 2022

^{Source: Euromonitor International}

Despite imminent regulation in Europe, the future outlook for BNPL is still considered positive. Furthermore, BNPL spending on the B2B sector is expected to be the next big trend in the Fintech industry.

Additional emphasis on customer verification to prevent fraud

Consumers are moving many aspects of their lives online as the pandemic accelerated the emphasis on online security and fraud prevention. Improvement of digital security in banking and financial services continues to accelerate. For example, Trulioo demonstrated its customer verification solutions on the first day of the conference, while on the second day, presentations discussed the importance of increasing security via verification methods, including KYC (Know Your Customer).

The unique solution of digital keys was discussed by Adam Lower from Arculus of CompoSecure, who used the global marketplace eBay as an example. eBay is reportedly looking to replace passwords with digital keys to improve platform security. Leading card network Mastercard was also present at Finovate Europe as an exhibitor of its NuData security product, which is technology that uses behavioral biometrics to prevent mobile and online fraud.

Partnerships between stakeholders remain essential

Lectures and panel discussions embraced the importance of collaboration within financial services. In a discussion on strategic partnerships in the fintech industry, panelists representing ING, Raisin, everyoneINVESTED (KBC Group) and CoinBase shared the view that older banks working in partnership with fintech, and vice versa, can pose challenges due to different work cultures. Based on the panelists’ experience, the vision and purpose of the two parties is essential to work smoothly and effectively together. Partnerships are considered extremely important from the aspect of the digital expansion and transformation of the industry.

Fintech companies and customers can benefit from the metaverse

Several presentations were centered around exploring what financial services in the metaverse would look like. Author Steven Van Belleghem’s keynote on customer experience highlighted that extending services through the metaverse will not only offer new forms of personalized experiences, but also new revenue streams for companies and financial institutions.

Finovate Europe’s demonstrations, insightful presentations and panel discussions around the current state and future of the industry highlighted that technological advances, including AI, blockchain or 5G, continue to shape the landscape of payments, lending and banking despite the unfavorable economic forecast.

For more discussion on BNPL, read our report, Trends and Outlook for BNPL.