Fintech predictions and opportunities for 2023

There have been a lot of things happening this year. While the reset of the funding environment was the main focus of the year, it is going to be a year of recalibrating for fintech companies.

Large enterprise and midmarket companies care a lot about their bottom-line impact. Cost savings and efficiency are important as revenue growth slows. Smaller companies are more likely to cut back on internal innovation efforts.

The door is open for fintechs to deliver real improvements to the bottom line by eliminating manual processes and saving their customers money.

Let's look at the sectors that are likely to be the most challenging.

Online lenders

It's going to be hard for lending. Today there are three big tailwinds.

1. Rising delinquency rates and charge-offs.
2. Higher cost of capital for the debt they lend.
3. Decreasing demand from customers because of higher interest rates.

Focus on how technology can solve hard problems, and don’t worry as much about finding what’s cutting edge in fintech.

It will be difficult to manage the rise in charge-offs from non-paying customers for newer fintechs that have been operating for less than five years. The younger companies don't have the models fully built out to predict which customers will default

It can be difficult to manage risk during a downturn.

Neobanks

The customer experience of traditional banks was changed by Neobank. Big players, like Chime, who raised large amounts of capital, will be fine.

Deposits are critical to banking business models in the long term and many neobanks have small average deposit balances. If any of the Neobanks' customers are laid off, the banks will see a decrease in deposit flows.

Fintechs serving SMBs

During a downturn, small businesses are more likely to close. Small and Medium Businesses are more likely to lose their customers to fintechs that serve them. Businesses such as Brex are moving away from serving small businesses.

What’s hot

Fraud, compliance, payment operations, taxes and infrastructure are some of the boring areas where there are opportunities in the future. The CFOs will be more focused on the bottom line. A reduction in fraud or a measurable improvement in payment authorization and reconciliation rates will allow for growth during the downturn.