From crypto payments and virtual cards to tribal banking, here are some predictions for the coming year.
Advances in blockchain and other financial technologies have led to a completely reimagined relationship between businesses and consumers.
New payment methods, from crypto and virtual cards to “buy now, pay later”, and the technologies that support these new ways are changing rapidly and are expected to continue to evolve as consumers become more informed in technology.
Here are some predictions for the fintech and crypto space this year, according to Nick Root, CEO of Swedish banking service Intergiro.
Cryptocurrency is an ‘everyday way to pay’
Crypto may not have had a great year in 2022, with the value of almost all cryptocurrencies collapsing and many investors losing millions as a result. However, experts believe that this will not take away interest in the technology as a means of payment in 2023.
In fact, Nick Root expects the opposite. He expects an increasing number of financial institutions to start accepting payments in cryptocurrencies.
“As more and more people invest in cryptocurrency, businesses are starting to accept it as a form of payment,” he explained.
Big companies like Mastercard and Google are supporting this trend. Mastercard, for example, is introducing plans to make crypto an “everyday way to pay” by acting as a bridge between crypto trading platform Paxos (used by PayPal) and big banks.
All major hurdles in the process, such as regulatory compliance and financing, will be handled by Mastercard.
Google also teamed up with Coinbase to allow customers to pay for some cloud services in crypto in early 2023.
“The term ‘crypto payment’ has seen a spike in interest, with searches up 136% since 2017, and with huge firms like Google getting on board in 2023, we predict more banks and financial providers will join to them.”
Virtual maps at the forefront of the revolution
One major trend in the fintech sector over the past few years has been the rise and rise of digital banks. Neobanks such as Revolut, Monzo and N26 are gaining popularity, especially among younger consumers who prefer to spend digitally and track finances in an app.
In line with this rise in popularity of digital banks is interest in virtual cards, which Ruth says are being hailed as the future of financial spending.
“Virtual cards are at the forefront of the revolution in business expense management,” he said. “Perhaps the biggest reason why virtual cards are becoming more popular is that they offer more robust security measures, helping to eliminate misuse by hackers and fraudsters.”
Based on Google Trends, searches for Revolut have increased by 143% since 2017, while searches for the term “virtual card” have increased by a whopping 216% over the past five years.
According to Ruth, part of this has to do with how virtual cards help companies effectively manage employee business expenses.
“Each employee has their own unique card, which means everyone can easily see who is spending what. Funds can also be allocated to team budgets and purchases can even be capped so that no one spends more than what is allocated to them.”
Buy Now Pay Later 2.0
One of the buzzwords of 2022, BNPL or ‘buy now, pay later’, saw a huge spike in interest – and came under just as much scrutiny on the grounds that it encouraged reckless payments.
Klarna was one of the first European names in the BNPL space, which was soon saturated with multiple services offering the split payment feature – including Revolut.
In October 2022, food delivery app Deliveroo teamed up with Klarna to enable an “eat now, pay later” feature that left many wondering if BNPL had gone too far.
However, the fact that many BNPL services offer interest-free installment payments means interest in the feature will remain – especially among Gen Z and Millennial shoppers.
According to Root, BNPL’s further expansion will also coincide with the space coming under increased regulatory scrutiny – particularly in the UK, where the government is expected to create a law requiring lenders to carry out affordability checks before approving loans .
Buy-now-pay-later advertising schemes will also begin to be regulated to be clear and not misleading to customers.
Rules for financial promotions for BNPL – for which searches are up 130 per cent since 2017 – are also set to change to ensure ads are clear and do not mislead consumers.
Will contactless wearables, not cash, be king?
Another trend that is on the rise and will continue on this trajectory in 2023 is the use of contactless wearables such as watches, bracelets and rings for payments.
As the Internet of Things begins to enter our daily lives, wearable technology will offer a fast and efficient alternative to making payments with cards or smartphones – and of course, cash.
The trend started with the Apple Watch, which took the world by storm with its ability to make payments by touching the watch to a reader. Smart rings are also on the rise, with demand for the technology up 180% globally, according to Root.
“We predict that this trend will continue to grow in 2023, and in light of this, fintech companies will increasingly use these connected devices to gather customer information and make more informed decisions,” he said.
The rise of “digital tribes” as consumers
Finally, another major trend that Root expects to take hold in 2023 is the concept of the “digital tribe.” The term is used to describe online communities that share a common interest – such as a football club or a TV show – and are connected to each other through social media.
Businesses will begin to engage with these digital tribes as a way to form deeper connections with consumers and generate more business. This means that businesses will begin to launch their own financial services centered around the tribes they are affiliated with.
“In the past, people from different communities felt uncomfortable with legacy banks because they weren’t represented, they didn’t feel empathetic and they weren’t open to communication,” Ruth explained.
“In this new era, banks need to be more authentic and receptive to communication. People in these communities will soon be looking for a bank that gives them a sense of representation and openness.”
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