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From crypto payments and virtual cards to tribe-based banking, here are a few predictions for the year ahead.
Advancements in blockchain and other financial technologies have led to the emergence of completely reimagined relationships between businesses and consumers.
New methods of payment, from crypto and virtual cards to ‘buy now, pay later’, and the technologies that support these novel ways have been rapidly changing and are expected to continue to evolve as consumers become more tech-savvy.
Here are a few predictions for the fintech and crypto space this year, according to Nick Root, CEO of Swedish banking service Intergiro.
Cryptocurrency an ‘everyday way to pay’
Crypto may not have had a great year in 2022, with the value of nearly all cryptocurrencies plummeting and many investors losing millions as a result. However, experts believe that this will not take away from the continued interest in the technology as a means of payment in 2023.
In fact, Nick Root expects the opposite. He expects to see a growing number of financial institutions begin to accept payments in cryptocurrencies.
“As more and more people invest in cryptocurrency, businesses are starting to adopt it as a form of payment,” he explained.
Big companies such as Mastercard and Google are backing this trend. Mastercard, for instance, is rolling out plans to make crypto an ‘everyday way to pay’ by acting as a bridge between crypto trading platform Paxos (used by PayPal) and major banks.
All major roadblocks in the process, such as regulatory compliance and finance, will be handled by Mastercard.
Google, too, has teamed up with Coinbase to allow customers to pay for some cloud services in crypto in early 2023.
“The term ‘pay with crypto’ has seen a surge of interest, with searches increasing by 136pc since 2017, and with huge firms such as Google jumping on board, in 2023, we predict more banks and financial providers will join them.”
Virtual cards at the ‘forefront of a 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 have been gaining popularity, especially among younger users who prefer spending digitally and keeping track of finances on an app.
Corresponding to this rise in popularity of digital banks is an interest in virtual cards, which, according to Root, is being hailed as the future of financial spending.
“Virtual cards are the forefront of a revolution in business expenses management,” he said. “Perhaps the biggest reason why virtual cards are increasing in popularity is because they offer more robust security measures, helping eliminate misuse from hackers and fraudsters.”
Based on Google Trends, searches for Revolut have shot up 143pc since 2017, while searches for the term ‘virtual card’ has increased a whopping 216pc in the last five years.
According to Root, part of this has to do with the way in which virtual cards help companies handle employee business expenses efficiently.
“Every employee has their own unique card, which means anyone can easily see who is spending what. Funds can also be assigned to team budgets and purchases can even be limited so that nobody spends more than what’s allocated to them.”
Buy Now Pay Later 2.0
One of 2022’s buzz phrases, BNPL or ‘buy now, pay later’, has seen a huge surge in interest – and come under equal scrutiny on grounds of encouraging reckless payments.
Klarna was one of the early European names in the BNPL space, which was soon saturated by a host of services offering the split payment feature – including Revolut.
In October 2022, food delivery app Deliveroo teamed up with Klarna to allow for an ‘eat now, pay later’ feature that got many wondering if BNPL had gone too far.
However, the fact that many BNPL services offer payments in interest-free instalments means that interest in the feature is here to stay – especially among Gen Z and Millennial shoppers.
According to Root, BNPL’s further expansion will also correspond with the space coming under more regulatory attention – especially in the UK, where the government is expected to create a law requiring lenders to carry out affordability checks before approving loans.
Advertising ‘buy now, pay later’ schemes will also begin to be regulated so as to be clear and not mislead customers.
The financial promotion rules for BNPL – searches for which are 130pc up since 2017 – are also set to change to ensure advertisements are clear and do not mislead consumers.
Contactless wearables, not cash, will be king?
Another trend that has been on the rise and will continue on that trajectory in 2023 is the use of contactless wearables such as watches, bracelets and rings for payments.
As the internet of things begins to creep into 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 was started by the Apple Watch, which took the world by storm with its ability to make payments by tapping one’s watch to a reader machine. Smart rings are also on the rise, with searches for the tech up 180pc globally, according to Root.
“We predict this trend will continue to grow in 2023, and in light of this, fintech companies will increasingly use these connected devices to gather customer insights and make more informed decisions,” he said.
Rise of ‘digital tribes’ as consumers
Finally, another major trend that Root expects to gain ground in 2023 is the concept of a ‘digital tribe’. The term is used to describe online communities that share a common interest – such as a football club or 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 launching their own financial services centred around the tribes they are connected with.
“In the past, people from diverse communities have been uncomfortable with legacy banks because they have not been represented, don’t feel empathised with, and aren’t open to communication,” Root explained.
“In this new era, banks need to be more authentic and receptive to communication. People from these communities will soon be looking for a bank that gives them a sense of representation and openness.”
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