Future Prediction of Lending Market in 2023
With the arrival of a new year, it's time to reflect on the past and anticipate
the future of the lending market in the fintech industry. The industry is
constantly advancing, and it's expected that new technologies will surface and
shape its landscape by the end of 2023. The pandemic has accelerated digital
transformation in the financial sector as the demand for digital services grew
with social distancing measures. SaaS platforms reduce infrastructure costs for
financial companies and enable fintech startups to launch their operations
quickly and efficiently. SaaS-based solutions allow both established financial
institutions and startups to easily scale up operations, quickly develop and
deploy new digital products and services, and upgrade their skills to meet
changing client demands.
Evolution of finance from traditional methods to alternative financing
The evolution of finance has gone through several stages, starting from
traditional methods such as banks and credit unions to alternative
financing methods such as crowdfunding and peer-to-peer lending.
In the traditional finance system, banks were the primary source of
financing for individuals and businesses. However, with the rise of
technology and the internet, alternative financing options have emerged.
These options offer more flexible and convenient financing solutions,
often at lower costs and with fewer requirements than traditional banks.
Crowdfunding, for instance, allows individuals to pool funds to finance
projects or ventures. Peer-to-peer lending enables individuals to lend
money directly to other individuals, bypassing the need for banks as
intermediaries. Another alternative financing option is online lending,
where technology platforms match borrowers and lenders, often providing
faster and more accessible loans than traditional banks.
The evolution of finance has seen a shift from traditional methods
towards alternative financing methods, as technology has made financing
more accessible and convenient for individuals and businesses. Even in
2023, alternative financing platforms will leverage technologies such as
machine learning and AI to streamline the loan application and
underwriting process, offering more customized loan options that cater
to individual borrowers and small businesses. With greater popularity
and usage, alternative financing is also likely to face increased
regulatory scrutiny in 2023, aimed at protecting consumers and ensuring
the stability of the financial system. To gain further insight, we
sought predictions on what we can expect in the next 12 months for the
BNPL( Buy Now, Pay Later)
The pandemic-induced economic shifts have spurred an increase in online
shopping, leading consumers, especially tech-savvy millennials and Gen Z, to
turn to micro-credits and Buy Now Pay Later (BNPL) services for a smoother
online shopping experience. More businesses are entering the BNPL sector and
conventional banks are partnering with
cutting-edge fintech to offer BNPL services. BNPL mode of payment is looking to
grow exponentially in the coming years, especially in 2023
SME( Small and Medium Enterprises) Loans Supporting the Digitization of Small
In recent years, the rise of digital technology has improved efficiency
and revenue for small businesses. SMEs are gradually adopting digital
tools for data collection, trend analysis, and decision-making. They are
using business loans to digitize their enterprises and expand their
business, bridge communication gaps, reach remote and rural customers,
and stay updated with changing buyer demands. A strong, frictionless,
and resilient digital platform like UPI is helping provide quick and
simple loans to SMEs and small business owners.
The adoption of digital ledger books by businesses has increased,
allowing them to manage their client base, track consumer credit, and
analyze transactions for valuable insights and informal credit scoring.
This offers lenders an opportunity to expand their business and meet the
growing credit demand.
The power of AI making banking efficient
By 2023, many banks will transform into tech firms that provide digital
services, taking advantage of their large customer base and widespread
channels. They will face competition from tech companies in areas such
as fraud detection and compliance due to the latter's access to advanced
analytics and ability to handle vast amounts of data.
NLP ( Natural language processing) will become the standard for customer
interaction in 2023. Chatbots and virtual assistants are already making
an impact across industries, but their adaptability makes them
particularly useful in banking
Banks should leverage this tech to improve customer experience, such as
providing automated answers to common questions, reducing call centre
volume, and pre-screening candidates to free up staff for more crucial
tasks. By 2023, these technologies will become common in banking apps on
various devices, including smartphones and tablets.
AI can also help lenders in the underwriting process by analyzing vast
amounts of data and helping to identify potential borrowers who are most
likely to repay the loan. This can involve using machine learning
algorithms to analyze financial data, social media profiles, and other
relevant information. In underwriting, AI can help automate the process
by using algorithms to analyze financial data and other relevant
information to assess the creditworthiness of a potential borrower. AI
can also be used to help identify potential fraud, assess the risk of
default, and provide recommendations for loan approval or denial.
The embedded finance industry has seen significant growth in the
past 2 years, fueled by the COVID-19 pandemic which accelerated
e-commerce and digitalization in finance and changed consumers'
expectations. Fintech firms have gained consumers' trust in
financial services, rivalling and even surpassing traditional banks
in some cases. This presents ample opportunities for embedded
In 2023, it is expected that embedded finance will gain wider
adoption in emerging markets, led by inclusive fintech startups that
aim to serve consumers who were previously underserved by
traditional finance. The less restrictive environment and lower
costs in emerging markets can also stimulate further innovation.
Additionally, we may see deeper partnerships between traditional
financial services and fintech companies in support of embedded
finance, particularly between banks and payment companies. Banks can
provide essential infrastructure while payment fintech brings
inclusivity and customized services for various business models.
Finally, there will be a heightened focus on technology and
operational capabilities to address challenges such as risk and
compliance management in embedded finance. Technologies like cloud
computing and AI will have a multiplying effect across industries,
enhancing their ability to embrace embedded finance.
Revised Cross-border Payments
Payments are an integral part of our life because the movement of
people, goods, services, and funds will dictate growth. The remittance
industry, for instance, will be affected by people's displacement due to
disasters and conflict. There is talk that independence will replace
global interdependence in B2B scenarios.
However, globalization is deeply ingrained in the worldwide economy, and
the dynamics between developed and developing nations will continue.
Therefore, capital will continue to flow across borders, and fintech has
a crucial role to play in facilitating this. This may include supporting
sellers to expand across borders through digital commerce or enabling
tech companies to access worldwide expertise and support from freelancer
hubs. The world is more interconnected than ever, and fintech acts as
the global connector when it comes to cross-border business.
- Variable recurring payments refer to payments that are made on a regular
basis (e.g. monthly, annually), but with the amount that changes over
time. This could be due to several reasons such as changes in the cost
of goods or services being paid for, exchange rate fluctuations, or
agreed-upon price increases.
Variable Recurring Payments
In 2023, the use of variable recurring payments is likely to increase as
more businesses adopt subscription-based models and as consumers become
more accustomed to paying for goods and services in this manner. The
ability to adjust payment amounts in response to changing circumstances
is likely to be seen as a positive for both consumers and businesses, as
it allows for greater flexibility and can help to ensure that payments
are always fair and accurate.
However, it's important to note that the use of variable recurring
payments may also lead to confusion and misunderstandings if the changes
are not clearly communicated to
consumers. To minimize the risk of this happening, businesses using this
payment model should be transparent about their policies and procedures
for adjusting payment amounts and should provide clear notifications to
customers in advance of any changes.
Rise of ESG credit
ESG (Environmental, Social, and Governance) credit refers to a type of
financial product that considers environmental, social, and governance
factors in its investment decisions. ESG credit products are typically
bonds or loans issued by companies or governments with a strong focus on
sustainability and responsible business practices. In 2023, ESG credit
is expected to continue its trend as a growing segment of the lending
market, driven by increased investor demand and recognition of the
financial benefits of sustainable business practices. Lenders and
financial institutions may start offering more ESG credit products and
services, leading to greater availability and competition in the market.
This trend may also encourage companies to adopt more sustainable
business practices in order to access ESG credit and attract investment.
However, the exact impact will depend on factors such as the regulatory
environment, market conditions, and investor sentiment.
Open banking in MENA
The future of open banking in the Middle East and North Africa (MENA)
region in 2023 is expected to be characterized by rapid growth and
increasing adoption. As the fintech industry continues to expand, more
financial institutions are likely to embrace open banking and offer APIs
to third-party providers. This will drive innovation and competition,
leading to new and improved financial products and services for
customers. In addition, the increased availability of financial data and
the use of advanced technologies such as artificial intelligence and
machine learning, are likely to further enhance the value of open
banking in the region. The regulatory environment in MENA is also
evolving, and regulators are expected to continue to play a key role in
shaping the future of open banking in the region. Despite the growth
potential, open banking in MENA may face challenges such as
cybersecurity risks and limited consumer trust, which may impact its
In 2023, fintech lending is likely to continue its upward trend, with an
increasing number of consumers and businesses opting for digital lending
solutions over traditional methods. As financial technology advances,
fintech lenders will be able to offer more personalized and accessible
loan options, and improvements in the areas of risk assessment and fraud
detection will make the lending process more secure. Additionally, the
continued growth of e-commerce and the shift towards a cashless society
will drive demand for digital lending solutions.
As the demand for fintech solutions grows in 2023, Theecode has refined
its approach to digital lending by offering a versatile product (
Embedded Lending Framework) that can meet your specific lending needs.
This product acts as a testing ground for your fintech startup idea and
can be launched in just 60 seconds, at no cost. Given the promising
future of the fintech industry, would you spend 60 secs in giving your
fintech idea a shot?