3 Factors Shaping The Future of Financial Institutions in 2023

Fintech Insights

Jairo Riveros

Innovation occurred quickly in 2020, so operations could continue during the COVID-19 pandemic. In the wake of this recovery and adjustment to a new normal, organizations that made decisions in haste now have an opportunity to take a step back and reevaluate their current business model will help innovate and set them up for success in the future. This is especially true for the financial sector.

Moving into 2023, these are some of the factors that we see affecting the growth and success of financial institutions:

Assessing and Improving Payment Regulations

Forces in the macro environment are creating rapid changes within financial institutions.

Advancements in technology have expanded upon what we have thought was traditionally possible. For example, mobile payments, e-wallets, and other payment options have resulted in faster, instant payments as well as 24/7 settlements and reconciliations for the consumer. This has also shaped the customer experience, where embedded finance, placing financial services in non-financial customer experiences, is increasingly commonplace and even expected.

In the near future, increased regulations will enable new business models, improve connectivity and increase the adoption of global financial innovations. For example, CFPB regulators are already assessing open banking in the U.S., driven by consumer and commercial demand.

A Generational Push for Financial Institutions to Change

In addition to regulations making changes to the financial services industry, Gen Zers are also driving change in the market, as these digital natives come of age to make more financial decisions. With rising inflation, uncertain economic conditions, and showing greater concern over climate and social concerns, this generation feels as uncertain of the future as ever. With over $140 billion in spending power — and growing as more Gen Zers enter the workforce — financial institutions need to consider the needs of this generation and meet them where they are by zeroing in on their concerns and offering specialized products and messaging that convey a proper understanding of their needs. The rise of ‘finfluencers’ and open discussions on Discord and Reddit forums indicate that Gen Z prefers to engage with others through community forums as global citizens without traditional country borders. This means financial institutions that can offer personalized products, reflect their identities and values, and provide a sense of belonging within a global community will speak most to Gen Z.

Financial Institutions Taking Steps to Innovate Now Will Emerge in 2030

Financial institutions have a unique opportunity to make a positive impact on major societal issues and challenges, starting with financial inclusion. Financial institutions that embrace this momentum while also adapting to shifting consumer preferences and technological advancements will be the ones to emerge in 2030.

These financial institutions center the consumer at the forefront of business solutions and embrace open banking, which allows them to provide consumers with access to financial products that can save them time and money. Financial institutions will offer consumers a menu of ‘a la carte’ financial services, irrespective of traditional barriers and borders. Through the power of open banking, financial institutions will not only serve consumers and empower unbanked populations but transform society through sustainable economic growth.

About the author:

Jairo is the Chief Strategy Officer and Managing Director of the U.S. and Latin America at Paysend, a global fintech payments company born in 2017, based in the UK and regulated by the FCA, servicing over 7 million customers, reaching 170+ countries worldwide.