The examined fall of the Euro in the last quarter of 2022 and the potential fall of other universally recognized currencies is urging not only economists, but the financial sector, to analyze the opportunities, risks, threats and trends in the upcoming period.
With that, there are 3 emerging trends that seem to be leading the financial sector in the first half of 2023. While those trends may not get fully realized within the same year, they are worth investigating by financial institutions, after all, no one can tell if we will be skating smoothly on the Alps or hopping the discrete trenches of the Himalayas!
- Concept of Money Reformation
Since 2008, cryptocurrencies have been disrupting the financial sector, with the aftermath opening new doors for the adoption of blockchain and Distributed Ledger Technology (DLT) in financial solutions and services. This is evident first and foremost in the global transition towards central bank digital currencies, which is anticipated to fully reform the concept of money.
Whether central bank digital currency issuance is accelerated by central banks in 2023 or not, banks are anticipated to expand their research and development in potential solutions they can build to offer new blockchain-based or DLT-based technologies.
These technologies will be utilized by banks to find new opportunities to reform the concept of money within the M0-M2 money spectrum, this includes managing assets that require smart contracts, or implementing delivery-versus-payment and payment-versus-payment services over DLT networks.
- Open Banking
Open banking is becoming not only a trend but also a de facto standard that is expected to rule the banking industry for the next two decades. The list of already licensed digital banks had exceeded 350 holding assets of over 200$Bn so far.
It is expected that the concepts of virtual and digital banks will become a norm and the number of operating digital banks will double or triple within 2023. It is also expected that new licensed institutions and subsidiaries operated virtually by banks will arise.
Open banking requires financial systems and services to consider remote registration utilizing new compliance tools including Electronic Know Your Customer (eKYC), federated identity management and authentication, and Public Key Infrastructure (PKI) based electronic signatures. It also impacts not only the nature of omnichannels, but core banking systems. And the move to a fully cloud-native solution will be a must-have.
Accordingly, Payments Hub is a necessary solution that offers a fully digital, cloud-native, and compliant solution with SWIFT, ISO, and ANSI standards. It is the recommended platform to offer a spectrum of open banking functionality and integrate with local and international payment and blockchain networks.
- Banks-FinTech Collaboration
Banks already recognize the need to either keep up or join forces with fintechs, and the result of this type of collaboration is expected to be seen between 2023 – 2025. On the other hand, many fintechs will also remain hesitant to collaborate with banks, despite their rooted expertise in the domain and larger customer base.
Despite all this, all parties involved in the financial sector, including customers, and banks and fintechs themselves, will benefit from this collaborative trend for several reasons: fintechs will make use of lower startup costs and higher customer retention rates, whereas banks will accelerate their digital transformation initiatives. As for customers, they will benefit from lower transaction costs and a massively enhanced portfolio of services!
Discover how ProgressSoft can assist you with your digital transformation journey. Start by contacting us at [email protected].
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