Armin Moradi, is the co-founder and CEO at Qashio, a UAE-based spend management platform 

Numerous challenges faced by businesses in the past few years have led to major innovations and developments in the fintech industry that will be game changers in 2023. In the past few years, there has been rapid growth in the number of fintech startups and their funding. This is due to companies realising the importance of going digital over the past three years of global challenges.

Fintech in 2022 accounted for $75 billion dollars in funding globally, regionally, fintech startups raised over $1 billion, nearly double the amount raised in 2021 according to Wamda. There are a few factors driving this:

• Traditional financial institutions are waking up to the threat posed by fintechs. They are investing in and partnering with these companies to stay ahead of the curve. 

• Consumers are becoming more comfortable using digital channels for their banking needs. 

• Governments are realising the potential of fintech to promote economic growth. They are creating favourable policies and regulations for startups and investors. 

As the world is facing long-term economic uncertainty, companies are looking to adopt practices that help them with recession-proofing. According to Gartner, 74 per cent of organisations state that sustainability is increasing their digital maturity, and 90 per cent state that going digital is increasing their sustainability maturity, showing that technology and sustainability create a virtuous cycle.

Companies are looking to spend smarter; maximise return on investment, automate processes and focus on sustainability over growth. This year is going to see an increase in solutions that help companies achieve these goals.

Fintech trends and their impact: 

1. Embedded finance 

Though embedded finance started with a mere POS system aeons ago, today, companies can extend offerings throughout a customer's journey to increase customer satisfaction and business revenue. It covers the entire gamut of financial services such as banking, credit, investment etc. One popular use case is buy now pay later. 

KPMG revealed the size of the embedded finance market is projected to reach $230 billion in 2025 — more than ten times the $22.5 billion seen in 2020. The majority of non-financial companies provide embedded finance through fintechs.

2. Digitisation of financial services 

Traditional financial products and services are being disrupted by innovative technologies from fintechs. A report by McKinsey & Co stated UAE’s consumer digital payment volumes from SMEs have significantly increased by 44 per cent. 

There are benefits for consumers and businesses such as increased transparency, visibility and customer satisfaction. Additionally, digital payments enhance efficiency across the public and private sectors by providing easy-to-access solutions that are fast, reliable, convenient to use and promote financial inclusion.

3. Data analytics and AI

A Mastercard study revealed that data analytics and AI are the top technologies of the Fourth Industrial Revolution driving the growth of fintech solutions in the region. AI is already being used by fintechs to provide customers with better recommendations and services. Some finance apps now use AI to offer users personalised advice on investments. We can expect to see more AI applications in fintech, which will make this industry even more efficient and effective.

4. Automated accounting practices

Companies are prioritising sustainability over growth by making cash flow a key focus area. A comprehensive spend management system empowers companies to focus on sustainability by helping them make informed cash flow decisions. We see a global shift from retrospective accounting practices to proactive financial planning accounting empowered by insights generated through spend management systems using technologies like AI and machine learning. 

With the introduction of corporate tax in the UAE, companies can benefit from implementing a spend management platform to ease the process of reporting and auditing. Though still nascent, the introduction of spend management solutions in the region will help businesses overcome this transition.

5. Investor slowdown

With the rise of digital banking, customers are looking for financial services that are able to offer them seamless experiences and the insights they need to make better financial decisions. Startups and businesses that can help improve the user experience will thrive. Even in a global investment downturn, companies that are able to differentiate their product and strategy will be able to raise capital.

Overall, the region’s fintech sector is poised for growth owing to a strong government push for a cashless economy. While the first wave of fintech focused on digital payments, the next wave will be building the second layer of applications for fintechs empowered by digital transactions. These innovative technologies are making hyper-personalised experiences a reality, which in turn is fuelling the demand for a 24x7 digital experience.