There are a variety of reasons why this past year has been challenging. Businesses worldwide have become accustomed to adapting to new circumstances due to post-pandemic complexities, war-induced energy crises, cryptocurrency market crashes, high inflation and soaring interest rates.
However, despite all these challenges, the UK fintech market has grown steadily and has provided businesses with ways to remain ahead of the curve and offer simpler, more accessible financial services.
Fintech’s influence will continue to grow in 2023, and Lynne Darcey Quigley, CEO and Founder of Know-it explains what trends are expected to dominate:
1 – The Rise Of Invoice Financing
It is well known to every business that there can sometimes be a long gap between revenue and cash flow, especially when your customers demand long payment terms and wait until the last minute to pay.
Invoice finance can help you bridge that gap by borrowing against the invoice value. A short-term loan against invoices is invoice financing, in which your business borrows money against amounts that are due on invoices you’ve issued to customers. Collateral is then provided in the form of these trade receivables. The construction, retail, transportation, and consumer goods industries regularly use invoice financing.
Using invoice finance can be viewed as one of the many business financing options because you can receive cash immediately without waiting for your customers to pay you in full. As a result, working capital is maintained and problems with the credit and cash flow of the company are avoided. It can then serve as an alternative to financing slow-paying accounts receivable or to meet short-term liquidity needs. There will be a strong role for invoice financing in the fintech market of 2023 as cash flow continues to dictate the chances of success for many businesses.
Invoice financing will soon be available in the Know-it platform, allowing users to borrow up to 95% of the value of their unpaid invoices, to a maximum of £5 million.
2 – The Rise Of Cloud Computing
Cloud technology has played a critical role in facilitating SMEs and large enterprises in recent years and will play a major role within fintech in 2023. With cloud computing, businesses can reimagine and pave the way for a technology-first and data-first work culture which cultivates business continuity and digital transformation.
Applied agile technologies have been a key component of fintech services. Structures of banks are complex, with functional silos. By adopting agile technologies, modern banks, particularly neobanks, are simplifying their organisation’s processes and ensuring accountability in the face of global digitisation. As the fintech industry grows exponentially, cloud computing is driving that growth. Scalability and flexibility should be the core principles of UK SMEs as they seek steady expansion in 2023.
Cloud-based platforms that can be accessed on a web browser from anywhere in the world, allow businesses to always keep on top of their credit management to protect their business cashflow, something that will be vital throughout 2023 as we navigate a recession.
3 – The Rise Of Embedded Finance
One fintech trend that is poised to boom in 2023 is embedded finance. As well as providing benefits to the user, embedded finance also benefits the provider. For users, this technology simplifies and speeds up purchases and makes items more accessible.
In addition to giving the providers a way to maintain strong relationships with the add-on providers, embedded finance provides a way to increase customer loyalty to the provider with all-in-one purchases. Embedded payments have made the payment process simpler for businesses and end-users, eliminating barriers and further meeting our desire for even more convenience given the society we live in.
However, some embedded lending platforms have been unregulated for a considerable period of time and have only recently begun performing credit checks for users looking to use the facility which could spiral into a credit crunch.
4 – The Rise Of AI
For fintech companies, artificial intelligence has long been an indispensable tool. Automation of report writing, financial data management, and other operations is made faster and more accurate with robotic process automation (RPA). The reduction in employees is made possible by removing human intervention from routine tasks.
As a result, financial institutions are implementing adaptive AI, which adapts to work in a specific field. By obtaining information about past human-machine interaction experiences, it self-adapts to the conditions exhibited. Gartner predicts that by 2026, companies that use adaptive AI will have a 25% advantage over competitors using conventional earlier AI models.
RPA and AI are rapidly changing how businesses are working, having a huge impact on productivity and giving organisations deeper insight from vast amounts of data. Know-it helps businesses make sense of their sales ledger, better know their customers and automate the credit control process end-to-end. This helps businesses mitigate credit risk, reduce debtor days and boost cashflow with ease.
5 – The Rise Of PaaS
Retaining customers is something every business must focus on. To improve and maintain their retention rates, many companies have been turning to platform as a service (PaaS). As part of the PaaS model, clients can create new add-ons for the product they originally purchased. As a result, SaaS/PaaS providers will be able to offer clients a much more personalised experience which should encourage their growth rate and customer retention.
6 – Making Tax Digital (MTD)
Since MTD was announced in 2015 most businesses have responded well to these changes by implementing new tools and processes has been largely positive. Businesses have been able to adopt new tools and technologies and take a digital mindset when it comes to filing taxes.
This change may have been daunting for some at the time, however many will have quickly reaped the benefits of automating and keeping a digital record of invoices, transactions and tax filings.
The new Making Tax Digital penalty points system will come into effect in January 2023 so expect this to be a hot talking point as we begin to see the business that have been slow to adopt these new technologies, regularly make mistakes and miss deadlines punished.
Fintech’s are known for their disruptive innovations, and 2023 will be no exception. Others fully embrace it while some struggle against it. To mitigate against shocks and disruptions like the one that occurred in 2022, fintech companies should build their financial services more robustly. Despite that, there is no limit to the possibilities. 2023 will be full of innovation and growth.