Innovations in the Finance Industry to Watch for in 2023 | by Jesse Almeda | The Capital | Jan, 2023

So many fields have been disrupted by new startups, technologies, and other innovations. This includes the global finance industry, which is predicted to top $37 billion by 2026.

As we look forward to next year, the finance horizon is filled with plenty of advancements and improvements. But why are so many entrepreneurs and investors focused on changing finance in the first place? The answer is simple: The finance world has lagged behind other sectors in catching up with digital trends. Consequently, it’s ripe for evolution.

Below are just a few of the most notable finance-related innovations likely to make a big impact over the next 12 months.

1. Streamlined methods for consumer income verification.

How do landlords and lenders determine which applicants become renters or borrowers? Numerous factors are taken into consideration, including applicants’ salaries. However, the process to verify income can be difficult, especially for people who have changed jobs recently or are part of the gig economy.

Companies like Truework are shaking up a legacy industry to make income verification more automatic, cost-effective, and accurate. From payroll partnerships which provide data instantly, automatic document parsing, and even consumer-permissioned data sharing from payroll platforms, Truework provides a comprehensive income verification solution.

The more rapidly income verification takes place, the more rapidly consumers can achieve goals like owning a home or auto. Plus, having a third party handle all the income verification tasks lets the lender concentrate on other services. Ultimately, the experience is improved for all parties.

2. Opportunities to safely invest in NFTs.

Many people are intrigued by non-fungible tokens (NFTs). Nevertheless, the world hasn’t quite figured out how to invest in them. Enter startups like OpenSea, a digital marketplace devoted to the buying and selling of NFT products.

The general OpenSea concept isn’t novel. The site operates as a trading ground where budding investors can go to find and build NFT collections. However, NFTs aren’t bought and sold with fiat money. Only Ethereum cryptocurrency is accepted on OpenSea. This sets OpenSea up to be a launching point for many people’s first digital wallets. To reduce the chance of pirated materials, OpenSea relies on proprietary algorithms to authenticate NFT trades. This ensures that the platform is reliable. In fact, OpenSea has dominated the NFT exchange marketplace.

Though NFTs are still in their infancy, there’s little sign that they’re going away. As NFT creators grow their followings, more startups will no doubt be devoted to making NFT ownership effortless.

3. Gateways to competitive peer-to-peer loans.

Not everyone has the background or credentials to be approved for a typical loan. For example, consumers with questionable credit scores are often denied loan approvals. Alternatively, they may be offered excessively high interest rate products that strap them financially for years. Peer-to-peer lending sites offer a workaround to the traditional lending vehicle.

At peer-to-peer lending sites, consumers can apply for loans that are crowdfunded by a number of individual investors. The investors decide which loans to fund and how much money to invest. Instead of paying a bank, credit union, or finance company, the borrower pays the peer-to-peer lending platform. The platform then transfers a percentage of each payment to the loan’s individual lenders.

Although peer-to-peer lending can be risky for lenders, it has its rewards. Individuals who diversify their investment dollars across multiple loans increase the odds of making money. It can take several years for peer-to-peer lending to pay off. Nevertheless, it can be a good wealth-building model for the right people. By 2028, the peer-to-peer lending market is expected to reach more than $800 billion.

4. A variety of payment solutions for every exchange.

Does it seem as if different payment solutions are popping up all the time? They are, and they’re going to continue to heat up into 2023. Take contactless payments. They’re some of the most appealing payment methods.

Once thought of as something a bit unusual, consumers have become accustomed to tapping cards and scanning phones at registers. But contactless payment providers are thinking of ways to take this a step further. Imagine being able to walk into a store and be identified through software. If the software was linked to a payment account, there wouldn’t be a need for a checkout at all. Someone could literally walk in, pick up a bag of potato chips, and leave the store. The store’s backend program would do the “hard work” of handling the transaction.

Of course, space-age contactless payments aren’t quite a reality yet. Voice-authenticated payments may be, though. The bottom line for fintech innovators is to figure out ways to enhance the buying experience. And they’re getting more creative year after year.

5. A rise in the availability of neobanking.

The term “neobank” is popping up across the web — for good reason. Neobanks are the latest form of bank. They’re 100% digitally based without any brick-and-mortar headquarters. As such, they offer a nimbleness and mobile-friendly interface that appeals to some modern consumers. Perhaps not surprisingly, younger Gen Z and Millennial generation members seem to be especially open to neobanking.

Neobanks offer several benefits that standard banks either don’t or simply can’t. Case in point: Neobanks frequently offer higher interest rates on investment products and lowered fees on loans. How? Easy: Neobanks don’t have the same overhead as their conventional counterparts. This allows them to have more leeway when it comes to operating in the green while presenting attractive rates.

Certainly, neobanks have their downsides as well. The most obvious is that consumers can’t go to a branch or meet with a banker in person. Despite this disadvantage, neobanking is on the rise. Between now and 2030, neobanking should become a larger force in finance. No one anticipates that neobanks will usurp traditional banks, but they’re poised to become more normalized in the near future.

Like all other industries, finance is moving forward. Thanks to incredible innovations, people and businesses have more financial choices than before. Looking ahead, finance should keep developing in unique, exciting directions.