Another year is about to pass and it has been another year of continuous innovation and accelerated growth for the payments and fintech sector.
We have seen steps being made to evolve regulation in the form of proposals for the impending PSD3, digital payments continue to grow and excel becoming the inevitable social form of payments, and despite often being at odds, banks and fintechs are collaborating more frequently to find the best solutions to serve the customer.
However, 2023 has also been a challenging year for not just customers, but businesses too. The strain of the current economic climate continues to take a toll on customers’ pockets, and has affected how firms run their operations as inflation remains high.
To give an overview of the year, and look into potential trends for 2024, to find the most interesting developments in the payments and fintech space and the challenges that arose.
Martin Heraghty, Regional Director, Europe of Paymentology
2023 has seen an acceleration in the adoption of digital banking throughout Europe, as institutions continue to deliver novel and personalised financial services in a bid to retain customers. It has become clear throughout the payments industry that a digital-first approach is needed for mass adoption, informing our optimistic outlook for the continued adoption of digital banking.
In 2024, we are expecting a number of new digital bank brands across Europe aimed at 18-40 year old “digital nomads”, cashing in on the millennial/Gen Z preference for digital-first financial tools.
We are also observing a shift to digital-first banking in countries which have previously lagged behind in adoption, with innovators in markets including Greece and Portugal expected to close the gap to regional counterparts.
During 2023, the SME preference for accessibility and flexibility helped to build a positive outlook for digital business banking in Europe, suggesting that SME founders are favouring the wide breadth of products offered by newcomers in the place of trusted incumbents.
By offering banking services alongside FX capabilities and business financing via partnerships, digital-first banking brands will continue to see success with SMEs.
Lisa Scott, CEO, Europe of Banked
2023 was an exciting year for payments across the globe. Amidst a backdrop of harsh macroeconomic conditions and the withdrawal of venture capital, innovation was surprisingly resilient.
A key payments trend in 2023 was the adoption of Open Banking, seeing increased usage across key European markets and a ramp-up in Australia. We’re expecting the Open Banking community to gain even more momentum in 2024 as consumers become familiar with authorising payments from their banking apps.
Government regulation will be a key differentiator in the new year; while some countries are swiftly moving into the next phase of executing frameworks, many others are still catching up. Regardless, 2024 is likely to be the year of Open Banking acceleration.
Another emerging trend this year was an increase in collaboration between traditional banks and fintech firms. As a result, digital banking services provided by traditional banks are becoming more personalised, enabling heightened adoption of innovative financial services. This trend is especially important for the USA and Australian markets, where banks are now shifting gears and partnering with fintechs to integrate open banking payments throughout their product stack.
We’re also expecting more attention to turn towards sustainability in payments; it’s a key battleground for climate protection as demands for environmental, social and governance reporting and responsibility continue to grow.
The rise of digital wallets and eco-friendly payment methods is an inevitable result of this shift in focus, decreasing emissions from payment operations whilst improving and personalising the customer experience.
Dhaval Patel, Chairman and Co-Founder of Universal Partners
The past year has delivered a particularly volatile environment for businesses trading across borders, owing to geopolitical tensions and trade disputes among other triggers.
Furthermore, we’ve observed an uptick in costs for businesses as they send dollars to markets across the globe, relying on local partners to convert them into local currencies. UK businesses are reacting quickly, partnering with the right cross-border payments specialists to transfer the local currency directly to improve their bottom line, a trend we are expecting to gain momentum throughout 2024.
During the tough macroeconomic climate of 2023, we also observed a significant increase in the utilisation of business financing. With fintechs absorbing most of the new demand, owing to simple online application processes and more flexible terms, businesses are now beginning to integrate liquidity solutions into their cross-border trade strategies.
We’re expecting this trend to accelerate in the new year as businesses implement short-term financing capabilities alongside other sources of funding in 2024.
The geopolitical instability of 2023 is set to continue next year, owing in part to crucial elections in the UK and the US.
The self-service approach of international payment providers is likely to fall out of favour with corporate clients as they continue to seek consultative partners to manage the complex risks presented by major political events.
Low-cost transactions are only part of the payments and risk management strategies required by firms developing relationships across borders, leading to an expansion in demand for a bespoke approach to international payments in 2024.
Thomas Müller, CEO and Co-Founder of Rivero AG
During the last couple of years, we have seen many banks across Europe reassessing their payment infrastructure, with many beginning to adopt digitalisation in core payment processes, such as payment processing, fraud, and dispute management.
As banks transition from legacy systems and manual processes to more digitalised and automated approaches, there is also a notable change in customer service strategies. Instead of relying predominantly on traditional call centres, banks are increasingly incorporating digital self-service options into their applications and online portals.
This evolution is not only improving operational efficiency but also revolutionising how customers interact with their banks, mirroring the broader industry’s shift towards innovative digital solutions to meet evolving consumer needs.
We expect that the digital transformation of payment infrastructures further accelerates, with an even greater number of banks globally adopting and refining critical processes such as fraud and dispute management. This progression leads to more sophisticated offerings.
Customer service experiences become increasingly automated, with chatbots and virtual assistants becoming more prevalent, offering real-time, customer-friendly support while reducing operational costs for banks.
