2023 marked another challenging year for the fintech sector, like 2022. Higher interest rates, a tightening money supply and other macroeconomic headwinds led to funding woes, layoffs, fintechs reigning in spend, and even some fintech closures.
While the macroeconomic climate will continue to reshape the market in 2024, experts are cautiously optimistic about the year, as fintechs across Europe recalibrate their models for 2024.
Here are some of the key trends fintech experts expect to see in the year ahead, both in the UK and across Europe.
More bank switches
Industry figures show that there were over one million current account bank switches in the UK in the first half of last year. UK neobanks like Monzo and Starling are usually strong performers when it comes to account switches.
Another star performer recently has been UK challenger bank, Kroo, which netted 150,000 customers in the 12 months since it launched its eye-catching current account, paying an unusually high interest, now at 4.35 percent. Its CEO Andrea De Gottardo thinks we will see more switching in 2024.
“In 2024 we can expect to witness a shift in consumer behaviour, as people become more conscious of the financial institutions they choose to bank with.
Emerging trends suggest that customers are paying closer attention to what they are truly getting from their bank, and are choosing to switch banks in search of better deals.”
BNPL becomes increasingly mainstream
The rise of BNPL has been one of the key trends in financial services in recent years- with the likes of Klarna, Scalapay, Alma, Afterpay, Divido, and Clearpay key BNPL names across Europe.
Its rise will continue in 2024, says UK Country Manager at Clearpay, Rich Bayer.
Bayer said 2023 marked the year that BNPL established itself as the "everyday payment method” for UK shoppers.
He pointed to data showing that nearly a third of UK consumers used BNPL in the 12 months ending August 2023 and that baby boomers have been the payment method’s fastest-growing group of users this year, commenting:
“As consumers across all ages seek out seamless shopping experiences that offer the same flexibility online and in-store, we expect more high-street retailers to look to innovative technologies to meet customer demand.
Last year, payment terminals began to offer integrated BNPL, giving customers more choice over how they pay on the high street and since then we’ve seen several major brands announce their decision to offer BNPL instore. We expect the trend of in-store BNPL to continue in 2024.”
Profitability remains key
The word profitability has been emanating from the mouths of many a fintech CEO in recent times, as startups opt for profits over growth. Amid a difficult economic environment, experts say there will still be an onus on fintechs to be in the black in 2024.
Scott Simpkin, head of UK campaign team, crowdfunding platform Seedrs said:
"Many businesses will continue to prioritise paving a quick path to profitability as various pressures including high-interest rates weigh on their ability to grow at all costs.”
Pat Patel, executive director, Elevandi, a not-for-profit set up by the Monetary Authority, Singapore, said:
"The market environment is unlikely to improve greatly in 2024, however, organisations have refocused and are better equipped to cope with the volatility.
The recent trend for startups to focus on ‘first principles’ will continue with profitability being the number one priority over growth.
AI use cases on the rise
AI has been leveraged in financial services for years, but the arrival of the much-hyped generative AI has elevated the tech’s potential to stratospheric levels in the finance world. De Gottardo says:
“In 2024 we can expect to see AI playing a much larger role in the fintech space, and one major facet of this AI-driven evolution is the revolutionizing of customer support, with a focus on providing round-the-clock assistance.
The challenge lies in striking the right balance to ensure these technologies are embedded safely."
“While AI will continue its hype cycle, we are likely to see strong use cases being developed in financial services, especially as many banks are experimenting and getting comfortable with the advancements across the business. I predict more opportunities for the application of AI within the fraud detection, risk management and cyber security areas."
The possibility that US regulators will approve a Bitcoin ETF has caused much excitement in the crypto industry, with approval likely to spark a key shift in institutional engagement with crypto, marking a major fillip for the industry.
The crypto market certainly seems to be enjoying an uptick of late, as it emerges from the Crypto Winter. Simpkin is upbeat about the UK market in 2024.
“As the Crypto Winter thaws, we’re going to see the Crypto Spring emerge, especially on this side of the pond where regulation is primed to let Web 3 businesses thrive."
Surge in hybrid working
Talent is always an important topic in fintech, as in all industries.
The rise in hybrid working emanating out of Covid marked a key change in working practices- and fintech leaders continue to scrutinise how best to organise their workforces.
Ian Bradbury, CTO, financial services, Fujitsu, says that startups must ensure they are offering varied working practices to ensure staff stay with them. Bradbury says:
“Fujitsu predicts a surge in hybrid working models to ensure those who have newly joined the finance sector stay, as well as continuous education programs and a ramp-up in diversity, equity, and inclusion initiatives.
To tap into the widening talent pool, financial institutions must make these adaptations swiftly.”
Lead image: Austin Distel.