Fintech predictions and opportunities for 2023

News Summary

  • While big players, like Chime, who raised large amounts of capital will be fine, expect to see consolidation among the smaller neobanks.The reality is that many neobanks have customers with small average deposit balances, and deposits are critical to banking business models in the long term.
  • These younger companies don’t have the models fully built out to predict which customers are likelier to default.Managing risk during a downturn can be brutal, and lenders will feel this most acutely.Neobanks transformed the customer experience of traditional banks by offering better digital products and lower costs.
  • Lenders have to manage three big tailwinds in today’s market: The rise in delinquency rates and charge-offs from non-paying customers will be tough to manage for newer fintechs that have been operating for less than five years.
  • Neobanks will also be downstream victims of layoffs — if any of their customers are laid off, the banks will see their direct deposit flows diminishing.Small businesses are more likely to shut shop during a recession.
  • In turn, fintechs that serve SMBs rather than larger midmarket and enterprise customers are more likely to lose their SMB customers.
  • This is why you already see businesses like Brex moving away from serving SMBs.The opportunities for fintechs in 2023 lie in the “boring” areas like fraud, compliance, payment operations, taxes and infrastructure.
Its been quite an eventful year. Fintech has fallen a long way from the highs of 2021, and while 2022 was largely about the reset of the funding environment, 2023 is going to be a year of recalibrati [+2684 chars]