What Fintechs Should Watch in Q2 2023

Fintech leaders are challenged to walk the tightrope of delivering on ambitious growth plans while remaining dynamic enough to adapt to evolving consumer behavior, new market trends, and impending regulations. As we begin the next quarter, fintechs should keep these emerging trends in mind: 

Buy Now, Pay Later

Buy Now, Pay Later (BNPL) user penetration is expected to exceed 40% of U.S. digital buyers for the first time this year. And although spending growth decelerated, BNPL is on track to more than double its user growth. The number of merchants is also growing as BNPL expands into new sectors including grocery, healthcare, legal services, and travel. For instance, stubborn inflation and rising consumer money stress have driven a 40% increase in online grocery shoppers delaying payment in just the first two months of 2023. 

Consumer Lending 

The first three months of 2023 saw a 73% increase in lenders writing off bad consumer loans from the previous year. As consumers facing increasing financial stress, Transunion forecasts a rise in delinquencies across all lending categories and expects credit card delinquency rates to hit 2.6%.

Mortgages 

Loan servicing volumes are returning to pre-pandemic levels, while demand for new loans and refinancing hits a 22-year low. Increased regulation, rising interest rates, and inflation are the top challenges consumers are most concerned about over the next three months according to recent research by HousingWire. 

Payments

Open banking APIs are gaining traction with 20% of U.S. respondents listing it as the top priority IT product investment for payment issuers and acquirers according to Omdia’s 2022/23 survey. In addition, fraud continues to rise across the payments space with a 13% increase in attacks from 2021 to 2022.

Personal Financial Management

Consumers are craving financial guidance and 66% of Americans feel open conversations about money are necessary in establishing financial freedom. Despite this desire, 62% of consumers find themselves clamming up around money topics. A rising number of young adults coping with their financial stress by ignoring it and avoiding their finances altogether. According to Credit Karma’s recent survey, 28% of millennials and Gen Zers report often or always experiencing financial dissociation, a significant gap compared to 4% of Baby Boomers.