Fintech Opportunities in 2023: From Fraud Prevention to Government-Backed Loans

Welcome to 💰 Fintech Friday 💰 ! A weekly note of select insights and developments from the world of financial technology, and how it is changing the way we handle money and do business.

Let’s dive in!

• 😴 Opportunities for fintechs in 2023 lie in “boring” areas like fraud prevention and compliance, where they can show tangible results and stand out in a downturn

• 🇲🇽 A Mexico-based startup is making loans as easy as a video call with AI and natural language processing

• 💸 The Biden administration is trying to allow fintech startups to offer government-backed loans under the Small Business Administration’s (SBA) flagship “7(a)” program, traditionally reserved for traditional lenders.

Fintech Predictions and Opportunities for 2023

• 2023 will be a year of recalibration for fintech companies. Many new entrants may face higher struggles to manage risk during the downturn.

• Online lending is expected to be challenging due to rising delinquency rates, higher cost of capital, and decreasing customer demand.

• Neobanks (banks that operate exclusively online) may face challenges due to the small average deposit balances of their customer base. Changes in this customer base, such as layoffs, could result in a reduction in direct deposit flows and potentially harm the business model of these banks.

• As economic downturns can often lead to an increase in fraud, and with regulatory scrutiny remaining high in the wake of the crypto meltdown, companies specializing in fraud prevention and compliance are expected to continue seeing success in 2023.

Aviva Fintech Revolutionizes Lending with AI and Video Calls in Mexico

• Aviva is a Mexico-based fintech startup that uses AI and natural language processing to match spoken words to fields of a loan application to qualify customers within minutes

• 40 million Mexicans are excluded from certain financial products due to banks not targeting them, but Aviva aims to bring working capital to unserved communities using its technology

• Aviva’s approach uses AI and natural language processing to match customers’ spoken word to the fields of a real-time credit application, allowing customers to qualify for a nano-business or home improvement loan of up to $1,000 within minutes

• Aviva is rolling out a network of physical and digital onboarding kiosks using biometrics and biosignals to determine the client’s risk and willingness to pay in order to underwrite the loans

• The company has received $2.2m in pre-seed funding and plans to invest in building out its credit and underwriting system, preparing to launch its own credit card and expanding its kiosks

Biden Administration Fights to Allow Fintechs to Offer Government-Backed Loans

• The Biden administration is trying to allow fintech startups to offer government-backed loans under the Small Business Administration’s (SBA) flagship “7(a)” program, traditionally reserved for traditional lenders

• Trade groups such as the American Bankers Association and the National Association of Government Guaranteed Lenders argue that the SBA is not equipped to regulate fintech firms and the changes could be a financial burden on the program and its borrowers

• Fintechs argue that banks are trying to protect their turf and have done a poor job serving the smallest businesses

• The proposal has political baggage as well, as fintechs played a large role in delivering emergency Paycheck Protection Program loans during the beginning of the COVID-19 pandemic, but have faced accusations of exposing the SBA to scammers