Predictions and Developments Shaping the Banking and Fintech Industry in 2023

• 🏦 In 2023, Big banks will enter the BaaS (Banking-as-a-Service) market by partnering with retailers/merchants to focus on commercial and small business opportunities and take advantage of high payment or loan volume.

• 👀 Chinese billionaire Jack Ma, founder of Alibaba and one of the most influential figures in Chinese business and technology, is ceding control of fintech giant Ant Group.

• 📈 Consolidation deals, such as Paya’s acquisition by Canadian FinTech Nuvei, helped boost sentiment and drive the FinTech IPO Index up 13.5% for the first time since it’s been tracked.

• 🚫 JPMorgan Chase shut down the website of a college financial aid platform it bought for $175 million after alleging the company’s founder created nearly 4 million fake customer accounts.

5 Predictions for Banking and Fintech in 2023

• #1: Big banks will enter the BaaS (Banking-as-a-Service) market by partnering with retailers/merchants rather than consumer-facing fintechs, to focus on commercial and small business opportunities and take advantage of high payment or loan volume.

• #2: Banks and credit unions will turn to embedded fintech (the integration of fintech products and services into financial institutions’ websites, mobile apps, and business processes) to counter the trend of platforms like Square, Amazon, and Shopify diversifying their service offerings and deepening relationships with small business customers.

• #3: Buy now, pay later (BNPL) providers will become more prominent and evolve from financing individual purchases to financing lines of credit, becoming the new entry-level offering for credit cards. However, few banks are showing interest in this service.

• #4: The regulatory environment for banking in 2023 will be messy. At the end of last year, the Consumer Financial Protection Bureau (CFPB) has asked the Supreme Court to overturn an appellate ruling that the agency’s funding structure is unconstitutional. If that was not enough, the Federal Trade Comission (FTC) required Mastercard to provide other debit networks with the keys to convert tokenized card account information for online transactions, putting merchant and retailer revenue above fraud prevention and consumer security.

• #5: 2023 is predicted to be the year that bank executives finally invest conversational AI, in order to accelerate their digital transformation efforts. Credit unions in particular are expected to deploy chatbots, with one in four stating plans to do so in 2023. Nonetheless, institutions will require more than just chatbot deployment: they will need to implement intelligent digital assistants (IDAs) with natural language understanding and more sophisticated conversation capability.

Jack Ma loses control of Chinese fintech giant Ant Group

• Jack Ma, the chairman of Alibaba Group, is ceding control of Ant Group, the company that owns Alipay.

• Ant Group announced it would end agreements that had allowed Ma to hold a dominant position within the company’s corporate governance structure.

• Ma influenced Ant Group through a handful of investment vehicles that owned a combined 50.5% stake in the fintech giant.

• Jack Ma and nine other company executives and employees will have voting rights they had agreed to use independently of one another.

• Chinese authorities blocked Ant’s initial public offering in 2020 after Ma called the country’s banks “state-owned pawnshops” during a speech in Shanghai.

• The company was ordered to return to its roots as a payment provider and a year later, Alibaba was fined $2.8 billion following an antitrust investigation.

Fintech IPO Index Soars 13% on Positive Sentiment and Consolidation Deals

• The FinTech IPO Index soared 13.5% through the week, marking the first time it’s happened since it’s been tracked.

• The rally is due to positive sentiment in the tech sector, as well as macroeconomic data that suggests inflation may be cooling, which could lead to the Fed slowing its pace of interest rate hikes.

• Consumer-focused names, such as Affirm and Upstart, also saw gains, with Affirm up 32.7% and Upstart up 32.3%.

• The Index was also affected by individual stories such as Paya, which rocketed up 25% following news of its acquisition by Canadian FinTech Nuvei for $1.3 billion.

JPMorgan Shuts Down $175 Million Platform After Fraud Allegations

• JPMorgan Chase shut down the website for a college financial aid platform it bought for $175 million, Frank, after alleging the company’s founder, Charlie Javice, created nearly 4 million fake customer accounts.

• JPMorgan previously touted the deal as giving it the “fastest-growing college financial planning platform” used by more than 5 million students at 6,000 institutions.

• Months after the transaction closed, JPMorgan said it learned the truth after sending out marketing emails to a batch of 400,000 Frank customers. About 70% of the emails bounced back, the bank said in a lawsuit filed last month in federal court.

• Specifically, after being pressed for confirmation of Frank’s customer base during the due diligence process, Javice used a data scientist to invent millions of fake accounts, according to JPMorgan.

• Instead of gaining a business with 4.25 million students, JPMorgan had one with “fewer than 300,000 customers,” JPMorgan said in the suit.

• Money View valued at $900 million in new funding

• KreditBee nears $700 million valuation in new funding

• Toss closes $405M Series G as valuation rises 7%

• Manafa raises $28 million to fund expansion