Trends in Financial Software Development for 2023: More Security, More Simplicity And More Functionality

Open Banking

Open banking is on the rise, with an estimated 63.8 million users in 2024, according to Statista. The practice focuses on securely sharing financial information with non-traditional institutions via accessible APIs. Fintech companies offering budgeting, expense tracking and other services are taking advantage of open banking prospects.

McKinsey assumes that open banking has only tapped into 10% of its potential. However, users are slowly realizing the benefits of open data, such as improved financial services and opportunities for financial software development and scientific research.

Open banking allows account holders to receive regular reports on their account balances, expenses and savings. In addition, banks can share clients' financial data with insurance companies, retailers and others. This enables verification of solvency for insurance, loans and simple online payments.

Surprisingly, traditional banks benefit from this approach by offering better services and more options to end-users. For example, customers can merge their financial data from multiple banks into one app, receive their salary at one, save at another and use the card with the best cashback reward.

Neobanks

Neobanks are online banks that operate without physical branches and handle all communications and customer service electronically via smartphones, tablets or computers. They usually obtain banking licenses or partner with traditional banks.

Sweden is set to become the first cashless country in the near future, setting a trend that other nations are likely to follow. As a result, more and more new banks are adopting a purely digital approach. With each passing year, older generations are also becoming more familiar with the financial software development products, making the shift to digital banking almost inevitable in the future.

Among the most popular neobanks worldwide are Revolut, Monzo, Statrys and Atom bank. These innovative financial institutions reshape the way people manage their finances, offering a seamless and convenient digital banking experience.

Big Data

Big data provides banks and financial institutions with vast amounts of structured and unstructured data. This wealth of information enables them to predict consumer behavior, develop effective strategies and differentiate themselves from traditional organizations.

In the financial sector, data flows constantly, being received, processed and generated every second. Structured data is stored internally by companies and serves as valuable insights for timely decision-making. Unstructured data, on the other hand, which originates from various channels, holds great potential for analysis and enables a deeper understanding of customer behavior.

With financial software development products powered by big data, financial firms can better understand their clients, increase security, make informed risk assessments and improve the user experience to pave the way for success in this evolving industry.

Blockchain

The global blockchain market will experience exponential growth, reaching $1.5 trillion by 2030 — a 143-fold increase. Major companies like Visa, Mastercard and PayPal have already embraced cryptocurrencies and enabled crypto payments.

Sending money across borders is a cumbersome and expensive process. However, blockchain technology offers a solution. It promises faster and more secure international transactions at lower costs.

This financial software development technology records each transaction in a unique block that is linked to previous ones. Anyone on the network can access it, but a transaction is only valid if more than half of the participants agree. The decentralized nature of blockchain makes it difficult to manipulate.

Blockchain not only facilitates online payments and storage, but also improves identity protection and data security. Already, 45% of customers use cryptocurrencies for international transfers, and over half consider them a legitimate option.

AI-Powered Solutions

Over 90% of fintech companies worldwide already rely heavily on artificial intelligence and machine learning. AI enables companies to monitor customers' financial health by analyzing their cash accounts, credit accounts and investments. This allows them to offer personalized and relevant services. 

In financial software development solutions, AI takes customer interaction to a new level through chatbots and virtual assistants, creating a direct and engaging experience. For instance, UBS Group, a major financial holding company, has partnered with a Singapore-based fintech company Sqreem Technologies, which uses AI for banking assistants. They have developed a premium service providing intelligent insights and forecasts to VIP clients.

Biometric Cybersecurity

Using passwords instead of user-friendly biometric identity verification methods can cost businesses their clients. When it comes to accessing financial data, customers actively seek out companies that offer fast personality confirmation. That's why fintech businesses are paying close attention to improving their security measures.

Keeping their bank accounts safe is a top priority for 93% of consumers, making biometric authentication technologies a must-have in the fintech world. Investing in the security of fintech solutions is directly linked to improving their efficiency. It's critical for companies to ensure safe data storage and processing and withstand cyberattacks. 

Interestingly, cybersecurity experts believe that biometric authentication is much more secure than traditional passwords and PINs. Dr. Thirimachos Bourlai from West Virginia University explains that biometric features such as unique fingerprints and voices can effectively protect against personal information theft or fraud.

RegTech (Regulatory Technology)

Government institutions and financial markets have established a set of rules for banks, but it's tough for companies to keep up with all of them. It's virtually impossible to follow every single regulation, especially as the list keeps growing.

Such financial software development solutions as RegTech are in high demand because they help companies automatically keep track of their operations to make sure everything is correct and legal. It handles important tasks such as identifying customers, protecting data and analyzing financial risks. With RegTech, businesses can obey the rules and avoid being fined.

RegTech also keeps an eye on data security, ensures fraud detection and automates repetitive tasks. With large companies placing a high value on security, the value of the financial software development products is expected to reach a whopping $55.28 billion by 2025. RegTech adoption is a must for financial firms to navigate the complicated world of regulations with ease.

BNPL (Buy Now, Pay Later)

BNPL is a kind of short-term financing that lets you pay for goods or services in the future. And the best part is that there is often no interest involved. With installment loans, customers make a down payment on an item and pay the remaining balance later. This is a popular funding method, as 43% of Americans used its services in 2022.

For example, Amazon and Affirm work together to introduce BNPL options that allow customers to split payments for purchases of $50 or more into smaller monthly installments.

One of the most popular BNPL systems is offered by the multinational financial company PayPal. This financial software development product allows customers to split a payment of up to $1,509 into four equal installments, payable every two weeks. BNPL has gained popularity due to its flexibility and convenience, making it the first choice for many shoppers.