Future of Banking and Payment Processing: Top 10 Trends to Watch in 2023 and Beyond

The banking industry is radically transforming. The sector experienced strong revenue growth once the effects of the pandemic reduced; however, the growth margins are now shrinking. Additionally, there has been looming uncertainty due to global geopolitical and economic issues. 

According to data by McKinsey, banks reached a 14-year high profitability in 2022, and the revenue grew by $345 billion. This happened due to rising interest rates and net margins in the sector. As we look into the future, the banking industry has to restructure to accommodate the new trends and challenges. 

With the shift towards digital technologies, especially in payment processing, banks must realign their processes around customer needs. This could be a huge opportunity to earn new revenue streams and higher margins. This blog post will look at how changing consumer preferences and technological advancements drive new banking and payment processing trends.


Top 10 Trends to Watch in 2023 and Beyond


#1: Digital Banking Applications Are Growing

The banking sector is increasingly shifting towards digital banking. Payment ecosystems have changed since the beginning of the pandemic in 2020 as more customers have moved their preferences to digital and contactless payment models

Because of this, online banking platforms and mobile banking apps have become more prominent. Statistics show that the number of active online banking users was more than 2 billion in 2022. This number will continue to grow with the introduction of digital-only banks, also known as neobanks. These new banks don’t have any physical branches; therefore, they have more streamlined operations to attract younger customers.  

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#2: Cryptocurrencies and Blockchain Are Transforming Modern Transactions

A 2021 BIS survey showed that about 60% of banks were considering adopting Central Bank Digital Currencies (CBDCs). Digital currencies have become more prevalent in most countries as more governments and financial institutions explore the potential of cryptocurrencies and blockchain technology. For instance, Jamaica, the Bahamas, and Nigeria have launched CBDCs. 

Thanks to this, the Decentralized Finance (DeFi) market size has also grown as more consumers turn to this technology since it’s a secure digital wallet that can transfer money in minutes without intermediaries. Therefore, banks must adopt payment technologies to compete with this emerging technology.


#3: Biometrics and Identity Verification Increase Payment Safety

As digitization progresses, the risk of identity fraud increases. Banks now use biometrics such as fingerprints, heart rate sensors, voice, and facial recognition to authenticate customers. 

To improve security, banks must partner with payment processors offering these technologies. This will reduce their PCI scope, minimize identity fraud, and identify suspicious transactions.


#4: Artificial Intelligence and Machine Learning are Increasing Efficiency

Fraudsters are becoming more daring by targeting bank systems through hacks. Modern banks rely on artificial intelligence and machine learning for risk assessment, fraud detection, and boosting customer service.

For instance, machine learning identifies customer patterns, performs authentication tests, and builds a suspicious activity monitoring system. Therefore, if a bank needs to process checks via the ACH network, it can use machine learning and AI to verify the checks. 


#5: Open Banking is Breaking Barriers

The open banking model allows banks to share financial and consumer transactional data with third-party institutions using Application Programming Interfaces (APIs). Therefore, banks can share account information, age, location, credit score, transaction information, and income with consent from the customer.

There’s potential for innovation and increased competition in this sector. So, as a bank manager, you must adopt these models to partner with companies offering advanced payment processing solutions like email invoicing.


#6: The Internet of Things (IoT) is Bringing Technologies Together

Thanks to the rapid evolution of the Internet of Things, customers can now open bank accounts digitally within a few minutes without visiting a physical branch. In addition, banks can now collect information and design products according to target customer needs.

Banks can now develop 24/7 customer support due to IoT. This technology offers chatbots and virtual assistants to address customer queries. Because of this, financial institutions can process payments much faster and meet their clients’ needs.


#7: Contactless Payments are Reducing Friction

Contactless payments, such as wearable technology and mobile wallets, have become a constant feature. Peer-to-peer payment models like Venmo and Zelle have increased as consumers shift to digital payments. 

Thanks to near-field communication (NFC) technology, merchants offer these systems. This technology is set to expand in more areas to help with payments. Banks are adopting their own contactless technologies, such as IVR payments, that allow customers to make transactions over the phone.


#8: Data Privacy and Security Takes Priority

These institutions are investing heavily in data privacy and security to prevent identity theft and fraud in the bank. They are partnering with payment processors to offer technologies like hosted payment portals that are highly secure. 

In addition, the sector is changing thanks to the introduction of new regulations and standards to protect customer data. For instance, FedNow payment technology is being introduced to offer safe payment services, and banks can use this tech to reduce operational risk and detect fraud. 


#9: Customer Experience is Critical for Customer Attraction and Retention

In 2023 and beyond, banks are paying more attention to customer experiences. They are doing this by increasing personalized services to meet client needs. Additionally, they are adopting technologies like chatbots and voice assistants to increase the response time. Therefore, customers can get information much faster if they need to process payments.


#10: Sustainability is the Key for Continued Bank Growth

Green technologies have become an important element in every sector. In the banking sector, institutions have to invest in green financing and invest in renewable energy. To achieve this, most banks are diverting their funds to green industries.

By doing this, banks can partner with more eco-friendly businesses for payment processing. Through this development, they can encourage sustainability while growing their margins.


Getting Started on the Right Foot

Banks must embrace the latest trends to enhance customer relationships and grow their revenue. With the evolving digital economy, these institutions must provide technologies that meet their customers’ needs. iCG can provide these payment solutions to help them stay ahead of the curve. Contact our relationship manager today for more information. 

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