2023 has been an important year for the banking and payments sector. From the excitement around national digital currencies to the growth of high-speed international transfers, the digital revolution has arrived. It’s not been all good news, though. Brick and mortar stores are at record lows across the western world, buy-now-pay-later use is booming, aided by a lack of regulation, and Revolut still hasn’t got its banking licence.
As the year draws to a close, Electronic Payments International examines the winners and losers of 2023.
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Winners:
Despite the broader crypto industry’s woes this year following the collapse of FTX and the arrest of two of the sector’s largest proponents (Sam Bankman-Fried and Changpeng Zhao), Bitcoin has emerged as a clear victor. Up over 145% since the start of the year, and awaiting an ETF approval pushed by BlackRock, the currency has not only weathered the storm but thrived in it.
Low-cost international transfer companies have also done well in 2023. Wise, the premier provider, has seen its stock price rise 56% YTD as well as massive profit increases. The company increased its user base by over 30% between April and September (H1), moving £57.4bn ($72.6bn). Atlantic Money, a competitor aimed at high-value transfers, has also expanded into the European Union and India, as well as launching a business account service.
Another big winner this year has been decentralised finance (DeFi). DeFi has historically aimed to operate outside of traditional banking structures, storing value public blockchains like Ethereum. This has changed in 2023 as banks and governments have begun experimenting with their own private blockchains that offer the low-cost high-speed transfers of DeFi combined with the institutional recognition these institutions can provide. JP Morgan unveiled its proof of concept built in tandem with the Monetary Authority of Signapore and Apollo in November, the same month Hong Kong completed its digital currency pilot.
Losers
Branch numbers continued to fall across the western world this year. The US hit a 40-year low in November, but still remains above most of Europe in terms of branch density per 100,000 people where the number can get as low as five and a half. This reduction in branch numbers is bad for customers who rely on physical branches, particularly the elderly. It might also be bad for banks. According to GlobalData’s Financial Services Consumer Survey, 58% of US consumers don’t want to use a bank that has no branches.
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By GlobalDataRevolut has also been unable to get ahead this year, failing yet again to gain its UK banking licence despite reports in February that it expected to receive it within weeks. The company has sought this prize for almost three years now, but it remains illusive. The company’s recent inability to file yearly accounts to the UK’s regulator on time may be adding to the problem.
Buy now, pay later (BNPL) companies have also seen their user base grow, raising fears of unregulated lending dragging consumers into debt. The UK charity Citizens Advice warned that 28% of UK adults said they are likely to use BNPL services to ease festive spending costs and highlighted that many of the users of these services are already financially unstable; one in ten users in the country have been visited by an enforcement agency or bailiff due to missing a payment over the last year.
At the same time, companies in the sector have continued to collapse due to a fundamentally unstable business model. ZestMoney, once valued at almost half a billion dollars, failed earlier this month (8 December) following in the footsteps of Openpay and IOUpay. Regulation remains absent from the sector, harming both consumers and anyone invested in field.
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