Top Personal Finance Trends to Watch Out for in 2023

The Indian economy has seen a growth boom over the past couple of years. Hence, it doesn’t come as a surprise that the country’s finance sector is seeing heightened penetration by several new and innovative financial ventures. The ever-increasing digital literacy of today’s population, particularly amongst Gen Z and millennials, has contributed to this financial innovation. Gone are those days when financial management, savings, and investments were restricted to a handful of time-tested tools.  

As we turn the pages of our calendars to 2023, many new financial practices are gaining prominence. According to financial experts, these will also play an active role in further uplifting India’s macroeconomic standing. From new market tools and lending services to innovative banking systems and digital currency, these are the financial trends that are likely to make the headlines this year.  

1. BNPL – Credit is the new normal!

Surely you are a regular customer at some local shop or grocery store where you don’t pay for every little purchase all the time. Rather, you probably have a tab with the vendor that you settle at the end of every month or after a specific period. That is the basic premise of Buy Now Pay Later. It is a payment option that is gaining popularity by the day as it allows you to purchase goods and acquire services without paying for them immediately.  

Instead, you pay off your dues or credit on a later date as decided by your lender. BNPL is a great way to manage your day-to-day finances without burning your finances. BNPL usage is likely to rise in India, with rapid growth at least in a short-term period. However, it can prove to be a significant gamechanger across the country in the coming years.  

 2. Neobanking – Is virtual the future?

Yes, banks have already penetrated the digital sphere and brought their financial services to our fingertips, but 100% virtual banking? That is the basic premise of neobanks – non-physical banks that operate entirely on a digital forum. Hence, these are also known as digital banks. They provide a similar range of financial products and facilities like regular banks. These include debit cards, loans, online payments, investments, money transfers, withdrawals, deposits, etc.  

On the downside, neobanks are not authorised to carry out operations independently, since the RBI has not yet formulated a banking license to such digital entities. Hence, like NBFCs, they operate in collaboration with traditionally licensed banks. The advantage of neobanks is that they have low operating costs due to a comprehensive online process. This gives them the edge in faster account creation, verification, updations, and transactions.  

 3. ETFs – Low risk for the long run!

Essentially, exchange-traded funds or ETFs work just like mutual funds. They mirror the indices of the market, and you trade in them just like you do with regular stocks. ETFs make the most of the market risks by investing your money in a wide range of assets such as gold, bonds, stocks, and other securities. These funds are regulated by SEBI and investors can buy them in terms of units.  

Keep in mind that you will need to open a Demat account to invest in ETFs. So, if you are looking for a risk-averse investment option and are happy with earning stable but moderate returns across a long-term period, ETFs are your go-to investment. For these benefits, ETFs have risen in popularity among Indian investors in recent times. Between November 2020 and November 2021, ETFs saw a 58% YoY growth in terms of use.  

4. Real estate – Is there money in land?

When it comes to potential long-term investment ideas, owning your own house is always on the cards. With the prices of commodities rising, and the value of various movable assets falling, particularly after the pandemic struck, people began to recognise the value of owning a property. Consequently, secondary home purchases and real estate investments skyrocketed in 2022. The aura of a secure investment venture with decent returns and low volatility appealed to investors.  

But investing in property requires a huge corpus. This is where investing in a Real Estate Investment Trust (REIT) proves beneficial. These are schemes which allow investors to buy a property stake, just like mutual funds. But here, the real estate property is the asset instead of the company’s shares. REITs generate dividends by renting or leasing the property and distributing the earnings among the investors. Thus, investments in real estate are expected to develop further in 2023.  

 5. P2P Lending – Helping out a friend in need! 

 Here, a relationship of lending and borrowing exists between you and someone just like you. Like BNPL, this form of lending has also been present in the country for decades, while its rise as a formal lending option in the finance world gained popularity with the increased use of the digital medium. P2P lending comes with high interest rates as it is a form of unsecured debt like personal loans.  

Thus, investing in this new form of lending, brings high returns, as it means lending money to a borrower willing to return it with a sizable interest. The growth of P2P lending has vastly helped the financially backward population of the country who find it difficult to get emergency credit from formal channels. P2P lending can soon grow into a reliable source of credit and investment in India.  

6. Cryptocurrency – How cryptic is it really? 

Cryptocurrency is a form of digital money that is used for their intrinsic value as well as for making payments. It is secured using cryptography –hence the name– and has grown to become one of the most debated modern financial offerings around the globe. The craze around cryptocurrencies such as Solana, Dogecoin, Bitcoin, etc. has forced worldwide central banks to ponder over if and how to regulate and accept this phenomenon.  

The cryptocurrency craze stems from its extremely high-risk and extremely high reward essence. While this makes them arguably the riskiest asset to add to one’s portfolio, its frenzy today, particularly among young investors, makes it worth attention. In India, there are no rules or guidelines, nor any regulations for investing in cryptocurrency. While it is not formally banned, the venture is deemed too risky by both analysts and officials.  

Watch Out! 

The Global Innovation Report for 2023 asked various business leaders from both financial and non-financial sectors in India about their business strategies and their experience or activities regarding such new financial endeavours. These include the likes of embedded finance, decentralized finance, cryptocurrencies, etc and how they affect industrial environmental, social and governance (ESG) frameworks.  

According to the report, most of these businesses expect a sizable impact from all these top financial trends in the coming months and years. Spurred by digital and technological advancements, all these modern sectors emerged as the key opportunities that will attract investments. Whether this claim materialises or not, advancement in fintech will make leaps and bounds due to these alternative investment arenas. Keeping an eye out for them will likely see personal finance make an upheaval in 2023.