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Klaros’ 2023 Banking, Fintech, and Regulatory Predictions

Happy New Year from the Klaros Group! Like our media friends at Axios, Bloomberg, and Fortune, we took stock of the trends that dominated financial services regulation this past year to predict what lies ahead in 2023. Here are a few of our favorites.

If you need help solving any of these types of challenges (or just want to engage in a spirited debate about these predictions), let us know at

Mergers & Acquisitions

  • Any fintech without runway into 2024 needs to be contingency planning about its exit strategy and potential buyers now. Fintechs will move through the five stages of grief on valuations by mid-year, resulting in significantly greater later stage funding and M&A in the second half of 2023. - Adam Shapiro

  • Banks will be bargain-hunting amidst the fintech wreckage, but will be waiting for signs that prices have bottomed and some certainty in the macro environment to avoid buying a landmine. All but the largest banks are in search of both a growth and technology strategy, and this could be a once-in-a-decade opportunity to accelerate those strategies. Fortune will favor the brave. - Jonah Crane

Banking as a Service (BaaS)

  • Turn up the BaaS! 2023 will be a breakout year for banking-as-a-service with more community banks looking to get into the space. The regulatory bar for community banks trying to get into BaaS will be higher, but this ultimately will be outweighed by its appeal as a way to accelerate growth and increase profitability. - Andreas Westgaard

Regulatory (OCC, FRB, FDIC and CFPB)

  • Regulators have drawn the perimeter: incumbent banks are inside; fintechs and crypto companies are outside. It’s regulatory capture, and it’s going to become increasingly stark over the course of 2023 as regulatory pressure on bank partnerships increases and lessens the competitive threat fintech innovators pose to big banks. - Michele Alt

  • Regulatory scrutiny of partner/BaaS banks will continue to intensify, leading to public enforcement actions at one or more leading partner banks. Absent a course change by the Federal Reserve, neobanks will be increasingly squeezed as the mainstream banking industry gradually raises deposit rates over the course of 2023. The FDIC risks public embarrassment should the failure of a neobank partnered, as most are, with an FDIC-insured state nonmember bank leave large numbers of customers unable to access insured deposits. - Konrad Alt


  • The spectacular failures of lightly regulated crypto firms in 2022 will hasten efforts to rein in centralized intermediaries but will also embolden DeFi proponents who point to decentralization, automation, and on-chain transparency as a panacea. This will lead to increasing confusion for policy makers and impede their ability to reach consensus on legislation/regulations addressing decentralized crypto applications and infrastructure. - Patrick Haggerty

  • In 2023, we'll see a burgeoning digital currency arms race between central banks looking to pilot and issue CBDCs. In developed economies, the European Central Bank will lead the charge in helping us work out whether CBDC is a game changer or a solution that can’t find a problem to solve. - Adam Shapiro


  • Prudential regulators begin conducting climate related financial risk reviews at large banks and ramp up expectations for appropriate risk management frameworks. The Federal Reserve in particular will develop climate scenario analyses for large banking organizations as a precursor to climate related financial risks eventually being incorporated into the capital stress testing programs. - Tracy Basinger

Photo by Arnesh Yadram on Pexels


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