The Fintech industry has experienced significant growth over the past decade, disrupting traditional financial services and providing innovative solutions to meet the evolving needs of consumers and businesses.
Tech advancements continue to shape how financial institutions around the world work. And Fintech companies are expanding, building their footprint in the market.
However, with this growth comes new challenges for Fintech companies, and CTOs in particular.
Whilst technological developments have been major drivers of Fintech innovation, now is the time to further digitize financial services and the banking sector to build a more inclusive and efficient industry that promotes economic growth.
Fintechs are stepping up to lead, navigate and disrupt the industry during this time of uncertainty, and software development will play a vital role in shaping the future landscape.
It is essential to understand the significant challenges faced by the industry and devise strategies to overcome them. Companies can address these challenges by leveraging their internal resources or by seeking professional assistance from third-party experts for custom software development.
In this article we will navigate the complex challenges Fintech is facing and explain how software development can help with its value-added solutions.
Repetitive Security Breaches
Cybersecurity is a significant concern for Fintech companies and their customers with increasing reliance on digital transactions. Online and mobile channels are subject to far higher rates of fraud than branch-based services.
As the Fintech industry continues expanding, businesses are prime targets for cyberattacks. Cybercriminals are seeking to exploit vulnerabilities in their systems and steal sensitive financial data. Any security breaches can result in significant reputational damage and financial losses, which can be devastating for companies and their customers.
Have you heard about Capital One data breach in the summer of 2019? It affected around 100 million Americans and 6 million Canadians. Capital One suffered severe effects, including a damaged brand reputation, a $150 million cost, and a 5% drop in sales.
According to Gartner, by 2023, 75% of companies intend to adopt new solutions that combat the growing global cybersecurity issue caused by new technology challenges.
For Fintech executives, keeping their companies safe from ransomware attacks should be a prerogative. They must prioritize cybersecurity measures and ensure that they are employing the latest technologies to protect their systems and customers.
By taking proactive steps to safeguard against cyber threats, fintech companies can build trust with their customers and ensure the long-term viability of their business.
Fintech companies can leverage technology to implement robust cybersecurity measures such as two-factor authentication, encryption, AI security analytics, and biometrics.
AI/ML technology plays a crucial role in reducing the risks of fraud and scams. AI/ML algorithms can analyze large volumes of data, identify patterns and trends, and make predictions to help fintech companies better manage risk.
By leveraging AI/ML technology companies can obtain a more comprehensive understanding of risk factors, make informed decisions and swiftly respond to potential risks by harnessing the power of this technology. This enables them to mitigate their overall risk exposure and enhance their risk management strategies.
In addition, the cloud can improve platform integrity through automated and embedded security processes and controls.
Compliance and Regulation
Compliance and regulatory challenges are among the most pressing concerns facing Fintech companies today.
Given the highly regulated nature of the financial industry, Fintech companies must navigate a complex web of rules and regulations to ensure that they are operating within legal boundaries.
Additionally, as Fintech companies expand globally, they must navigate the varying regulatory regimes across different countries and jurisdictions. This requires significant resources and expertise to stay abreast of changes in regulations and ensure compliance.
Through the use of automation and advanced analytics, the software can help companies monitor their operations in real-time and identify potential compliance issues before they become problems.
Software can offer automated and streamlined solutions to meet the demands of financial regulations. This not only helps companies stay compliant but also reduces the cost and time associated with manual compliance processes.
Fintech industries rely on consistent users to stay profitable. Customers expect a seamless and personalized experience, which can be challenging for fintech companies to provide as they must find ways to balance user experience and security practices.
Fintechs were ahead of the curve in terms of convenience, offering online banking and financial services well before the repercussions of the COVID-19 pandemic in 2020. However, just having an app or in-browser platform is no longer enough. With the competitive marketplace and rising consumer expectations, Fintechs must deliver top-of-the-line CX if they want to survive.
Fintech brands have to create positive, meaningful and efficient customer experiences that exceed client expectations. This instills confidence that they are the right service to handle the complex capabilities needed to set a financial institution apart from the competition.
Recent advances in big data have enabled Fintech brands to connect with their customers and provide improved customer experience management.
Fintech companies can use technologies such as blockchain, artificial intelligence (AI), and machine learning (ML) to analyze customer data and provide personalized recommendations, streamline processes, and offer a more efficient and satisfying customer experience.
With exceptional software development, Fintech solutions can both comply with strict security and data encryption standards, whilst offering a polished and streamlined user experience for customers.
As Fintech solutions rely heavily on data, companies must be able to collect, store, and analyze large amounts of data to derive insights and drive business decisions.
These valuable insights enable stakeholders to make educated decisions aligned with the company’s vision, roadmap, and customer expectations
However, the sheer volume of data generated by Fintech companies can be overwhelming, and traditional data management tools may not be sufficient to handle the complexity and scale of this data.
Additionally, with increasing regulatory scrutiny around data privacy and security, they must ensure that their data management practices comply with regulatory requirements.
To address these challenges, Fintech companies can leverage advanced data management technologies such as cloud computing and big data analytics to efficiently store, process, and analyze large volumes of data. By implementing robust data management practices, Fintech companies can unlock the full potential of their data and gain a competitive advantage in the market.
Scalability is key to thriving in the Fintech sector. Is an important factor that drives all financial organizations today. It stems directly from the sector’s immense workload, and the knack of minimizing human interactions.
With the growing parameters, the idea of scalability becomes important, because financial companies are always looking to upgrade and better their software to deal with the increasing workload more efficiently.
Financial firms need IT partners who will analyze their business thoroughly and come up with a scalable technological option to suit their needs.
AI-enabled applications work to make most processes automatic, which means human tasks come down, while the industry grows. Voila! this is the very definition of scalability.
Last, but not least, cloud-based solutions can be used to scale their infrastructure quickly and cost-effectively, providing more flexibility and agility to adapt to changing market conditions.
Time to Market
Speed to market is one of Fintech’s greatest strengths vs. traditional financial enterprises, and companies rely on it to increase profit margins, accelerate growth and gain market share in the fast-paced and dynamic fintech industry.
The world of Fintech is constantly changing. The Journal of Theoretical and Applied Electronic Commerce Research put it best: “Fintech is a dynamic and innovative field that fully benefits from advances in information and communication technology.” With the continuous evolution of technology, the fintech industry must adapt and keep pace with these changes.
Technology can play a crucial role in helping Fintech companies reduce time to market and stay ahead of the competition. By leveraging modern development methodologies such as Agile and DevOps, Fintech companies can streamline their software development processes, enabling them to quickly adapt to changing market demands and deliver new products and services faster.
The iterative, integrated and collaborative approach allows development teams to work more efficiently, with faster feedback loops and shorter release cycles.
Additionally, Fintech companies can leverage cloud computing and other advanced technologies to scale their operations quickly, providing a seamless user experience to their customers.
With modern technologies, efficient workflows, and no silos or bureaucracy, Fintech product teams can innovate, and deliver projects faster.
Most common ERPs are difficult and costly to customize, and you will need to work with ERP vendors, which would imply allocating a significant portion of your budget and time to the project.
In addition, traditional ERP systems can easily cost you five figures for a single license, so if you need many users accessing it will cost you an arm and a leg.
When the ERP as it is implemented is not enough, and it is needed to tailor the system to your specific needs to improve operational efficiency, and provide a better customer experience, or you need to avoid users limitations, you should try the below.
Custom software can be developed considering all the specific business requirements and be integrated seamlessly with the ERP (or any other core system), ensuring they reap the rewards of a more efficient and effective system, accessible to every user you need, at a significantly lower price (in terms of time, development itself and licenses).
The Future of Fintech
As Fintechs compete to increase profit margins and gain market share, the more determined they are in stepping-up to lead, navigate and disrupt the industry during this time of uncertainty, and software development will play a vital role in shaping the future landscape.
As seen, through the aid of software development, Fintech companies can create robust capabilities and applications that seamlessly integrate with customers’ existing environments, enabling them to address evolving needs, meet new business objectives and adhere to regulatory requirements efficiently.
Being aware of the potential risks and problems in fintech development and selecting an expert technical supplier can considerably boost the possibilities of releasing a solid and effective software solution that works perfectly for your company’s demands and goals.
The future of financial services lies in its ability to fully benefit from new technologies.
However, it’s a journey no company should take on its own.
If you are a Fintech executive looking for a reliable tech partner to leverage the latest technologies and access specialized IT expertise to enhance your products and services, improve operational efficiency, and reduce risk, let’s talk!